Exhibit 10.1

PRIME VENDOR AGREEMENT

By and Between

AmerisourceBergen Drug Corporation, a Delaware corporation

And

Longs Drug Stores California, Inc., a California corporation

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TABLE OF CONTENTS

 

1.      DEFINITIONS; EXHIBITS; RULES OF CONSTRUCTION

   1

A.

   Definitions    1

B.

   Exhibits and Attachments    2

C.

   Rules of Construction    2

D.

   Prior Agreement    2

2.      SUPPLY AND PURCHASE COMMITMENTS

   3

A.

   Products    3

B.

   Pharmacies    5

C.

   Contract Administration    6

3.      DUTIES OF ABDC

   7

A.

   Orders and Services    7

B.

   Longs Locations and Deliveries    7

C.

   Delivery Times    8

D.

   Title And Risk Of Loss    8

E.

   Emergency Orders    8

F.

   Adjusted Service Level Commitment    8

G.

   Manufacturer Agreements    8

4.      DUTIES OF LONGS

   8

A.

   Late Fees    8

B.

   Longs’ Affiliates    8

5.      IMPLEMENTATION OF CONTRACT

   9

A.

   Orders and Deliveries    9

B.

   Returned Goods    9

C.

   Services in Hawaii    9

D.

   Central Fill Pharmacy Service    9

E.

   Program    9

F.

   Additional Value-Added Services    9

G.

   Additional Facilities    9

H.

   RePack Program    9

6.      RECORDS; AUDITS

   9

A.

   Records    9

B.

   *         Files    9

C.

   *    10

D.

   Periodic Audit    10

E.

   Audit Fees    11

F.

   Contract Compliance    11

7.      TERM OF AGREEMENT

   11

A.

   Term    11

B.

   ABDC’s Termination Rights    12

C.

   Longs’ Termination Rights    12

D.

   Mutual Termination Rights    13

E.

   Survival Upon Termination    13

F.

   Automatic Extension    13

G.

   *    13

 

* Subject to a request for confidential treatment; Separately filed with the
Commission.

 

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8.      REPRESENTATIONS AND WARRANTIES

   13

A.

   Compliance With Laws    13

B.

   Goods    13

C.

   Qualified Suppliers    14

9.      INSURANCE AND INDEMNITY

   14

10.    RECALL

   15

11.    FORCE MAJEURE

   15

12.    NOTICES

   16

13.    CONFIDENTIALITY

   17

A.

   Confidential Information    17

B.

   HIPAA Compliance    17

C.

   Patient Confidentiality    18

14.    SOFTWARE LICENSE

   18

A.

   License    18

B.

   Limited Warranty    18

C.

   Remedy    18

15.    MISCELLANEOUS

   18

A.

   Entire Agreement    18

B.

   No Assignment    19

C.

   EEO Requirements    19

D.

   Independent Contractors    19

E.

   No Waiver    19

F.

   Severability    19

G.

   Successors and Assigns    19

H.

   Choice of Law; Applicable Law; Remedies    19

I.

   Dispute Resolution    19

J.

   Billing Disputes;        *    20

EXHIBITS

 

EXHIBIT 1 - PRICING / PAYMENT TERMS

EXHIBIT 2 -         *        PROGRAM

EXHIBIT 3 - ORDERS AND DELIVERY

EXHIBIT 4 - RETURNED GOODS POLICY

EXHIBIT 5 - SERVICES IN HAWAII

EXHIBIT 6 - CENTRAL FILL PHARMACY SERVICE

EXHIBIT 7 -         *        PROGRAM

EXHIBIT 8 - ADDITIONAL VALUE-ADDED SERVICES

ATTACHMENTS

ATTACHMENT A - Defined Terms

ATTACHMENT B -         *        Category List (Fine Line Codes)

 

* Subject to a request for confidential treatment; Separately filed with the
Commission.

 

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PRIME VENDOR AGREEMENT

This Prime Vendor Agreement (“Agreement”) is made as of March 14, 2006
(“Execution Date”) by AmerisourceBergen Drug Corporation, a Delaware corporation
(“ABDC”), and Longs Drug Stores California, Inc., a California corporation
(“Longs”).

A. ABDC is a national distributor of pharmaceutical and other products,
including prescription pharmaceuticals (“Rx”) and over-the-counter
pharmaceuticals (“OTC”), nutritional, health and beauty care products (“HBC”)
and home health care products (“DME”) (collectively, “Products”), and a provider
of related services to be provided under this Agreement (collectively,
“Services”);

B. Longs owns and operates a chain of retail pharmacies (“Pharmacies”) in
various states, including California, Nevada, Oregon, Washington, Hawaii and
Colorado and certain central fill pharmacies, warehouses, specialty pharmacies
(“Specialty Pharmacies”), mail order pharmacies (“Mail Order”), and pharmacy
benefit management (“PBM”) operations (collectively, “Other Facilities”);

C. Longs and ABDC are parties to that certain RxD Warehouse and Direct Store
Delivery Primary Supplier Agreement, dated February 1, 1999, as amended to date
(“Prior Agreement”);

D. Longs and ABDC intend by this Agreement to replace and supersede the Prior
Agreement and to set forth herein their obligations to each other for an
arrangement under which ABDC will provide Products and Services to Longs
(“Program”) effective as of July 1, 2006 (“Effective Date”); and

E. Longs and ABDC or their affiliates are parties to the following additional
agreements related to the Products and Services to be supplied hereunder, each
of which (as amended to date) shall remain in effect according to its terms
after the Effective Date:

 

  1. certain agreements between Longs and AutoMed Technologies, Inc.
(“AutoMed”), an affiliate of ABDC;

 

  2. an agreement between Longs and American Health Packaging, Inc., an
affiliate of ABDC, dated as of October 15, 2002 (“RePack Agreement”); and

 

  3. the Pharmacy Data Services Agreement, dated February 25, 2005, between the
parties.

NOW THEREFORE, the parties hereto agree as follows:

 

1. DEFINITIONS; EXHIBITS; RULES OF CONSTRUCTION

A. Definitions. Terms used as defined terms herein shall have the meanings as
set forth in Attachment A, which includes an index to terms defined in the text
of this Agreement.

 

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B. Exhibits and Attachments. The Table of Contents hereto sets forth a list of
all Exhibits and Attachments to this Agreement, each of which is incorporated
herein by reference.

C. Rules of Construction.

 

  1. The term “including” means “including, without limitation” unless the
context clearly indicates otherwise.

 

  2. All references in this Agreement to articles, sections, exhibits or
attachments, unless otherwise expressed or indicated, are to the articles,
sections, exhibits or attachments to this Agreement.

 

  3. References to terms set forth “herein,” obligations to be performed
“hereunder,” and similar phrases shall be construed as references to this
Agreement.

 

  4. Words importing persons include, where appropriate, firms, associations,
partnerships, trusts, corporations and other legal affiliates, including public
bodies, as well as natural persons.

 

  5. Words importing the singular include the plural and vice versa. Words of
the masculine, feminine or neuter genders are each deemed to include the
correlative words of the other genders.

 

  6. All references to a number of days mean calendar days, unless expressly
indicated otherwise.

 

  7. The article, section and attachment headings and any table of contents
(except to the extent it incorporates exhibits and attachments pursuant to
Section 1(B)) are for reference and convenience only and shall not be considered
in the interpretation of this Agreement.

 

  8. All references herein to this “Agreement” shall include the attachments and
exhibits referenced in the body of this Agreement.

D. Prior Agreement.

The term of the Prior Agreement, as amended, is agreed to be extended through
June 30, 2006, and will terminate as of the Effective Date. Except as otherwise
agreed, the rights and obligations of the parties under the Prior Agreement that
accrued prior to its termination will not be extinguished, but will be satisfied
according to the terms of the Prior Agreement. Notwithstanding the foregoing, if
Longs meets its obligation to purchase        *        in branded Rx net
purchases under the Prior Agreement earlier than June 30, 2006, the Prior
Agreement will not expire until June 30, 2006. As of the Effective Date, Longs’
obligation to purchase        *        in branded Rx net purchases under the
Prior Agreement        *        under Section 11A of the Prior Agreement (as
added by the 6th Amendment thereto).

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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2. SUPPLY AND PURCHASE COMMITMENTS

A. Products. This Agreement encompasses several categories of Products to be
supplied by ABDC to Longs hereunder, each of which is subject to different
pricing terms, and some of which are governed by different sets of commercial
terms.

 

1. Quantity, Price and Terms. These categories and the supply and purchase
commitments hereunder applicable to each are as follows:

 

  a) Branded Rx Products.

 

Category Definition

   Branded Prescription Pharmaceuticals.

Quantity

   ABDC will be the “primary vendor” of Branded Rx Products to Longs, meaning
that ABDC agrees to supply to Longs        *        of all Branded Rx Products
purchased by Longs for its: (i) Pharmacies; (ii) central fill pharmacies; (iii)
Mail Order; (iv) pharmacies primarily serving assisted-living and long-term-care
facilities (“LTC Pharmacies”); (v) Specialty Pharmacies; and (vi) PBM
operations, and that Longs agrees to purchase the Total Branded Rx Net Purchase
Volume within a period as set forth in Section 7(A) hereof and in Exhibit 1,
Section 3.

Pricing

   All Branded Rx Products shall be priced at        *        as in effect at
the time Longs places its order,         *        

Special Terms

           *        Products will be priced as and included in Branded Rx
Products as set forth in Exhibit 1, Section 1(A)(2).

 

  b)         *        Products, Longs Contracted Generic Products and Other
Generic Rx Products.

 

  (i)         *        Products.

 

Category Definition

           *        Products.

Quantity

   As provided in Exhibit 2, Longs will participate in ABDC’s preferred generic
formulary program (“        *        Program”), pursuant to which ABDC will
supply to Longs        *        , and Longs will purchase from
ABDC        *        , of those Generic Rx Products represented in the
ABDC        *        Program (        *        ); provided, however, Longs may
elect to        *        .

Pricing and Terms

   Pricing of Generic Rx Products purchased pursuant to
the        *        Program (“        *        Products”) is based
on         *        

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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  (ii) Longs Contracted Generic Products.

 

Category Definition

   “Longs Contracted Generic Products” consist of those Generic Rx Products that
Longs purchases pursuant to contract directly with such Product’s manufacturer,
or through a collective buying group or other group purchasing organization
(“GPO”) or any other party, and which ABDC administers on behalf of Longs and
for which ABDC provides warehousing and delivery services hereunder.

Quantity

   Longs’ Contracted Generic Products that are        *        .

Pricing and Terms

   Longs pricing for Longs Contracted Generic Products will be based on
the        *        of such Products (        *        ).

 

  (iii) Other Generic Rx Products.

 

Category Definition

   “Other Generic Rx Products” consist of Generic Rx Products that Longs buys
from ABDC, but which are not offered under the        *        Program and are
not Longs Contracted Generic Products.

Quantity

   As ordered by Longs, provided, however, that Longs has no minimum obligation
with respect to Other Generic Rx Products.

Pricing and Terms

   Pricing for Other Generic Rx Products will be        *        , unless the
parties mutually agree an adjustment is appropriate.

 

  c) Non-Rx Products.

“Non-Rx Products” include all non-prescription Products other than those
non-prescription Products that are        *        Products. Non-Rx Products
consist of (i)        *        Non-Rx Products and
(ii) any        *        Non-Rx Products (as such terms are defined,
respectively, in        *        below).

 

  (i)         *        Non-Rx Products.

 

Category Definition

   The category “        *        Non-Rx Products” includes all Non-Rx Products
(which does not include         *        Products) other
than        *        Non-Rx Products.

Quantity

   As ordered by Longs.

Pricing

   Pricing of        *        Non-Rx Products for Mainland delivery is based
on        *        , and subject to the         *        .

Special Terms

   As set forth in Section 1(D) of Exhibit 1.        *        Non-Rx Products in
Hawaii are treated under Exhibit 5.

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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  (ii)         *        Non-Rx Products.

 

Category Definition

           *        Non-Rx Products consist of those categories of Non-Rx
Products as listed on Attachment B (“        *        Category List”), subject
to Section 1(C)(2)(a) of Exhibit 1.

Quantity

   As ordered by Longs.

Pricing

   Pricing for all        *        Non-Rx Products shall be        *        .

 

2. Quantity Measurement. Except as otherwise provided, percentages herein are to
be measured by dollar volume on an annual basis.

 

3. Quantity Exclusion. Products that Longs purchases from other suppliers
because ABDC has been unable to supply within the time periods required in this
Agreement, including under Exhibit 3: (i) shall not count against
the        *        and (ii) shall be        *        .

B. Pharmacies.

 

1. Pharmacies within the scope of this Agreement consist of all Pharmacies owned
and operated by Longs as of the Effective Date, subject to the following:

 

  a) Pharmacies newly opened by Longs shall be deemed added to the scope of this
Agreement upon opening;

 

  b) existing Pharmacies acquired by Longs in the ordinary course of its
business shall be deemed added to the scope of this Agreement (in all cases
pursuant to a reasonable transition plan agreed upon by the parties) upon the
later to occur of:

 

  (i) closing of the acquisition, or

 

  (ii) the earliest time when Longs may terminate existing agreements for the
supply of Products to such Pharmacies without breach or payment of charges for
early termination;        *        , or

 

  (iii) if the existing supply agreement for any such existing acquired Pharmacy
is        *        ; and

 

  c) Pharmacies closed or sold by Longs from time to time in the ordinary course
of its business (and thereafter not operated by Longs) shall be deemed deleted
from the scope of this Agreement upon such event.

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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2. Acquisitions.

 

  a) In the event that, during the Term, Longs makes any acquisition of a group
of pharmacies (“New Pharmacy Chain”), such acquisition is subject to
Section 2(B)(1)(b) above, provided, however, that Longs will allow a reasonable
period of time to enable ABDC to arrange logistics infrastructure, before
activating the Adjusted Service Level Commitment under Exhibit 3 with respect to
the New Pharmacy Chain.

 

  b) Further, for any acquisition of a New Pharmacy Chain of at
least        *        new Pharmacies to be added to this Agreement, that were
not supplied by ABDC at the time of the acquisition (other than any Pharmacy
whose existing supply arrangement with ABDC is terminated in connection with the
acquisition by Longs and then resumed under Longs’ ownership),        *        :

 

        *        

           *                    *        

        *        

           *                    *        

        *        

           *                    *        

        *        

           *                    *        

        *        

           *                    *        

        *        

           *                    *        

 

  c) *        .

C. Contract Administration.

 

1. Longs’ Supplier Contracts Administered by ABDC.

In administering Longs’ GPO or other supplier contracts for Rx and Non-Rx
Products which Longs elects to have administered by ABDC, Longs will (a) provide
ABDC with the material terms of all such contracts to enable ABDC to load
relevant data into its ordering and other systems, (b) comply with each
supplier’s terms in order to afford ABDC the ability to receive appropriate
pricing chargebacks thereunder, and bear the economic risk of the inability to
receive chargebacks due to Longs’ failure to comply with such terms of the
supplier’s contract terms, and (c) with respect to Rx Products, use all Products
for its “own use” (as defined in judicial and legislative interpretations).

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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2. Rx Supplier Contract.

ABDC must notify Longs whether it is purchasing Rx Products primarily for Longs
under a Longs’ GPO or other supplier contract, and in any such case (effective
after the date of such notice), Longs will (a) provide reasonable notice but not
less than 30 days’ notice before it changes suppliers, and (b) upon changing
suppliers, use commercially reasonable efforts to assist ABDC in disposing of a
reasonable amount of excess inventory that was acquired for Longs. When
invoiced, Longs will promptly reimburse ABDC for any unpaid chargebacks with
respect to such Rx Products that are (x) denied by a Longs GPO or
manufacturer/supplier or (y) not paid within forty-five (45) days and, in either
case, Longs will look to such GPO or manufacturer/supplier (and not to ABDC) for
redress of any such issues. As used in this Section 2(C), an Rx GPO or other
supplier contract will be considered as “primarily for Longs” when Longs’ Net
Purchases constitute        *        of ABDC’s sales of such Product, as
measured separately for each DC servicing Longs hereunder.

 

3. Non-Rx Special Purchase Contracts.

 

  (a) ABDC shall have no obligation to purchase Non-Rx Products
that,        *        .

 

  (b) Notwithstanding the foregoing,        *        .

 

3. DUTIES OF ABDC

A. Orders and Services. ABDC will accept and fill all orders placed by Longs in
accordance with this Agreement. Orders will be placed and filled at least in
accordance with the minimum standards set forth below and in Exhibit 3. When
available, ABDC will provide Longs with the capability to place orders for Class
II controlled substances using the electronic CSOS ordering system,
at        *        . Each party shall perform its obligations hereunder in
accordance with the performance requirements set forth in this Agreement, but in
all cases at least to the standard of care and competence of an experienced
professional engaged in the regular performance of similar activities.

B. Longs Locations and Deliveries.

 

1. Pharmacies. ABDC will deliver Products to each Pharmacy for direct store
delivery (also known as “DSD”), within the existing service areas six days per
week (Monday – Saturday), once per day, during normal business hours. The
existing service areas are those areas where existing Pharmacies are served as
of the Effective Date, excluding        *        .

 

2. Warehouses and Large Volume Facilities. ABDC will deliver Products to Longs
at Warehouses and Large Volume Facilities (each as defined in Exhibit 1,
Section 1(A)(1)) within existing service areas, in all cases during normal
business hours, as set forth below:

 

Warehouses

   Five days/week-M-F    once per day M-F

HRx and SRx

   Five days/week-M-F    once per day M-F

Large Volume Facilities

   Six days/week-M-S   

twice per day M-F

once per day Saturday

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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C. Delivery Times. ABDC shall use best efforts to deliver to each of Pharmacies,
Warehouses and Large Volume Facilities        *        on each delivery day.
ABDC does not make normal deliveries on holidays or its scheduled physical
inventory days (        *        ) in an ABDC distribution center (“DC”).

D. Title And Risk Of Loss. All Products are shipped F.O.B. Longs’ receiving
location, with freight prepaid for normal delivery. Title and risk of loss pass
upon delivery to Longs.

E. Emergency Orders. ABDC will use all reasonable efforts to meet a requested
delivery time for emergency orders. Longs will reimburse
ABDC’s        *        . If ABDC cannot meet requested emergency delivery times,
Longs may fill emergency orders on such occasions using another provider.

F. Adjusted Service Level Commitment. ABDC shall perform its delivery
obligations in compliance with the Adjusted Service Level Commitment pursuant to
Exhibit 3.

G. Manufacturer Agreements. As ABDC (but typically not Longs) is a party to
contracts with Product manufacturers, ABDC shall        *        .

 

4. DUTIES OF LONGS

A. Late Fees. Longs will pay all invoices and other charges by their due date
pursuant to Exhibit 1; provided, however,        *        . If such payment is
not received by ABDC by the due date (other than due to        *        ), ABDC
will assess a late payment fee as follows:

 

  (1)         *        .

 

  (2) For each of the        *        a payment is late (or on the first day
following        *        ), ABDC will assess a late fee of        *        .

 

  (3) ABDC’s right to assess a late fee for Longs’ payment delays does not
relieve Longs of its obligation to make prompt payment in accordance with this
Agreement.

B. Longs’ Affiliates. Purchases by Longs’ affiliates from ABDC will be
(1) entitled to pricing as provided hereunder, (2) included within the quantity
of Longs’ purchases for purposes of this Agreement and (3) considered as
purchases by Longs hereunder. As used above, “Longs’ affiliates” consists of all
entities owned and controlled by Longs Drug Stores Corporation.

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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5. IMPLEMENTATION OF CONTRACT

A. Orders and Deliveries. Terms regarding orders and deliveries of Products
hereunder, together with required Service Levels and credits related thereto,
are as set forth in Exhibit 3.

B. Returned Goods. Terms regarding returns of goods (“Returned Goods Policy”)
are as set forth in Exhibit 4.

C. Services in Hawaii. Special terms regarding sales of Products and provision
of Services for Pharmacies and Longs’ central fill pharmacy in Hawaii (“HRx”)
are as set forth in Exhibit 5.

D. Central Fill Pharmacy Service. Terms regarding provision of Services for
Longs’ Mainland central fill pharmacies, Escalante and SRx in Southern
California, are set forth in Exhibit 6.

E.         *        Program. Special terms regarding the        *        program
are as set forth in Exhibit 7.

F. Additional Value-Added Services. Terms regarding additional Services to be
provided by ABDC are as set forth in Exhibit 8.

G. Additional Facilities. Purchases by and Services to be provided by ABDC to
Specialty Pharmacies, LTC Pharmacies, and PBM operations are included under this
Agreement.

H. RePack Program. The parties intend to negotiate in good faith for a new
agreement to amend or replace the RePack Agreement, if such agreement can be
concluded on mutually satisfactory terms.

 

6. RECORDS; AUDITS

A. Records. ABDC will maintain records related to Products and transactions
under this Agreement in compliance with applicable law. In the event that Longs
has a reasonable business need (for purposes other than audits, reviews or
inquiries pursuant to the other sub-sections of this Section 6) to review such
records of ABDC: (1) for the immediately preceding        *        , ABDC will
make such records available to Longs; and (2) for prior periods, ABDC will make
such records available to Longs only to the extent it has preserved such records
(without obligation hereunder to do so). In either case, (1) if the records
requested by Longs with respect to such        *        can be produced or
generated by ABDC in the ordinary course of its operations (including reports
generated by standard computer data-base inquiry), ABDC will provide such
records        *        , and (2)        *        , Longs will reimburse ABDC
its costs of producing or generating such records or reports.

B.         *        Files. To provide Longs with a means to order
Products,        *        , ABDC will provide        *        hereunder on
        *        basis. Further, ABDC will provide Longs with a

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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        *        for Products available to Longs. Such        *        will be
provided in a format and manner consistent with current practice between the
parties as of the Execution Date, with any changes therein subject to mutual
agreement, which agreement will not be unreasonably withheld or delayed. ABDC
will make commercially reasonable efforts so that (1)        *        provided
by ABDC to Longs will include        *        and stocked by DCs that service
Longs and (2)        *        provided to Longs will be complete and accurate.

C.         *        . ABDC will continue to show all        *        statements
to Longs, accompanied by supporting detail showing the basis
for        *        , with any changes therein subject to mutual agreement,
which agreement will not be unreasonably withheld or delayed.

D. Periodic Audit.

 

1. For purposes of audit under this Section 6(D), ABDC will maintain records of
all transactions under this Agreement (i) for the         *        during the
Term and (ii) for the        *        immediately prior to the expiration or
earlier termination of this Agreement for at least        *        following
such expiration or earlier termination; provided, however, if a dispute exists
relating to any earlier periods, ABDC also will maintain records related to such
dispute until such dispute is resolved. Longs will have the right to review the
relevant records of ABDC pertaining to the business transactions covered under
this Agreement for the purpose of verifying ABDC’s compliance with the terms of
this Agreement and the following:

 

  a)         *        ;

 

  b)         *        ;

 

  c)         *        ; and

 

  d)         *        .

 

2. Not more than        *        per Contract Year, Longs will have the right to
review the relevant records of ABDC pertaining to the business transactions
under this Agreement for the purpose of verifying ABDC’s compliance with the
terms of this Agreement (each a “Periodic Audit”) within the previous twelve
(12) month period (“Audit Period”) (provided that the first Periodic Audit may
include transactions under both this Agreement and the Prior Agreement during
such period). Periodic Audits may be conducted only during ordinary business
hours and upon reasonable notice.        *        .

 

3. ABDC shall produce supporting cost information        *        .

 

4.

For each audit, with regard to the next step procedures, Longs and ABDC shall
work together for up to        *        days or as extended by mutual consent to
determine whether they can resolve the issues or if additional testing or
procedures shall be performed. Each party will propose to the other next step
procedures reasonably designed to generate information which would resolve the
audit issues identified in the initial Periodic Audit.

 

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* Subject to a request for confidential treatment; Separately filed with the
Commission.

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The parties will cooperate reasonably to limit the scope of such next steps to
those Product categories, DCs, locations, processes or other areas in which the
identified audit issues appeared.

 

5. If ABDC and Longs are unable to resolve any disagreement related to such
audits, or agree upon next step or additional next step testing that should be
performed within        *        days (or such period as extended by mutual
consent) after such disagreement is notified by either party to the other, then
such disagreement shall be submitted to a mutually satisfactory independent
auditor for resolution. If the parties cannot agree        *        . Any
amounts payable as a result of such resolution shall be paid
within        *        of receipt of the independent auditor’s report.

E. Audit Fees. Each party shall bear its own costs and expenses relating to each
Periodic Audit and share equally the cost of the independent auditor described
in Section 6(D)(5).

F. Contract Compliance. Longs’ opportunity to verify pricing accuracy pursuant
to this Section 6 does not relieve ABDC of its obligation to correctly invoice
charges and issue credits and to promptly correct any identified errors that may
occur during the Term. Inaccurate pricing or other over- and under-charges shall
be corrected in the ordinary course of business, as described in Section 15(J),
(any prior corrections shall not be duplicative of corrections resulting from an
audit).

G. Additional Inquiries. In addition to conducting Periodic Audits, if during
the course of this Agreement Longs reasonably determines that billings may have
been rendered in error, Longs retains        *        . Any such additional
inquiries may not extend to periods earlier than the then-current Contract Year
and        *        .

 

7. TERM OF AGREEMENT

A. Term. Subject to a party’s right to terminate this Agreement as provided
herein, the term of this Agreement (the “Term”) will initially extend from the
Effective Date through such date as Longs has purchased its Total Branded Rx Net
Purchase Volume (as defined in Section 3 of Exhibit 1). Notwithstanding the
foregoing obligation to purchase the Total Branded Rx Net Purchase Volume, the
Term will extend through at least June 30, 2009 unless terminated as provided
below in this Section 7.

 

1. Either party may terminate this Agreement effective upon a date after Longs
has purchased the Total Branded Rx Net Purchase Volume, but not earlier than
June 30, 2009, by giving written notice to the other of its intent to terminate
not less than 90 days prior to the effective termination date.

 

2. In the event that Longs’ purchases of Branded Rx Products from ABDC hereunder
do not meet the Total Branded Rx Net Purchase Volume amount by June 30, 2012,
but nonetheless Longs provides reasonable documentation to establish that it
has        *        , this Agreement will terminate effective June 30, 2012.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 11 -

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3. In the event that Longs’ purchases of Branded Rx Products from ABDC hereunder
do not meet the Total Branded Rx Net Purchase Volume amount by June 30, 2012,
and Longs has not        *        , this Agreement will automatically be
extended for an additional        *        or, if earlier, until Longs meets the
Total Branded Rx Net Purchase Volume. During the final year of the extended
term, if any as provided above, all terms of this Agreement shall remain in
effect and, in addition, during such year        *        .

B. ABDC’s Termination Rights.

 

1. ABDC may terminate this Agreement, by giving written notice to Longs during
March 2009, in the event of a Material Change in ABDC’s business as defined
herein, such termination to be effective no earlier than January 31, 2010. ABDC
shall provide with such notice information establishing a reasonable basis for
its conclusion that a Material Change has occurred. If such notice is not given
during March 2009, this right will be deemed to have been waived. A “Material
Change” means that both (a) there has been a reduction in ABDC’s “incremental
net earnings” on sales to Longs hereunder (over a period of at
least        *        ) by at least        *        as compared to ABDC’s
incremental net earnings when calculated in the same manner over any
earlier        *        period during the Term and (b) ABDC’s incremental net
earnings on sales to Longs under this Agreement are no more
than        *        . Following such notice, the parties will
engage        *        or another national accounting firm of comparable size,
scope and stature reasonably acceptable to both parties (“ITP”) to validate both
such elements. By way of example, to have the right to terminate, ABDC’s
earnings would have to decline from        *        to        *        (       
 *        ; that is, a         *        reduction in order to
reach        *        ) or, as a different example,
from        *        (        *        ) to        *        (        *        ,
a        *        reduction). “Incremental net earnings” means
ABDC’s        *        attributable to sales to Longs under this Agreement,
including        *        for such sales but without        *        .

 

2. ABDC shall provide        *        .

 

3. During the period after notice of termination due to Material Change and
until such termination is effective, the parties will continue to perform their
respective obligations under this Agreement. The parties may attempt to
negotiate a replacement agreement in lieu of termination, but if no new
agreement is reached by the end of November 2009, the parties will plan for
wind-down of supplies and services hereunder pursuant to Section 7(G).

C. Longs’ Termination Rights. Longs may terminate this Agreement upon occurrence
of        *        .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

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--------------------------------------------------------------------------------

D. Mutual Termination Rights. In addition to other available remedies, either
party may immediately terminate this Agreement for cause upon written notice to
the other party upon the other party’s:

 

1. (a) filing an application for or consenting to appointment of a trustee,
receiver or custodian of its assets; (b) having an order for relief entered in
Bankruptcy Code proceedings; (c) making a general assignment for the benefit of
creditors; (d) having a trustee, receiver or custodian of its assets appointed
unless proceedings and the person appointed are dismissed within thirty
(30) days; (e) insolvency within the meaning of Uniform Commercial Code
Section 1-201 or failing generally to pay its debts as they become due within
the meaning of Bankruptcy Code Title 11, Section 303(h)(1) (11 U.S.C.
§303(h)(1)), as amended; or (f) certification in writing of its inability to pay
its debts as they become due (collectively, “Bankruptcy”);

 

2. failure to make any undisputed payment of        *        when due in
accordance with the terms of this Agreement and such failure
continues        *        after written notice thereof; or

 

3. failure to perform any other material obligation of this Agreement and such
failure continues for thirty (30) days after it receives notice of such breach
from the non-breaching party; provided, however, if the other party has
commenced to cure such breach within such thirty (30) days, but such cure is not
completed within such thirty (30) days, it will have a reasonable time to
complete its cure if it diligently pursues the cure until completion; and
further provided that if such breach occurs more than three times during any
twelve (12) month period, the non-breaching party may terminate this Agreement
upon thirty (30) days’ written notice. “For cause” does not include Longs’
receiving a more favorable offer from an ABDC competitor.

E. Survival Upon Termination. Upon termination of this Agreement, all
outstanding amounts will be payable according to their normal payment terms.
Additionally, (1) within thirty (30) days Longs will return to ABDC all
hardware, Software and other equipment, including ordering devices and totes, or
pay to ABDC the replacement cost of such items that are not returned, and
(2) ABDC will promptly deliver all Longs inventory purchased by Longs and not
previously delivered and equipment held by ABDC.         *        . Obligations
in any provision the context of which shows the parties intended it to survive
will remain in effect after the Term.

F. Automatic Extension. Upon its expiration pursuant to Section 7(A), the Term
will, thereafter, be extended on a month-to-month basis until either party gives
at least ninety (90) days’ prior written notice to the other of its intention
not to extend this Agreement.

G.         *        .

 

8. REPRESENTATIONS AND WARRANTIES

A. Compliance With Laws. Each party will comply with all federal and state laws
applicable to Products and Services hereunder.

B. Goods. ABDC hereby represents and warrants that the Products it ships will
not be modified or adulterated by ABDC (or its employees, affiliates or
subcontractors), and will be handled, shipped and stored in accordance with
manufacturers’ instructions regarding the Products and in accordance with all
applicable federal, state, and local laws now or hereafter in effect.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 13 -

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C. Qualified Suppliers. In order to assist ABDC in complying with the foregoing,
in the event Longs requests that ABDC acquire certain Products from a
manufacturer or supplier that has not been a supplier of ABDC’s at the time of
such request, Longs agrees that         *        .

 

9. INSURANCE AND INDEMNITY

A. Longs. Longs will maintain in force a Commercial General Liability insurance
policy, including Products Liability insurance, with limits of no less
than        *        per incident and        *        aggregate for bodily
injury including death and personal injury to persons and damage to property.
ABDC will be named on such policies (up to such amounts) as an additional
insured to the extent of Longs’ insurable liabilities assumed under this
Agreement.

B. ABDC.

 

1. ABDC will maintain in force a Commercial General Liability insurance policy,
including Products Liability insurance, with limits of no less
than        *        per incident and        *        aggregate for bodily
injury including death and personal injury to persons and damage to property.
Longs will be named on such policies (up to such amounts) as an additional
insured,        *        .

 

2. ABDC shall maintain in force a Commercial Auto Liability policy, with policy
limits of no less than        *        per occurrence, and Workers Compensation
and Employers Liability insurance with Statutory limits for Workers Compensation
and limits of no less than        *        for Employers Liability. Any such
Workers Compensation policy will allow ABDC to waive any of its and its
insurer’s rights of subrogation against Longs.

C. Requirements. Such insurance policies shall be maintained with responsible
insurers that have a Best’s financial rating of at least A-VII. Such policies
may not be cancelled or materially reduced without thirty (30) days’ prior
written notice to the additional insured. Each party shall furnish the other
with a Certificate of Insurance upon request evidencing that such policy terms
and conditions are maintained in force.

D. Indemnification

 

1. Each party (“Indemnifying Party”) will indemnify and defend the other party,
together with its employees and representatives (“Indemnified Party”), against
all claims of third parties for damages (including the Indemnified Party’s
expenses and reasonable attorneys’ fees) (“Claims”) to the extent caused by the
Indemnifying Party’s breach of its obligations under this Agreement.

 

2.

If any third-party Claim is commenced against an Indemnified Party entitled to
indemnification under Section 9(D)(1), notice thereof shall be given to the
Indemnifying Party of its obligation to provide indemnification hereunder as
promptly as practicable.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 14 -

--------------------------------------------------------------------------------

 

Failure to give prompt written notice of a Claim will not relieve the
Indemnifying Party of liability except to the extent caused or contributed to by
such failure. If, after such notice, the Indemnifying Party shall acknowledge
that this Agreement applies with respect to such Claim, then the Indemnifying
Party shall be entitled, if it so elects, in a notice promptly delivered to the
Indemnified Party, but in no event less than 10 days prior to the date on which
a response to such Claim is due, to immediately take control of the defense and
investigation of such Claim and to employ and engage attorneys reasonably
satisfactory to the Indemnified Party to handle and defend the same, at the
Indemnifying Party’s sole cost and expense. The Indemnified Party shall
cooperate, at the cost of the Indemnifying Party, in all reasonable respects
with the Indemnifying Party and its attorneys in the investigation, trial and
defense of such Claim and any appeal arising therefrom; provided, however, that
the Indemnified Party may, at its own cost and expense, participate, through its
attorneys or otherwise, in such investigation, trial and defense of such Claim
and any appeal arising therefrom. No settlement of a Claim that involves a
remedy other than the payment of money by the Indemnifying Party shall be
entered into without the consent of the Indemnified Party. After notice by the
Indemnifying Party to the Indemnified Party of its election to assume full
control of the defense of any such Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal expenses incurred thereafter by
such Indemnified Party in connection with the defense of that Claim. If the
Indemnifying Party does not assume full control over the defense of a Claim
subject to such defense as provided in this Section 9(D), the Indemnifying Party
may participate in such defense, at its sole cost and expense, and the
Indemnified Party shall have the right to defend the Claim in such manner as it
may deem appropriate, at the cost and expense of the Indemnifying Party.

 

10. RECALL

ABDC will comply with all requirements for recalls of Rx Products in accordance
with manufacturers’ instructions and all applicable law. ABDC will notify Longs
of all Class I and Class II recalls immediately upon receipt of notice. ABDC
will notify Longs of any other types of recalls or Product warnings or advice as
instructed in the supplier’s notification.        *        . Longs consents to
receiving notices, including Product updates, recalls, new Product launches and
programs, advertisements and other marketing materials by facsimile (“fax”)
machine from ABDC, its affiliates and their related companies, to the fax number
set forth in Section 12, provided that fax notice is confirmed promptly
thereafter as provided in Section 12.

 

11. FORCE MAJEURE

If either party’s performance is prevented or delayed by labor disputes, fire,
terrorism, acts of God or any other cause beyond its reasonable control (other
than its financial inability to perform) and which such party is unable to
prevent, including unavailability of Products due to manufacturer shortage,
transportation, shortage of fuel, unavoidable delays by suppliers, loss of
facilities or distribution, telecommunication or electrical system failures or
interruptions, bank errors or delays, voluntary foregoing of the right to
acquire or use any materials in order to comply with or accommodate government
orders or requests, or compliance with law (“Force

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 15 -

--------------------------------------------------------------------------------

Majeure”), the affected party shall be excused from its failure to perform its
obligations hereunder to the extent such failure is caused by the Force Majeure
event, provided that the affected party (i) notifies the other party promptly of
the cause complained of and the anticipated effect thereof under this Agreement
and (ii) exercises all reasonable efforts to remove the disability and resume
operations at the earliest possible date. In the event that ABDC’s supply of
Products is restricted on account of Force Majeure, ABDC may reduce or eliminate
such Products to the extent affected by the Force Majeure on a pro rata basis
among all of ABDC’s customers ordering such Products. Any quantities of Products
that ABDC is unable to deliver due to an event of Force Majeure shall be
eliminated from this Agreement during the time in which the Force Majeure event
is preventing such delivery. Longs may, in its sole discretion, with notice to
ABDC, obtain any Products for which deliveries are reduced or eliminated, or
services that are suspended, from a third party until such time as ABDC notifies
Longs in writing of its ability to fulfill its obligations under this Agreement.
Nothing in this Section 11 restricts Longs’ rights to        *        .

 

12. NOTICES

All notices or demands of any kind that either party is required or desires to
give or make upon the other in connection with this Agreement, or arising out of
the relationship created hereby, shall be in writing and shall be given or made
by (a) United States registered or certified mail, return receipt requested,
postage prepaid, (b) personal delivery, (c) overnight courier, or (d) facsimile,
in each case to the address or facsimile number below. Notice sent by certified
or registered mail will be deemed delivered three (3) business days after
mailing. Notice delivered personally will be deemed delivered on the date of
actual delivery. Notice sent by overnight courier shall be deemed to have been
given on the date of delivery confirmed by the courier service. Notice sent by
facsimile will be deemed delivered on the day sent if sent during normal
business hours of the receiving party (or, otherwise, on the first business day
after the date of transmission), with a confirming copy by mail or overnight
courier. Either party may change its contact information by a written notice
delivered in accordance with this Section 12.

 

To Longs:

  

Longs Drug Stores California, Inc.

141 North Civic Drive

Walnut Creek, California 94596

Attn: Chief Merchandising Officer

Fax: (925) 210-6202

with a copy to:

  

Longs Drug Stores California, Inc.

141 North Civic Drive

Walnut Creek, California 94596

Attn: Corporate Secretary

Fax: (925) 210-6202

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 16 -

--------------------------------------------------------------------------------

To ABDC:

  

AmerisourceBergen Drug Corporation

1300 Morris Drive

Chesterbrook, PA 19087-5594

Attn: Senior Vice President, Retail Sales & Marketing

Fax: 610-727-3601

with a copy to:

  

AmerisourceBergen Corporation

1300 Morris Drive

Chesterbrook, Pennsylvania 19087-5594

Attn: General Counsel

Fax: (610) 727-3612

 

13. CONFIDENTIALITY

A. Confidential Information. Each party and its employees or representatives
(“Receiving Party”) will protect all proprietary and confidential information
(“Confidential Information”) disclosed by the other (“Disclosing Party”) and
will not use or disclose, directly or indirectly, any Confidential Information
except in connection with this Agreement or as otherwise agreed. Confidential
Information does not include information (i) available on a non-confidential
basis, (ii) known to the Receiving Party prior to disclosure hereunder, or
(iii) required to be disclosed by applicable law, regulation, rule having the
force of law, or subpoena or other enforceable legal process. Confidential
Information includes any information that, together with publicly available
information, would allow a third party to determine Confidential Information.
This Agreement is confidential. Pricing and payment terms are confidential and
shall not be shared with any third party and each party will remove Exhibit 1
and/or such other highly confidential provisions as the parties may agree (or
request confidential treatment therefor) if it discloses this Agreement for any
reason, including in a Securities and Exchange Commission filing. Before a party
makes any disclosure it believes to be required by law, with regard to which
confidential treatment is not assured by the recipient governmental agency, such
party will notify the other party of such intended disclosure in sufficient time
and manner as to allow the other party reasonable opportunity to request
confidential treatment of such information.

B. HIPAA Compliance. Each party will comply with applicable provisions of the
Health Insurance Portability and Accountability Act of 1996 (42 USC § 1320d
through d-8), including applicable regulations and federal privacy regulations
and federal security standards (“HIPAA”). Except as permitted by this Agreement
and HIPAA, neither party will either use or further disclose any patient’s
protected health information or individually identifiable health information
(“Protected Health Information”). Each party will implement appropriate
safeguards to prevent use or disclosure of Protected Health Information other
than as provided for by this Agreement and HIPAA. Each party will promptly
report any use or disclosure of Protected Health Information not provided for by
this Agreement or in violation of HIPAA of which it becomes aware. If either
party contracts with any agent to which it provides Protected Health
Information, it will require that such agent is subject to restrictions and
conditions applicable to it with respect to Protected Health Information.
Notwithstanding the foregoing, the parties’ attorney-client, accountant-client,
or other legal privileges will not be waived by virtue of these provisions.

 

-17-

--------------------------------------------------------------------------------

C. Patient Confidentiality. Notwithstanding anything in this Agreement,
including Section 13(B), Longs is not required to provide the names of patients,
and may otherwise limit the provision of information to ABDC so as to comply
with any applicable privacy laws.

 

14. SOFTWARE LICENSE

A. License. ABDC grants Longs a non-exclusive, nontransferable and revocable
license to use software and related documentation ABDC provides for use in the
Program (“Software”). Longs may not make, or allow others to make, copies except
one backup copy. Longs must include all proprietary notices in permitted copies.
Longs may not modify Software or create derivative works and may not translate,
reverse engineer, disassemble or decompile Software.

B. Limited Warranty. ABDC warrants that, for ninety (90) days from the Effective
Date, (i) Software will perform substantially in accordance with its
documentation if operated as directed and (ii) hardware provided by ABDC and
diskettes, CD-ROMs or other media on which the Software is provided will be free
from defects under normal use. During the Term, ABDC (x) warrants that all
Software is provided        *        and (y) agrees to indemnify, defend and
hold harmless Longs against any claims in violation of such warranty. ABDC
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF
MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE, FOR HARDWARE AND
SOFTWARE. No oral or written information provided by ABDC, its employees or
other representatives will create any warranty.

C. Remedy. ABDC’s liability and Longs’ exclusive remedy for breach of warranties
in Section 14(B) above will be, at ABDC’s option, to (i) repair or replace
Software or hardware so it performs substantially in accordance with its
documentation, (ii) advise Longs how to achieve substantially the same
functionality using different procedures at no additional cost to Longs, or
(iii) replace defective media or infringing Software returned within the
warranty period. Such replacement will not extend the applicable warranty
period.

 

15. MISCELLANEOUS

A. Entire Agreement. Except as specifically provided herein, the Prior Agreement
is terminated as of the Effective Date, and this Agreement constitutes the
entire agreement between the parties with respect to its subject matter,
superseding all prior contemporaneous understandings or agreements, and shall
not be extended, varied, modified or supplemented except by an agreement in
writing signed by the party to be charged. No course of dealing between the
parties, nor any terms and conditions included on any invoices, receipts, bills
or shipping documents or other commercial documents exchanged between the
parties in the ordinary course of performance of this Agreement, shall be
effective to amend or supplement this Agreement or waive any term, condition or
remedy hereunder, unless such modification is reflected in a written amendment
to this Agreement, and executed by a representative of each party who has or
would reasonably be expected to have authority to execute this Agreement on
behalf of such party.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 18 -

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B. No Assignment. Neither party shall have the right to assign this Agreement or
any interest therein without the prior written consent of the other, such
consent not to be unreasonably withheld, except each party hereby consents to
the other party’s assigning part or all of its obligations to any parent,
subsidiary, and affiliate, or to any entity with which the assigning party may
merge or consolidate, or any entity which may purchase the assigning party or a
material part of its business or assets; provided, however, that (i) such entity
will assume and agree in a writing delivered to the non-assigning party to
perform the covenants of the assigning party contained in this Agreement and
(ii) the assigning party will remain responsible for any breach of this
Agreement by its assignee. The terms “parent,” “subsidiary,” and “affiliate”
refer to any parent, subsidiary, or affiliate of the assigning party, provided
such parent, subsidiary, or affiliate entity controls or is controlled by the
assigning party or by persons or entities controlling or controlled by the
assigning party. The term “control” refers to ownership of at least a majority
of the voting stock of the entity controlled. Pursuant to the foregoing, Longs
consents to ABDC’s assigning or granting a security interest in this Agreement
in connection with any financing or securitization by ABDC or any affiliate.

C. EEO Requirements. ABDC warrants it does not and will not discriminate against
any employee or applicant for employment because of race, creed, color, national
origin, religion, gender, sexual preference, veteran status, handicap or as
otherwise may be prohibited by law and will meet affirmative action obligations
as are imposed by law.

D. Independent Contractors. The relationship of the parties shall at all times
be and remain that of independent contractors and not agents of each other for
any purpose whatsoever. Neither party shall have authority to create or assume
any obligation, express or implied, in the name of or on behalf of the other or
to bind it in any manner whatsoever.

E. No Waiver. The failure of either party to enforce at any time or for any
period of time any one or more of the provisions hereof shall not be construed
to be a waiver of such provisions of the right of such party thereafter to
enforce each such provision.

F. Severability. If any provisions of this Agreement shall be held invalid under
any applicable law, such invalidity shall not affect any other provision of this
Agreement.

G. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors, and permitted assigns.

H. Choice of Law; Applicable Law; Remedies. This Agreement shall be construed in
accordance with the laws of the State of California, without regard to the rules
regarding conflicts of law, including the Uniform Commercial Code as adopted in
California. Except where a remedy is stated as being exclusive, the rights and
remedies of the parties set forth in this Agreement are not exclusive, and are
in addition to those available under applicable law.

I. Dispute Resolution. The parties will attempt in good faith to resolve any
controversy, claims, disputes, or differences of opinion arising in connection
with this Agreement (collectively, a “dispute”) first by the use in good faith
of mutual best efforts to arrive

 

- 19 -

--------------------------------------------------------------------------------

at an agreeable resolution. If, after negotiating in good faith for a period of
ninety (90) days, or any agreed further period, the parties are unable to agree,
then such dispute shall be negotiated between appointed counsel or senior
executives of the parties who have authority to settle the dispute. The
disputing party shall give the other party written notice of the dispute. Such
dispute resolution process will be deemed to be confidential as settlement
discussions. If the parties fail to resolve such dispute within forty-five
(45) days of the disputing party’s notice, either party may undertake litigation
in order to resolve any dispute connected with this Agreement. The parties agree
to refrain from filing (or to cooperate in dismissing without prejudice) any
legal action with respect to disputes regarding this Agreement prior to the
conclusion of such dispute resolution process, except actions brought in whole
or in part to compel such dispute resolution process, actions for temporary or
permanent injunctive relief or actions that counsel to such party reasonably
deems necessary to protect such party’s rights.

J. Billing Disputes;        *        . Longs will promptly submit to ABDC any
requests for credits or other billing adjustments, including billing or pricing
errors, with documentation supporting Longs’ position. Any billing or chargeback
dispute must be brought to the attention of the other party
within        *        after the first statement containing the disputed amount
(or with respect to chargeback claims, any shorter period set forth in a written
contract with a manufacturer against whom chargeback claims are asserted) or the
parties will be deemed to accept the accuracy of such statements and to waive
their right to dispute such amount, other than        *        , each of which
must be brought within the time period(s) set forth therein. Upon such request,
ABDC will promptly investigate and advise Longs whether it agrees with such
request, and make an adjustment, or it will dispute such request. If ABDC
disputes such request, in whole or in part, it will advise Longs of its reasons
for doing so, and provide Longs with documentation supporting ABDC’s position.
Upon a resolution in Longs favor, ABDC will post any adjustment to Longs’
account on the following statement. If the matter is not resolved to the
parties’ satisfaction within        *        . The parties will respond promptly
to reasonable requests from the other regarding any such matters, will exercise
all reasonable efforts to resolve any such matters within such
        *        period, and will exercise their best efforts to
avoid        *        entirely. Any such disputes that are not resolved as set
forth above, will be resolved by the parties through the dispute resolution
process in Section 15(I) and the parties agree to follow such resolution before
commencing action in any court of law concerning such dispute. Longs’ obligation
to pay for invoices will be absolute, except as set forth herein. For any such
dispute resolved in Longs’ favor (by agreement or otherwise), ABDC will post the
adjustment (net overcharges or undercharges) to Longs’ account on the following
statement (or, if later, after receiving an applicable supplier’s credit).

IN WITNESS WHEREOF, the parties have had a duly authorized officer, partner or
principal execute this Prime Vendor Agreement as of its Execution Date.

 

LONGS:     ABDC:

Longs Drug Stores California, Inc.

   

AmerisourceBergen Drug Corporation

By:

 

/s/ Bruce E. Schwallie

   

By:

 

/s/ Jerry D. Cline

Name: 

 

Bruce E. Schwallie

   

Name: 

 

Jerry D. Cline

Title: 

 

Executive Vice President

   

Title: 

 

Group Vice President

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

- 20 -

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EXHIBIT 1 TO PRIME VENDOR AGREEMENT

PRICING / PAYMENT TERMS

 

1. PRICE OF GOODS

A. Branded Rx Products and        *        Products

1. The Price of Goods for Branded Rx Products and for        *        Products,
in each case, equals        *        as set forth below. In this Agreement:

 

  •   “Warehouses” means locations that order in bulk for purposes of
redistributing to Pharmacies, in each case having a minimum Net Purchase volume
of        *        per year in Product orders (including all Rx and Non-Rx
Products) from ABDC.

 

  •   “DSD” (or direct store delivery) means delivery directly to Pharmacies or
Other Facilities other than those that qualify as Warehouses or Large Volume
Facilities.

 

  •   “Large Volume Facilities” means Pharmacies or Other Facilities having an
annual Net Purchase volume of greater than         *        of Branded Rx
Products from ABDC, as determined pursuant to Section 2(A)(2) of this Exhibit 1.

2. Price of Goods for Branded Rx Products and        *        Products hereunder
will vary depending on the type of facility to which the Product is delivered,
as follows:

 

Delivery to

  

Price of Goods

Warehouses

           *        

DSD

           *        

Large Volume Facilities

           *        

B. Generic Rx Products

1.         *        . Longs will participate in the         *        Program as
set forth in Exhibit 2. The Price of Goods for Generic Rx Products within
the        *        Program shall be as provided in Exhibit 2.

2. Longs Contracted Generic Products. The Price of Goods for Longs Contracted
Generic Products will be        *        .

3. Other Generic Rx Products. (a) A        *        Price of Goods will apply to
Other Generic Rx Products procured by Longs through ABDC. For clarity, Other
Generic Rx Products does not include (i)        *        Products or (ii) Longs
Contracted Generic Products.        *        .

(b) ABDC will provide        *        report (or a        *        report if
ABDC is reasonably able to do so) to Longs of all Other Generic Rx Products
purchased at        *        or

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 1- Page 1

--------------------------------------------------------------------------------

pricing not pursuant to any contract agreement that includes: Product
description, NDC number,        *        number, quantity purchased, and invoice
price of purchase.

(c) “        *        ” pricing means        *        , subject to the terms set
forth herein. During the Term, pricing for Other Generic Rx Products
at        *        , when compared to a similar Product mix, unless otherwise
agreed.

(d) ABDC will use commercially reasonable efforts to        *        .

C. Non-Rx Products (        *        Non-Rx Products and        *        Non-Rx
Products).

1. For        *        Non-Rx Products, the Price of Goods for delivery within
the continental U.S. (that is, not Alaska, Hawaii or US Territories, “Mainland”)
is:

        *        

        *        

provided, however, that

(a)        *        ; and

(b) For clarity, as defined in Section 2(A)(1)(c)(i) of the body of the
Agreement, the term “        *        Non-Rx Products” excludes
        *        Non-Rx Products (which are priced pursuant to Section 1(C)(2)
below of this Exhibit 1); and

(c) For the avoidance of doubt, any Products that Longs purchases directly from
a manufacturer are not included in the foregoing calculations (as purchases of
either Rx or Non-Rx Products), and further, as long as orders do not exceed
levels in Section 1.1(e) of Exhibit 3, any Rx Products that Longs purchases from
other suppliers because ABDC has been unable to supply within the time periods
required in this Agreement, including under Exhibit 3, shall
be        *        ; and

(d) A “Contract Year” means the 12-month period from July 1 to the next June 30.

(e) ABDC shall provide Longs with monthly statements of its calculations of
Longs’ purchases on a Contract Year-to-date cumulative basis as compared to
the        *        .

2.         *        Non-Rx Products

(a) “        *        Non-Rx Products” are Products that are        *        .

(b) Pricing for        *        Non-Rx Products shall be        *        . Longs
may not increase its purchase of such Products following such notice so as
to        *        (i.e.,        *        ). For the purpose of clarity, ABDC
may immediately        *        Price of Goods        *        .

(c) Longs will procure directly and self-distribute most        *        Non-Rx
Products.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 1- Page 2

--------------------------------------------------------------------------------

3. Hawaii. The Price of Goods for Non-Rx Products purchased hereunder for
delivery in Hawaii is set forth in Exhibit 5.

D. Additional Pricing Terms.

1. The Price of Goods set forth in Subsections (A) through (C) above includes
ABDC’s Program fees for distribution and other Services as provided herein.

2. ABDC will add to the invoiced amount, to be shown as a separate line item,
any applicable sales, use or other similar taxes assessed on sale of Products to
Longs hereunder, subject to any applicable exemption or resale certification
provided to ABDC by Longs pursuant to which such taxes are not assessed.

3. Drop shipments        *        , will be provided by ABDC        *        .
Longs will pay the applicable Price of Goods and         *        related to
drop shipments, if any, resulting from        *        .

 

2. PAYMENT TERMS

A. Due Dates.

1. Payment terms for Products purchased hereunder will vary depending on the
type of facility to which the Product is delivered, as follows (as such terms
are defined in Section 1 of this Exhibit 1):

 

Delivery to

  

Payment Term

Warehouses

           *        days from invoice date

DSD

           *        days from invoice date

Large Volume Facilities

           *        days from invoice date

2. Whether Products sold for delivery to a particular Pharmacy or Other Facility
qualify for Large Volume Facility payment terms will be
determined        *        . Prior to the Effective Date (or when a new Pharmacy
or Other Facility begins purchasing under this Agreement), Longs
will        *        , and those Pharmacies and Other Facilities will
be        *        for that Contract Year. In each following Contract Year, each
Pharmacy and Other Facility will be categorized as either a Large Volume
Facility or not based on        *        . Whether based on Longs’ initial
designation or any subsequent re-categorization, each Pharmacy and Other
Facility will remain        *        ; provided, however, Longs
may        *        . Such notice must provide updated projections for Net
Purchase volumes at least thirty (30) days before they are effective, which
changes will be effective only on the first of a calendar month.

B. Payment. Except as otherwise provided in this Agreement, all payments must be
received for deposit to ABDC’s account by the due date by EFT. Except as
otherwise provided in this Agreement, all amounts payable by ABDC to Longs
hereunder (including invoice

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 1- Page 3

--------------------------------------------------------------------------------

adjustments for short deliveries) shall be paid (typically as an invoice credit)
within        *        from date of notice thereof, failing which Longs shall be
entitled to        *        .

C.         *        . Longs may request from time to time in writing that forms
of invoice or other shipping statements sent to its Pharmacies or Other
Facilities        *        . Such        *        will be        *        by
means of        *        ) delivered to Longs as directed by the Longs Corporate
Vice President-Controller. ABDC will exercise its best efforts
to        *        to Longs within        *        of the end of
each        *        , and in any event will do so not later
than        *        of the end of each        *        , with respect to the
prior        *        . At the time ABDC provides such a        *        to
Longs, ABDC will provide documentation to Longs that identifies (1) each
affected invoice, (2) each Product covered by the invoices, (3) the amount Longs
paid for each Product, and (4)        *        .

D. Discount. With respect to any discounts, rebates or other price reductions
that qualify as “discounts” under 42 C.F.R. §1001.952(h) (the “Discount Safe
Harbor”), which are provided by ABDC pursuant to this Agreement: (1) ABDC will
comply with applicable laws, including applicable reporting and other
obligations imposed on “sellers” under paragraph (h)(2) of the Discount Safe
Harbor, including the requirement that sellers fully and accurately report the
discounts that they provide to buyers on invoices or other statements submitted
to buyers, and (2) Longs will comply with applicable laws, including applicable
reporting and other obligations imposed on “buyers” under paragraph (h)(1) of
the Discount Safe Harbor, including the requirement that, upon request, buyers
provide certain information to the Secretary of the U.S. Department of Health
and Human Services or a state agency.

 

3. TOTAL BRANDED Rx NET PURCHASE VOLUME

Longs’ aggregate Net Purchase volume of Branded Rx Products under this Agreement
will be no less than        *        (“Total Branded Rx Net Purchase Volume”)
within a period of        *        , subject to termination of the Agreement as
provided in Section 7(A) of the Agreement. In the event Longs fails to do
so,        *        .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 1- Page 4

--------------------------------------------------------------------------------

EXHIBIT 2 TO

PRIME VENDOR AGREEMENT

        *        PROGRAM

1.             *            Program

1.1 Longs shall participate in ABDC’s        *        Program as set forth
herein. Longs shall participate in the        *        Automatic Compliance
Assurance Program (“ACAP”). Except as otherwise provided in Section 5 of this
Exhibit 2, Longs shall purchase        *        of all Generic Rx Products it
purchases by making such purchases under the        *        Program.

1.2 ABDC’s guidelines, which it has typically sought from manufacturers for
participation in the        *        Program, are as follows:

 

  (a)         *        .

 

  (b)         *        .

 

  (c)         *        .

 

  (d)         *        .

 

  (e)         *        .

 

  (f)         *        .

2. ABDC Program. ABDC will provide a Generic Rx Product purchasing program for
the Term. Specifically, this program will include contracting with Generic Rx
Product manufacturers and suppliers, and all functions associated with such
contracting, either through the        *        Program or outside of such
program. Such functions include, but are not limited to:

 

  a.         *        

 

  b.         *        

 

  c.         *        

 

  d.         *        

 

  e.         *        

 

  f.         *        

 

  g.         *        

 

  h.         *        

 

  i.         *        

 

  j.         *        

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 2- Page 1

--------------------------------------------------------------------------------

3. Pricing Adjustment.

3.1 Price Adjustments or Allowances. ABDC will pass along to
Longs        *        in connection with Products sold within the
        *        Program,        *        , but are not limited to, the
following:

a.         *        

b.         *        

c.         *        

d.         *        

e.         *        

f.         *        

g.        *        . To the extent that        *        Products
manufacturers        *        , ABDC will        *        to
Longs        *        ). By way of example, if
the        *        is        *        , then        *        from ABDC would
be        *        .        *        . The parties will exercise mutual good
faith efforts to        *        . For clarity, Longs has agreed to
limit        *        to        *        for the sole purpose
of        *        . As such, other than        *        , with respect to which
Longs will receive        *        , it is the parties’ mutual intent that Longs
will receive        *        related to Longs’ purchases through
the        *        Program.

3.2 Payment of        *        . ABDC will pay to Longs all        *        with
respect to a particular        *        . ABDC will not recognize payments that
are contingent or subject to being refunded until they are earned, and ABDC will
pay to Longs its        *        ; provided, however, any such        *        .

3.3         *        . During the Term, Longs will
receive        *        .        *        payments will be provided together
with documentation sufficient to verify the nature and extent of costs incurred
by Longs for an audit under § 1861(v)(1)(l) of the Social Security Act, as
amended.

3.4 ACAP System. At Longs’ request, ABDC agrees to utilize its ACAP System (as
defined in Section 1.1 of Exhibit 2) to force substitute Products onto Longs
Contracted Generic Products.

4. Product Selection. ABDC regularly provides a formulary list of Products
available under its generally applicable retail         *        Program. The
Products available to Longs under the        *        Program under this
Agreement will be those Products listed on such formulary list as modified from
time to time under ABDC’s generally applicable
program,        *        .        *        . Under the         *        Program,
ABDC will automatically substitute orders for a particular manufacturer of Rx
Product with the equivalent Generic Rx Product manufacturer designated by the
parties,        *        . During ABDC’s        *        :

 

  a)         *        .

 

  b)         *        .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 2- Page 2

--------------------------------------------------------------------------------

  c)         *        .

 

  d)         *        .

5.         *        .

5.1         *        .

5.2        *        .

5.3        *        .

5.4        *        .

 

  (i)         *        .

 

  (ii)         *        .

 

  (iii)         *        .

6. Own Use Compliance. Under the ABDC        *        Program, Longs represents
that all        *        Products purchased are for Longs “own use” as defined
under applicable law, regulations and rules thereunder.

7.         *        Service Level. The        *        Program has fulfillment
and delivery service levels as set forth in Exhibit 3.

8. Pricing.

8.1 ABDC will sell the Products and provide the Services contemplated by this
Exhibit 2 (for Generic Rx Products provided to Longs through
the        *        Program and for Generic Rx Products purchased by Longs
through ABDC pursuant to Longs Contracted Generics Products contracts) at the
prices as set forth below. The parties will comply with Section 2(B)(3)
(Contract Administration) of this Agreement regarding its contracts with Generic
Rx Product manufacturers to be administered by ABDC.

 

Products

  

Price of Goods

        *        Products

           *        

Longs Contracted Generic Products

           *        

Other Generic Rx Products

           *        

8.2 “        *        ” is defined as (i) with respect to Products purchased by
Longs from ABDC under the        *        Program, the        *        , and
(ii) with respect to Longs Contracted

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 2- Page 3

--------------------------------------------------------------------------------

Generics Products purchased by Longs through ABDC, the        *        . For
purposes of clarity,        *        ; pursuant to other provisions, ABDC
will        *        to Longs in connection with        *        Products and
Longs may receive        *        (        *        ).
Any        *        (        *        ).

8.3 The “        *        ” equals        *        of the        *        of
the        *        purchased from ABDC hereunder.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 2- Page 4

--------------------------------------------------------------------------------

EXHIBIT 3 TO

PRIME VENDOR AGREEMENT

ORDERS AND DELIVERY

In addition to the services described in this Agreement, the following terms
shall apply to ABDC in connection with Longs’ purchases of Products hereunder.

1. Adjusted Service Level Commitment.

1.1 Calculation of Adjusted Service Level Commitment. ABDC’s service level is
the         *         (“Adjusted Service Level”) each calendar month. ABDC’s
computerized reports will be used to determine the actual level achieved. Any
systems for automatic substitution of Products will be implemented only upon
agreement of both parties.

 

  a. any Product which is         *         will not be considered in the
calculation (         *         );

 

  b. a Product         *         will not be counted         *         ;

 

  c. where only a         *         quantity is received, it will be considered
        *         ;

 

  d. any new Product or Product previously not ordered by Longs from ABDC
        *         ;

 

  e. the quantity of Product ordered in excess of         *         for such
Product on an aggregate basis for all Pharmacies served by a particular DC
        *         ; and

 

  f.         *         , to the extent         *         is caused by such
circumstances.

1.2 Service Level. ABDC guarantees that it will meet the following Adjusted
Service Levels of all Products in each category ordered by Longs from each DC to
the ordering Pharmacy by the next delivery day following receipt of the order by
ABDC, adjusted pursuant to Section 1.1 above (“Adjusted Service Level
Commitment”). Satisfaction of the Adjusted Service Level Commitment will be
determined         *         .

 

  1.2.1  Branded Rx. ABDC will meet a         *         Adjusted Service Level
Commitment for all Branded Rx Products.

 

  1.2.2          *         . ABDC will meet a         *         Adjusted Service
Level Commitment for all         *         Products.

 

  1.2.3  OTC. ABDC will meet a         *         Adjusted Service Level
Commitment for all OTC Products.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 3- Page 1

--------------------------------------------------------------------------------

1.3 Failure to Meet Adjusted Service Level Commitment. If the Adjusted Service
Level Commitment is not met for any Product category by any DC for any month,
ABDC shall         *         for such failure to meet the applicable Adjusted
Service Level; provided, however, (i)         *         ; and
(ii)         *         , and remain subject to         *         .

1.4         *         . If service         *         unless doing so would
adversely affect         *         ; provided, however,         *         .

1.5 Compliance. In order to determine ABDC’s compliance with the Adjusted
Service Level Commitment, ABDC will         *         .

1.6 Longs’ Estimates. Longs will provide its estimated usage on new or
irregularly ordered Products with         *         prior to (i) the first order
of such Products from ABDC (both new Products and Products that have not been
ordered during the prior         *         ) or (ii) any significant increase or
reduction in Net Purchases of a Product.         *         .

1.7.         *         Service Level. The         *         Adjusted Service
Level Commitment will be         *         , provided, however, that any orders
filled with Products         *         shall constitute filled orders.

1.8         *         for Service Level Deficiency. In the event that
        *         during any         *         . Longs will promptly notify ABDC
there is a         *         and ABDC will have         *         . If ABDC
fails to meet the Adjusted Service Level Commitments over the
        *         , Longs will         *         .

2. On-Site Representation. ABDC will assign on         *         specific and
qualified ABDC associate (the “Associate”), who will be         *         , who
will be under the supervision of         *         and who will be
        *         , to facilitate exchange of information between Longs and
ABDC. As between ABDC and Longs, the Associate will operate as and have the
status of an employee of ABDC and will not act as or be an agent or employee of
Longs. All of the Associate’s activities will be at ABDC’s risk, and the
Associate will not be entitled to workers’ compensation or similar benefits or
other insurance protection provided by Longs. As the employer of the Associate,
ABDC will be solely responsible for supervising the Associate and determining
the means and methods by which the Associate performs his or her tasks.

3. ABDC’s Generic Autoship Responsibilities. For all new Generic Rx Product
launches, ABDC will offer         *         . Specifically, ABDC will, at Longs’
choosing,         *         .

4. Delivery Terms.

4.1 Mainland Pharmacies. Deliveries shall be made at the times and according to
the schedules as set forth in Section 3(B) of the Agreement.         *         .

4.2 Escalante, ADP and RxD. In each case, deliveries to Escalante, ADP and RxD
exclude holidays         *         . Other central fill pharmacies, Mail Order,
Specialty Pharmacies, LTC

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 3- Page 2

--------------------------------------------------------------------------------

Pharmacies and Warehouses, and services provided to any PBM operations, will be
added to this Agreement upon mutually agreed delivery terms.

4.3 Hawaii Pharmacies. Delivery terms for Hawaii are as set forth in Exhibit 6.

5.         *         . ABDC will assist Longs with the
        *         utilized by Longs as follows. ABDC will         *         and,
instead, Longs will         *         . ABDC will         *         . Longs may
process         *         .

6. Orders; Cut-Off Times.

6.1 Non-Rx Product Orders. Orders for Non-Rx Products will be placed in
multiples based on manufacturer’s shelf-pack sizes or, if there is no shelf-pack
for such Product, the minimum order will be three (3) of each SKU ordered. All
orders for Non-Rx Products for delivery to Mainland Pharmacies must be received
by ABDC no later than 4:00 p.m. (local time at ABDC’s serving DC) on the
preceding day.

6.2 Orders Excluded from Adjusted Service Level Commitment. Orders for and
delivery of Non-Rx Products pursuant to Section 1(C) of Exhibit 1 in the event
that Longs’ Warehouse cannot supply such Non-Rx Products that it normally stocks
will be excluded from calculation of any Adjusted Service Level Commitment of
ABDC, pursuant to Section 1.2 hereof.         *         .

7. Stocking of Non-Rx Products. ABDC will use its normal business logic for
stocking or not stocking Non-Rx Products; provided, however,         *         .

8. Deduction Process. ABDC will not         *         , and only if ABDC has an
appropriate accounting balance to support a deduction. If ABDC deducts an amount
on Longs’ behalf and         *         .

9. Prompt Notification of Longs         *         . ABDC will use commercially
reasonable efforts to notify Longs of         *         , including
        *         , within         *         of the occurrence of such change.

10. Prompt Notification of         *         . In the event ABDC
        *         , ABDC must         *         . Longs will notify ABDC of
        *         , and the parties will meet to review such         *         .
Failure to provide such prompt notification is not a default under this
Agreement,         *         .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 3- Page 3

--------------------------------------------------------------------------------

EXHIBIT 4 TO

PRIME VENDOR AGREEMENT

RETURNED GOODS POLICY

1. Returned Goods Policy

1.1 ABDC Returns Policy. ABDC will fully credit Longs for all its order filling
errors of both Rx and OTC Products not stocked in a Warehouse, all Rx and OTC
Products received from ABDC unsaleable (including short-dated), and all Rx and
OTC Products ordered in error within thirty (30) days of the invoice date. Other
than drop shipments or Products for which the manufacturer prohibits ABDC from
taking returns (with regard to which ABDC will facilitate returns to the
manufacturer), Longs may return to ABDC         *         any of the Products
ABDC ships (i) that do not conform to the representations and warranties set
forth in Section 8 of the Agreement, or (ii) that are not of sound and
merchantable quality (or otherwise unsaleable). ABDC may charge a service fee on
the cost of other salable returned Products during the Term of this Agreement.
The service fee for saleable Products returned after thirty (30) days is: Rx
Products         *         ; and Non-Rx Products         *         .

1.2 Credit Returns         *         .         *         .

1.3 Products Dating. ABDC will use its commercially reasonable best efforts to
deliver Products to Longs with at least         *         remaining prior to
Product expiration date) where available, and otherwise with best available
dating based on deliveries from the manufacturer. Longs may consider any Product
received with dating of less than         *         as not “saleable” hereunder,
and may, at its option, return it for full credit or replacement (i.e. Longs
will         *         for the Product and ABDC will         *         ).

1.4 Unsaleable Product Returns. Except as set forth in Section 1.3 above,
outdated and store damaged Products returned for credit to ABDC are subject to a
handling fee based on then-current         *         . The service fee for
unsaleable returned Products is: Rx Products         *         ; and Non-Rx
Products         *         .

1.5 New Pharmacy         *         Program. Any Pharmacy that is acquired by
Longs that will be serviced by ABDC under this Agreement will be permitted
        *         . Longs may return for full credit any saleable Product with
        *         but only if         *         . In all other respects,
standard return policies and guidelines set forth in this Agreement apply.

2. Exceptions to Returned Goods Policy. Longs may not return for credit to ABDC
Non-Rx Products that are stocked by Longs in a Warehouse, except:

2.1 Products received from ABDC pursuant to filling errors or received in
damaged condition by Longs from ABDC, which Products must be reported pursuant
to ABDC’s Returned Goods Policy;

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 4- Page 1

--------------------------------------------------------------------------------

2.2 In Hawaii, Products received from ABDC included on the         *         (as
defined Section 1.3 of Exhibit 5) for which ABDC is the primary supplier,
subject to the following terms: (i) saleable Products included on the
        *         returned for credit to ABDC within         *         from date
of invoice will         *         , (ii) saleable Products included on the
        *         returned for credit to ABDC after         *         from date
of invoice will be subject to a handling fee equal to         *         , and
(iii) outdated, store-damaged or otherwise unsaleable Products included on the
        *         returned for credit to ABDC will be subject to a handling fee
equal to         *         .

3. Return Procedures. Longs’ credit and return requests should be entered
electronically as appropriate for ordering errors, defects and outdated and
overstocked Products. Longs shall use commercially reasonable efforts to notify
ABDC of requests for credits involving billing errors, Products damaged in
shipment, shortages, and filling errors as soon as possible (e.g., within
        *         of its discovering the error), by telephone to ABDC’s customer
service-returned goods department at the serving DC, provided, however,
        *         and provided, further, that claims for shortages and damaged
controlled substance Products must be reported in compliance with applicable DEA
requirements. Return credits are typically issued         *         after ABDC
receives returned Product.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 4- Page 2

--------------------------------------------------------------------------------

EXHIBIT 5 TO

PRIME VENDOR AGREEMENT

SERVICES IN HAWAII

1. Pricing. The Price of Goods and other pricing and terms regarding sale of
Products for delivery in Hawaii shall be the same as the corresponding pricing
and terms regarding sale of Products for Mainland delivery, except as set forth
in this Exhibit 5.

1.1 Rx Products. Pricing of Rx Products in Hawaii shall be the same as the
corresponding pricing of such Products for Mainland delivery.

1.2. Non-Rx Products. Non-Rx Products, including OTC Products and HBC Products,
may be purchased for Hawaii DSD delivery, and the Price of Goods of Non-Rx
Products in Hawaii will be:

 

Products on the         *         (defined below), and any Longs’
        *         Products (as agreed below)

           *        

All other         *         Non-RX Products (other than (i) Products on the
        *         and (ii)         *         Products), including
non-         *         Longs’ Private Label Products

           *        

        *         Products

           *        

1.3         *         . Prior to the Effective Date, Longs and ABDC Hawaii
representatives will agree upon         *         . Effective July 1, 2007,
        *         . The Products on the         *         may be changed from
time to time by agreement of the parties’ local representatives, and if mutually
agreed may include         *         , provided, however, that (unless otherwise
agreed) the         *         is not expected to include         *         .

1.4 Longs’         *         Products. Products that Longs includes in its
        *         shall be at the         *         , whether or not on the
        *         , but only to the extent         *         .

1.5 Hawaii         *         Non-Rx Product List. The parties will agree upon a
list of Non-Rx Product categories that, to the extent ordered by Longs for
Hawaii delivery, will be priced at         *         (“Hawaii
        *         Non-Rx Product List”); provided, however, the Products on the
Hawaii         *         Non-Rx Product List shall not include Products on the
        *         . ABDC will work with Longs to mutually manage the Hawaii
        *         Non-Rx Product List. ABDC shall determine the pricing for
Hawaii         *         Non-Rx Products as provided in Section 1(C)(2)(b) of
Exhibit 1; provided, however, the Price of Goods for Hawaii
        *         Non-Rx Products may differ from the applicable Price of Goods
for Mainland Pharmacies.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 5- Page 1

--------------------------------------------------------------------------------

2. Orders. Orders for Non-Rx Products will be placed in multiples based on
manufacturer’s shelf-pack sizes or, if there is no shelf-pack for such Product,
the minimum order will be three (3) of each SKU ordered.

3. Delivery.

3.1 Week-Day Pharmacy Delivery. Normal delivery to Pharmacies in Hawaii is five
(5) days a week at no additional charge (other than pass-through freight charges
for delivery to neighbor island (non-Oahu) Pharmacies). ABDC will for the
specified charge provide the following additional delivery services for
Pharmacies in Hawaii (“Hawaii Delivery”). Hawaii Delivery includes (i) Saturday
delivery of Products from ABDC’s Hawaii DC to all Pharmacies within Hawaii and
(ii) delivery of completed prescriptions from HRx to Pharmacies from which such
completed prescriptions originated (each an “Originating Pharmacy”) in Hawaii.

3.2 Saturday Pharmacy Delivery Fee. ABDC will provide Saturday delivery of
Products for the following additional delivery fees, which may be adjusted
        *         :

 

Oahu Pharmacies (monthly):            *         per Pharmacy
        *         Pharmacies =         *         Neighbor island (non-Oahu)
Pharmacies:            *         per Pharmacy (per delivery) for the first
        *         pounds;         *         per pound thereafter

3.3 Central Fill Delivery Services. (a) ABDC will provide certain central fill
delivery services as set forth in this Section 3.3 (“CF Delivery Services”).
ABDC will deliver prescriptions processed by HRx (“Delivered Prescriptions”) to
Originating Pharmacies designated by Longs, including Oahu Pharmacies and
neighbor-island (non-Oahu) Pharmacies, once daily Monday to Saturday (picked-up
from HRx the prior evening, Sunday to Friday). HRx will place each Delivered
Prescription in a sealed container (tote) bearing the name and address of the
Originating Pharmacy. Thereafter, ABDC will deliver each tote containing
Delivered Prescriptions to the applicable Originating Pharmacy. ABDC will
include Delivered Prescriptions to Originating Pharmacies with deliveries that
ABDC is already making to such Originating Pharmacies.

(b) Longs will designate Originating Pharmacies from among the Pharmacies to
which ABDC makes daily deliveries within the normal trading area served by
ABDC’s Hawaii DC. Longs will pay ABDC the fee (“CF Delivery Fee”) described in
Section 3.4 hereof for Delivered Prescriptions to each Originating Pharmacy
designated by Longs to receive Delivered Prescriptions. For a Pharmacy that is
not an Originating Pharmacy by Longs (e.g. CF delivery due to exceptional
circumstances), a CF Delivery Fee will be separately determined, in good faith,
taking into consideration ABDC’s cost of providing such delivery service. The
parties will comply with provisions for maintaining the confidentiality of
patient information set forth in Section 13(B) and (C) of the Agreement.

(c) If HRx relocates to a site that is farther from ABDC’s Hawaii DC, the
parties will negotiate in good faith to revise the CF Delivery Fee.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 5- Page 2

--------------------------------------------------------------------------------

(d) ABDC also will provide twice-daily delivery of Products from ABDC’s DC to
HRx (Monday to Friday).

3.4 CF Delivery Fee. The current CF Delivery Fee is         *         per month
per Originating Pharmacy designated by Longs         *         per Pharmacy x
        *         Pharmacies =         *         ). Additionally, Longs will pay
pass-through freight charges for overnight courier services for Delivered
Prescriptions (currently         *         for the first
        *         pounds and         *         per additional pound) to the
neighbor island (non-Oahu) Pharmacies. The CF Delivery Fee may be adjusted to
        *         , and ABDC will endeavor to provide         *         .

3.5 Billing. Hawaii CF Delivery Services will be billed monthly and paid
        *         days from the invoice date. Neighbor island (non-Oahu)
Pharmacies will have Hawaii Delivery service fees included in each Pharmacy’s
monthly detail billing statement. Currently, CF Delivery Services are provided
to         *         Pharmacies. Either party may discontinue all or some of the
Hawaii CF Delivery Services upon 30 days’ prior written notice to the other
party; provided, however, Longs will not         *         .

3.6         *         Delivery Services. All Hawaii Pharmacies will receive two
        *         deliveries per week. Any additional
        *         deliveries required by Longs will be subject to an additional
        *         charge per delivery, which may be adjusted to
        *         . Additionally, all neighbor-island (non-Oahu) Pharmacies will
be charged         *         .

4. HazMat Restrictions. Each month, ABDC will deliver to HRx a list of Products
carried by ABDC to which Federal Aviation Administration (FAA) or other shipping
restrictions apply (“Hazardous Material”). In order to minimize the risk HRx
could, by mistake, ship any Hazardous Material, for any products not supplied by
ABDC, HRx shall obtain ABDC’s written approval prior to delivery of such
products to ABDC. Every Product identified as Hazardous Material that is kept in
inventory by HRx will be segregated (electronically or physically) from other
Products and clearly marked to indicate applicable shipping requirements,
limitations and restrictions. Longs will ensure that each of its HRx employees
is fully trained to understand the risks associated with shipping Hazardous
Materials, how to avoid shipping Hazardous Material by mistake, and the need to
properly label Hazardous Materials that are shipped. Longs will not deliver to
ABDC any Hazardous Material in connection with Delivered Prescriptions.
Notwithstanding the foregoing, should Longs include any Hazardous Material in
any Delivered Prescription, it will properly label such shipment and, under the
Agreement, will indemnify ABDC and its employees and agents against any claims
for failure to do so.

5. Patient Confidentiality.

5.1 Data associated with Delivered Prescriptions remains the exclusive property
of the Originating Pharmacy.

5.2 HRx will deliver Delivered Prescriptions for pick up by ABDC in a separate
sealed container (tote) for each Originating Pharmacy. On the exterior of any
sealed tote, there

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 5- Page 3

--------------------------------------------------------------------------------

will be no Protected Health Information and no information to indicate the type
or quantity of pharmaceuticals it contains.

6. Private Label Products. Longs private label Products will be sold in
full-case quantities only.

7. Conditions. It is Longs’ intention and ABDC’s expectation that Longs will
        *         of Products in Hawaii, approximately consistent with their
respective historical levels.         *         .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 5- Page 4

--------------------------------------------------------------------------------

EXHIBIT 6 TO

PRIME VENDOR AGREEMENT

CENTRAL FILL PHARMACY SERVICE

1. SRx Delivery Services. ABDC’s serving DCs in Corona, California and Valencia,
California will deliver completed filled prescriptions from Longs’ Southern
California central fill pharmacy, served by ABDC’s Valencia DC (“SRx”), to each
Originating Pharmacy served by ABDC’s Corona and Valencia serving DCs for a
delivery fee of         *         . Longs will submit to ABDC a monthly summary
report of this service, and ABDC will invoice SRx on a monthly basis for such
service.         *         . Completed filled prescriptions from SRx must be
delivered to the appropriate ABDC serving DC by no later than
        *         , and each must be properly marked and ready for shipment to
the Originating Pharmacy. ABDC’s Corona and Valencia serving DCs will deliver
completed filled prescriptions received from SRx within the applicable order
cut-off time to each Originating Pharmacy         *         on the next day on
which such serving DC is making deliveries to such Pharmacy. SRx will deliver
completed prescriptions to the serving DC in a separate sealed container (tote)
for each Originating Pharmacy. On the exterior of any sealed tote, there will be
no Protected Health Information and no information to indicate the type or
quantity of pharmaceuticals it contains. Data associated with delivered
prescriptions remains the exclusive property of the Originating Pharmacy.

2. Escalante Delivery Services. ABDC’s Sacramento serving DC will deliver
completed filled prescriptions from Escalante to each Originating Pharmacy
served by ABDC’s Sacramento DC for a delivery fee of         *         . Longs
will submit to ABDC a monthly summary report of this service, and ABDC will
invoice Escalante on a monthly basis for such service. ABDC will
        *         . ABDC’s Sacramento serving DC will pick up (or cause to be
picked up) from Escalante completed filled prescriptions in sealed containers
bearing the name and address of the Originating Pharmacy for delivery to the
Originating Pharmacy         *         on the next day on which ABDC’s
Sacramento serving DC is making deliveries to such Pharmacy. Escalante will
deliver completed prescriptions for pick up by ABDC in a separate sealed
container (tote) for each Originating Pharmacy. On the exterior of any sealed
tote, there will be no Protected Health Information and no information to
indicate the type or quantity of pharmaceuticals it contains. Data associated
with delivered prescriptions remains the exclusive property of the Originating
Pharmacy.

3. HRx Delivery Services. ABDC’s delivery services of completed filled
prescriptions from HRx (Longs’ Hawaii central fill pharmacy) are described in
Exhibit 5.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 6- Page 1

--------------------------------------------------------------------------------

EXHIBIT 7 TO

PRIME VENDOR AGREEMENT

        *         PROGRAM

ABDC will provide the following services (“         *         Program Services”)
to Longs in connection with prescriptions dispensed by certain Pharmacies as
contract pharmacies for one or more “         *         ” under
        *         .

1. Under terms of this Exhibit 7, ABDC will invoice the         *         and
the         *         will purchase and take title to Product dispensed on its
behalf by Longs.         *         .

2. For each         *         to which it intends to provide contract pharmacy
services (         *         ), Longs will enter into a contract pharmacy
agreement, which agreement meets all requirements for contract pharmacy
agreements under the         *         program.

3. Each         *         (         *         ) must enter into an agreement
with ABDC pursuant to which it will agree to purchase from ABDC Product
dispensed to the         *         patients by Longs, and ABDC will invoice the
        *         pursuant to terms in such agreement. The applicable cost-plus
percentage will vary according to payment terms selected by the
        *         . Each         *         must meet ABDC’s credit and other
requirements,         *         . The agreement between ABDC and the
        *         will identify which Pharmacy the         *         has
designated as its contract pharmacy.         *         .

4. In response to a valid prescription from a         *         for one of its
patients, Longs will dispense the prescription out of its existing inventory.

5. Longs will collect from the patient any applicable co-payment or deductible
pursuant to the agreement between Longs and the         *         .

6. Longs will send information on such dispensed prescriptions to its wholly
owned subsidiary, Rx America (“Administrator”). No less than once every two
weeks, on Monday by 5:00 p.m. (Pacific) or as otherwise agreed, Longs will
submit to ABDC by EDI transmission from the Administrator the number of
wholesale units (SKUs) that Longs has dispensed to patients of each
        *         with which ABDC has a purchasing agreement. Reported wholesale
units must be whole units, with no partials. Additionally, unless permitted by
        *         regulations and mutually agreed by the parties,
        *         . The report will identify which Pharmacy is
        *         . Such transmission will be in the standard communication
format utilized by the parties, including the Administrator. The Administrator
will not transmit any patient identifiable information to ABDC.

7. In response to such report from the Administrator, ABDC will ship Product to
the applicable Pharmacy that is the contract pharmacy for the
        *         as inventory to replenish Product it dispensed to patients of
such         *         .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 7- Page 1

--------------------------------------------------------------------------------

8. Within ten (10) days, ABDC will invoice each         *         directly
pursuant to the agreement between ABDC and such         *         so that the
        *         will take title to the         *         . ABDC will send a
copy of such invoice to Longs.

9.         *         .

10. Pursuant to the agreement between Longs and the         *         , Longs
will invoice the         *         for services Longs has provided, including
dispensing fees (less any co-payment, deductible or other payment collected from
patients).

11. ABDC will provide the Administrator with the         *         price file
        *         , and file updates on interim drug pricing changes
        *         , in a format acceptable to the parties, including the
Administrator.

12. Longs must promptly provide a signed and notarized         *         .
        *         .

13. Longs represents and warrants that, for each report submitted pursuant to
Section 6: (A) all information will be accurate and complete and not misleading
in any respect; (B) only the Pharmacy named on the self-certification form has
provided services to the         *         under such form or as may be approved
by         *         ; and (C) all Products were dispensed to patients of a
        *         and none were diverted or sold to anyone else.

14. The relationship in this Exhibit 7 has been negotiated by the parties at
arms’ length, with a fair market value to the relationship and transactions that
are contemplated, and nothing in this Exhibit 7 is intended to confer a benefit
that would, in any respect, constitute an inducement or otherwise implicate
fraud and abuse and anti-kickback rules under Medicare/Medicaid.

15. Longs will indemnify and defend ABDC, its employees and representatives
against all Claims arising out of performance of Longs’ obligations under this
Exhibit 7, including any Claims by ABDC due to a breach by Longs of terms in
this Exhibit 7 and representations and warranties in Section 13. ABDC will
indemnify and defend Longs, its employees and representatives against all Claims
arising out of performance of ABDC’s obligations under this Exhibit 7, including
any Claims by Longs due to a breach by ABDC terms in this Exhibit 7.

16. Either party may suspend or terminate         *         , with or without
cause, upon ninety (90) days’ written notice.

17. Each party represents that it will comply fully with all federal and state
laws applicable to         *         programs, including maintaining correct and
complete records for at least six (6) years following the date of each
transaction, and cooperating with, and making such records available for, an
audit during regular business hours upon thirty (30) business days’ notice. The
auditing party will bear all costs and expenses associated with such an audit.
Records subject to such audit include: prescription records; drug purchase
records; prescription claim records transmitted by Longs to ABDC; claim records
transmitted from Administrator to ABDC; records of billings to
        *         ; records of payments on behalf of         *         to ABDC;
records of chargebacks from manufacturers; and credits back from ABDC to Longs.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 7- Page 2

--------------------------------------------------------------------------------

EXHIBIT 8 TO

PRIME VENDOR AGREEMENT

ADDITIONAL VALUE-ADDED SERVICES

1. Services. ABDC will also provide the following Services in connection with
the Agreement throughout the Term as provided herein.

A. The following Services are offered to Longs by ABDC         *         :

 

  •   Bar-Coded Shelf Labels

 

  •   DEA Scheduled Pharmaceuticals Purchased Report

 

  •   Monthly Usage and 80/20 Report

 

  •   Price stickers – Rx and OTC

B. The following Services are to be provided to Longs by ABDC for the
        *         under the Agreement:

 

  •           *         Program as set forth in Exhibit 2

 

  •   Orders, Delivery and Other Services as set forth in Exhibit 3

 

  •   Returned Goods Policy as set forth in Exhibit 4

 

  •   Services in Hawaii as set forth in Exhibit 5

 

  •   Central Fill Pharmacy Service as set forth in Exhibit 6

 

  •           *         as set forth in Exhibit 7

C. Representatives of ABDC and Longs will meet         *         to review
Services, reports and other operations or logistics matters
(“         *         Service Review”). Representatives of ABDC and Longs will
meet at least         *         to review implementation of the Agreement and
any other matters bearing on the relationship between them with regard to this
Agreement (“         *         Business Review”).

D. As         *         , the parties may from time to time mutually agree to
        *         , including agreeing to         *         as the parties
mutually agree. Further, ABDC will         *         and will offer
        *         .

E. For clarity, as of the Effective Date, the         *         was discontinued
for all Pharmacies         *         and all         *         were deleted.

2. Ordering & Reporting Software and Hardware

A. ABDC will make available the following ordering and reporting software and
hardware.

 

  •   Custom reporting software for         *         per installation.

 

  •   Internet ordering software (Catalog and Order Entry (COE), iECHO or
similar software, as appropriate) for         *         per installation.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 8- Page 1

--------------------------------------------------------------------------------

  •   iScan hardware (current technology) for a purchase fee of
        *         per unit and iScan software and maintenance for
        *         per month per installation.

 

  •   UltraPhase/Telxon handheld electronic order entry terminal (two units per
Pharmacy or Other Facility) for         *         per installation, with
additional units available at a monthly fee of         *         /unit. ABDC
must identify to Longs any Pharmacies that are using more than two such units as
of the Effective Date, and Longs will have         *         .

 

  •   Any such hardware may be used solely with ABDC’s ordering and reporting
software. Longs is responsible for hardware maintenance and repair

B. ABDC retains title to all ordering and reporting hardware and software and,
pursuant to the applicable terms of the Agreement, Longs must return them upon
termination of this Agreement.

3. AutoMed

AutoMed has         *         , provided that (a) Longs is a party to and
remains in compliance with this Agreement (including its obligation to use ABDC
as its primary vendor (as defined in Section 2(A)(1)(a) of the Agreement), and
(b) Longs becomes a party to and remains in compliance with a definitive
agreement with AutoMed that defines the other terms and conditions of any such
transactions as agreed to by Longs and AutoMed.

4. Compliance with         *         .

A. Pursuant to the Prior Agreement (as amended by the 15th Amendment), ABDC
provided Longs with certain information relating to         *         . The
parties will meet monthly beginning July 2006 to         *         . Beginning
in November 2006, such meetings may occur on a weekly basis upon the request of
either party unless Longs has assured ABDC it will not require the special
delivery arrangements in Section 4(B) below.

B.         *         , Longs will provide ABDC with written notice
of         *         . Longs will endeavor to give ABDC as much notice as
possible in advance of         *         . As soon as commercially reasonable
after receipt of         *         from Longs, ABDC will make arrangements to
ship all         *         .

C. In the event Longs requests that ABDC         *         , then
        *         . Such terms will continue for an initial period of at least
        *         .

D. Upon giving such notice and regularly during such period, Longs will provide
its best estimates of the order volume (including, specifically, any incremental
volume of Product that is, at the time of such notice, then being purchased from
other sources), affected locations and the duration of Longs’ need for
        *         .

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 8- Page 2

--------------------------------------------------------------------------------

E. The parties will review whether Longs         *         . Upon such notice,
the parties will agree upon         *         and, following termination of such
        *         , will then revert to the operations, logistics and pricing as
provided in the remainder of this Agreement.         *         . For clarity,
special delivery arrangements and related pricing and payment terms under this
Section 4 will apply to all purchases by Pharmacies and Other Facilities during
such period, including any interim purchases of Product delivered to RxD or
another Warehouse during the transition.

5. Returns to Third-Party Processors

A. Longs may elect to use ABDC’s designated third-party returns processor
(“Returns Processor”) to handle return of non-saleable Rx Product. Once each
        *         (at a time mutually agreed upon by Longs and ABDC), Pharmacies
may send expired, unsaleable Rx Products to Returns Processor and not to ABDC.
Unsaleable returns are         *         . Longs will pay         *         .
For clarity, saleable Product must be returned to ABDC (not to the Returns
Processor) because all Products received at Returns Processor will be treated as
unsaleable without regard to its expiration date or condition. No such Product
will be returned to the Pharmacy. Returns Processor will determine if Product
qualifies for a return credit. ABDC will issue the credit to Longs
        *         . ABDC will credit Longs         *         at the time of the
return for return of unsaleable Rx Products that meet their manufacturer’s
return policy, less         *         . Once ABDC issues Longs such credit,
Longs will have no recourse with ABDC as to         *         . Likewise, ABDC
will have no recourse with Longs regarding         *         . (Alternatively,
the parties may agree to a risk-sharing model with a percentage tied to amounts
actually received.)

B. In lieu of the Third Party Returns process in paragraph A, Longs may upon 30
days’ prior written notice to ABDC elect to use its own third-party returns
processor to handle return of non-saleable Rx Product (“Longs Processor”);
provided, however, Longs must         *         and discontinue or resume using
Returns Processor as of         *         . In connection with Longs Processor,
ABDC will         *         , but only to the extent ABDC receives credits from
a manufacturer.

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Exhibit 8- Page 3

--------------------------------------------------------------------------------

ATTACHMENT A

The following terms are defined below or in the body of the Agreement.

 

        *        

   defined in Section 1(C)(1)(a) of Exhibit 1

        *        

   defined in Exhibit 7

ABDC

   defined in the opening Recital of the body of the Agreement

ACAP

   defined in Section 1.1 of Exhibit 2

Adjusted Service Level

   defined in Section 1.1 of Exhibit 3

Adjusted Service Level Commitment

   defined in Section 1.2 of Exhibit 3

Administrator

   defined in Section 6 of Exhibit 7

Affiliate

   defined in Section 15(B) of the body of the Agreement

        *        

   defined in Section 5.1 of Exhibit 2

Agreement

   defined in the opening Recital of the body of the Agreement and further
defined in Section 1(C)(8) of the body of the Agreement.

        *        

   defined in Section 5.3 of Exhibit 2

the Associate

   defined in Section 2 of Exhibit 3

AutoMed

   defined in Recital E(1) of the body of the Agreement

Bankruptcy

   defined in Section 7(D)(1) of the body of the Agreement

Branded Rx Products

   means those Rx Products sold under their brand name (excluding Generic Rx
Products regardless of whether sold under a generic manufacturer’s brand name).

        *        

   defined in Section 5.1 of Exhibit 2

CF Delivery Fee

   defined in Section 3.3(b) of Exhibit 5

CF Delivery Services

   defined in Section 3.3(a) of Exhibit 5

Confidential Information

   defined in Section 13(A) of the body of the Agreement

Contract Year

   defined in Section 1(C)(1)(d) of Exhibit 1

Control

   defined in Section 15(B) of the body of the Agreement

        *        

   defined in Exhibit 7

        *        

   defined in Section 1.8 of Exhibit 3

DC

   defined in Section 3(C) of the body of the Agreement

Delivered Prescriptions

   defined in Section 3.3(a) of Exhibit 5

        *        Products

   means        *        .

        *        

   means, for any Product, the        *        .

        *        Non-Rx Products

   defined in Section 2(A)(1)(c)(i) of the body of the Agreement (which, for
clarity, does not include        *        Non-Rx Products)

        *        

   defined in Section 1 of Exhibit 7

Disclosing Party

   defined in Section 13(A) of the body of the Agreement

Discount Safe Harbor

   defined in Section 2(D) of Exhibit 1

Dispute

   defined in Section 15(I) of the body of the Agreement

DME

   defined in Recital A of the body of the Agreement

DSD

   defined in Section 1(A)(1) of Exhibit 1 and referenced in Section 3(B)(1) of
the body of the Agreement

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Attachment A - Page 1

--------------------------------------------------------------------------------

Effective Date

   defined in Recital D of the body of the Agreement

ERV

   defined in Section 5(A) of Exhibit 8

Execution Date

   defined in the opening Recital of the body of the Agreement

Fax

   defined in Section 10 of the body of the Agreement

        *        

   defined in Section 1 of Exhibit 7

Force Majeure

   Defined in Section 11 of the body of the Agreement

Generic Rx Products

   means Rx Products that are available from two or more manufacturers and are
(i) therapeutically equivalent and (ii) pharmaceutically equivalent and
bioequivalent, as determined by FDA. Products are pharmaceutically equivalent if
they contain identical amounts of the same active drug ingredient in the same
dosage form and meet compendia or other applicable standards of strength,
quality, purity, and identity. Products are bioequivalent if they do not present
a known or potential bioequivalence problem, or, if they do present such a
problem, they are shown to meet an appropriate standard of bioequivalence.

        *        

   defined in Section 5.1 of Exhibit 2

GPO

   defined in Section 2(A)(1)(b)(ii) of the body of the Agreement

Hawaii Delivery

   defined in Section 3.1 of Exhibit 5

Hawaii        *        Non-Rx Product List

   defined in Section 1.5 of Exhibit 5

        *        

           *        

Hazardous Material

   defined in Section 4 of Exhibit 5

HBC

   defined in Recital A of the body of the Agreement

Herein, hereunder, and similar words

   defined in Section 1(C)(3) of the body of the Agreement

HIPAA

   defined in Section 13(B) of the body of the Agreement

        *        

   defined in Section 12 of Exhibit 7

HRx

   defined in Section 5(C) of the body of the Agreement

        *        

   defined in Section 7(B)(1) of the body of the Agreement

ITP

   defined in Section 7(B)(1) of the body of the Agreement

Large Volume Facilities

   defined in Section 1(A)(1) of Exhibit 1

Longs

   defined in the opening Recital of the body of the Agreement

Longs’ affiliates

   defined in Section 4(B) of the body of the Agreement

Longs Contracted Generic Products

   defined in Section 2(A)(1)(b)(ii) of the body of the Agreement

Longs Processor

   defined in Section 5(B) of Exhibit 8

LTC Pharmacies

   defined in Section 2(A)(1)(a) of the body of the Agreement

Mail Order

   defined in Recital B of the body of the Agreement

Mainland

   defined in Section 1(C)(1) of Exhibit 1

Material Change

   defined in Section 7(B)(1) of the body of the Agreement

        *        Service Review

   defined in Section 1(C) of Exhibit 8

        *        

           *        

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Attachment A - Page 2

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Net Purchases

   means total purchases in dollars during a time period less returns, credits,
rebates, late payment fees and similar items (to the extent such items are
included in total purchases) during such period

Net Purchase Volume

   means volume of Net Purchases

New Pharmacy Chain

   defined in Section 2(B)(2)(a) of the body of the Agreement

Non-Rx Products

   defined in Section 2(A)(1)(c) of the body of the Agreement (which, for
clarity, includes both         *        Non-Rx Products
and        *        Non-Rx Products but excludes Diabetes Care Products even if
they do not require a prescription)

Originating Pharmacy

   defined in Section 3.1 of Exhibit 5

OTC

   defined in Recital A of the body of the Agreement

Other Facilities

   defined in Recital B of the body of the Agreement; provided, further, that
any LTC Pharmacies that Longs may in the future acquire or operate shall be
included within Other Facilities

Other Generic Rx Products

   defined in Section 2(A)(1)(b)(iii) of the body of the Agreement

        *        

   defined in Section 8.3 of Exhibit 2

Parent

   defined in Section 15(B) of the body of the Agreement

PBM operations

   defined in Recital B of the body of the Agreement

        *    

           *        

Pharmacies

   defined in Recital B of the body of the Agreement

Price of Goods

   is the effective pricing to be paid by Longs for Products under this
Agreement, as defined with respect to each category of Products.

primarily for Longs

   defined in Section 2(C)(2) of the body of the Agreement

Primary vendor

   defined in Section 2(A)(1)(a) of the body of the Agreement

Prime interest rate

   defined in Section 5 of Exhibit 3

Prior Agreement

   defined in Recital C of the body of the Agreement

Products

   defined in Recital A of the body of the Agreement

Program

   defined in Recital D of the body of the Agreement

Protected Health Information

   defined in Section 13(B) of the body of the Agreement

        *        Products

   defined in Section 2(A)(1)(b)(i) of the body of the Agreement

        *        Program

   defined in Section 2(A)(1)(b)(i) of the body of the Agreement

        *        Business Review

   defined in Section 1(C) of Exhibit 8

        *        

   defined in Section 5 of Exhibit 3

Receiving Party

   defined in Section 13(A) of the body of the Agreement

RePack Agreement

   defined in Recital E(3) of the body of the Agreement

Returned Goods Policy

   defined in Section 5(B) of the body of the Agreement. For clarity, the
Returned Goods Policy is in Exhibit 4.

Returns Processor

   defined in Section 5(A) of Exhibit 8

Rx Products

   defined in Recital A of the body of the Agreement

        *        

   defined in Section 1.6 of Exhibit 3

Services

   defined in Recital A of the body of the Agreement

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Attachment A - Page 3

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SKU

   means a wholesale stock-keeping unit, which is the smallest unit by which
ABDC inventories and sells Products (e.g., one bottle, vial, tube, container or
other package).

Software

   defined in Section 14(A) of the body of the Agreement

Special Purchase Products

   defined in Section 2(B)(3)(b) of the body of the Agreement

Specialty Pharmacies

   defined in Recital B of the body of the Agreement

SRx

   defined in Section 1 of Exhibit 6

Subsidiary

   defined in Section 15(B) of the body of the Agreement

        *        

           *        .

        *        Category List

   is the list in Attachment B, as defined in Section 2(A)(1)(c)(ii) of the body
of the Agreement

        *        Non-Rx Products

   defined in Section 2(A)(1)(c)(ii) of the body of the Agreement, and further
defined in Section 1(C)(2)(a) of Exhibit 1

Term

   defined in Section 7(A) of the body of the Agreement.

Total Branded Rx Net Purchase Volume

   defined in Section 3(A) of Exhibit 1

        *        

   defined in Section 1.8 of Exhibit 3

Warehouses

   defined in Section 1(A)(1) of Exhibit 1

 

--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Attachment A - Page 4

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ATTACHMENT B

        *        Category List (Fine Line Codes)

 

        *        

           

        *        

              *                *                    *    

        *        

           *                *                    *                *        

        *        

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        *        

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--------------------------------------------------------------------------------

* Subject to a request for confidential treatment; Separately filed with the
Commission.

Attachment B - Page 1

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* Subject to a request for confidential treatment; Separately filed with the
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Attachment B - Page 2

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* Subject to a request for confidential treatment; Separately filed with the
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Attachment B - Page 3

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* Subject to a request for confidential treatment; Separately filed with the
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Attachment B - Page 5

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* Subject to a request for confidential treatment; Separately filed with the
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Attachment B - Page 6