Exhibit 10.1

Execution Version

 

 

 

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT

By and Among

WALGREENS BOOTS ALLIANCE, INC.,

WALGREEN CO.

and

RITE AID CORPORATION

Dated as of September 18, 2017

 

 

 

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TABLE OF CONTENTS

 

         Page  

RECITALS

     1  

ARTICLE I PURCHASE AND SALE

     2  

SECTION 1.1

  Purchased Assets      2  

SECTION 1.2

  Excluded Assets      4  

SECTION 1.3

  Assumed Liabilities      6  

SECTION 1.4

  Excluded Liabilities      7  

SECTION 1.5

  Assignment of Contracts and Rights      9  

SECTION 1.6

  Liabilities at Acquired Stores and Non-Acquired Stores      9  

ARTICLE II CLOSING MECHANICS

     10  

SECTION 2.1

  Closing      10  

SECTION 2.2

  Purchase Price      13  

SECTION 2.3

  Deliveries by the Company      14  

SECTION 2.4

  Deliveries by Purchaser Sub      15  

SECTION 2.5

  Inventory Valuation      17  

SECTION 2.6

  Prorations      18  

SECTION 2.7

  Purchased Cash; Aggregate Inventory Amount Adjustment      19  

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     20  

SECTION 3.1

  Organization and Qualification      20  

SECTION 3.2

  Authority      21  

SECTION 3.3

  No Conflict; Required Filings and Consents      21  

SECTION 3.4

  Compliance with Laws; Permits; Investigations      22  

SECTION 3.5

  Financial Statements; Undisclosed Liabilities      23  

SECTION 3.6

  Absence of Certain Changes and Events      23  

SECTION 3.7

  Absence of Litigation      23  

SECTION 3.8

  Employee Benefit Plans      24  

SECTION 3.9

  Labor and Employment Matters      25  

SECTION 3.10

  Properties      26  

SECTION 3.11

  Tax Matters      27  

SECTION 3.12

  Sufficiency of Purchased Assets      28  

SECTION 3.13

  Environmental Matters      28  

SECTION 3.14

  Privacy and Data Security; Company Rx Data      29  

SECTION 3.15

  Brokers      30  

SECTION 3.16

  Compliance with Healthcare Legal Requirements      30  

SECTION 3.17

  Title to the Purchased Assets      32  

SECTION 3.18

  Inventory      32  

SECTION 3.19

  No Other Representations or Warranties      33  

 

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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER SUB

     33  

SECTION 4.1

  Organization      33  

SECTION 4.2

  Authority      33  

SECTION 4.3

  No Conflict; Required Filings and Consents      34  

SECTION 4.4

  Absence of Litigation      34  

SECTION 4.5

  Brokers      35  

SECTION 4.6

  Funding      35  

SECTION 4.7

  No Other Representations or Warranties      35  

ARTICLE V CONDUCT OF BUSINESS PENDING THE SALE

     36  

SECTION 5.1

  Conduct of Business of the Company Pending the Sale      36  

SECTION 5.2

  No Control of Company’s Business      39  

ARTICLE VI ADDITIONAL AGREEMENTS

     39  

SECTION 6.1

  Competing Transaction Proposals; Acquisition Proposals      39  

SECTION 6.2

  Further Action; Efforts      42  

SECTION 6.3

  Notification of Certain Matters      46  

SECTION 6.4

  Taxes      46  

SECTION 6.5

  Ancillary Agreements      47  

SECTION 6.6

  Access to Information and Employees and Cooperation; Confidentiality      48  

SECTION 6.7

  Publicity      50  

SECTION 6.8

  Use of Names      50  

SECTION 6.9

  Cooperation      51  

SECTION 6.10

  Non-Solicitation of Employees      51  

SECTION 6.11

  Destruction of Purchased Assets; Store Removal      52  

SECTION 6.12

  Restriction on Use of Customer Data; Protection of Goodwill      53  

SECTION 6.13

  Intercompany Leases      54  

SECTION 6.14

  Employee Matters      54  

SECTION 6.15

  [Intentionally Omitted]      60  

SECTION 6.16

  No Third Party Beneficiaries      60  

SECTION 6.17

  Waiver of Non-Compete Provisions      60  

SECTION 6.18

  Obligations of Purchaser Sub      60  

SECTION 6.19

  Financing Cooperation      60  

SECTION 6.20

  Commercial Assistance      62  

SECTION 6.21

  RediClinic      62  

SECTION 6.22

  Acquired Leases      62  

SECTION 6.23

  Duplicate IT System      63  

SECTION 6.24

  Wellness+ Tier Status      63  

SECTION 6.25

  1199SEIU Arbitration      63  

SECTION 6.26

  Insurance Coverage      63  

SECTION 6.27

  Restructuring      64  

SECTION 6.28

  Closed Stores      64  

SECTION 6.29

  Termination Fee      64  

 

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ARTICLE VII CONDITIONS TO CLOSING

     64  

SECTION 7.1

  Conditions to Obligations of Each Party to Complete the Sale      64  

SECTION 7.2

  Conditions to Obligations of Parent and Purchaser Sub      65  

SECTION 7.3

  Conditions to Obligations of the Company      66  

ARTICLE VIII TERMINATION

     67  

SECTION 8.1

  Termination      67  

SECTION 8.2

  Effect of Termination      68  

SECTION 8.3

  Expenses      69  

ARTICLE IX INDEMNIFICATION

     69  

SECTION 9.1

  Indemnification by the Company      69  

SECTION 9.2

  Indemnification by Parent      70  

SECTION 9.3

  Notification of Claims      70  

SECTION 9.4

  Exclusive Remedies      72  

SECTION 9.5

  Additional Indemnification Provisions      72  

SECTION 9.6

  Mitigation      72  

SECTION 9.7

  Third Party Remedies      72  

SECTION 9.8

  Limitation on Liability      73  

ARTICLE X GENERAL PROVISIONS

     73  

SECTION 10.1

  Survival of Representations, Warranties, Covenants and Agreements      73  

SECTION 10.2

  Modification or Amendment      74  

SECTION 10.3

  Waiver      74  

SECTION 10.4

  Notices      74  

SECTION 10.5

  Certain Definitions      76  

SECTION 10.6

  Severability      85  

SECTION 10.7

  Entire Agreement; Assignment      85  

SECTION 10.8

  Parties in Interest      86  

SECTION 10.9

  Governing Law      86  

SECTION 10.10

  Headings      86  

SECTION 10.11

  Counterparts      86  

SECTION 10.12

  Bulk Sales Laws      86  

SECTION 10.13

  Specific Performance      87  

SECTION 10.14

  Jurisdiction      87  

SECTION 10.15

  WAIVER OF JURY TRIAL      88  

SECTION 10.16

  No Recourse      88  

SECTION 10.17

  Interpretation      88  

SECTION 10.18

  Time is of the Essence      89  

SECTION 10.19

  Misdirected Funds          89  

 

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EXHIBITS

 

Exhibit A

  

Inventory Procedures

Exhibit B

  

Transition Services Agreement

Exhibit C

  

Bill of Sale – Closing

Exhibit D

  

Bill of Sale – Subsequent Closings

Exhibit E

  

Transitional Trademark License Agreement

Exhibit F

  

WBAD Term Sheet for Supply Agreement

Exhibit G

  

Transaction Accounting Principles

INDEX OF DEFINED TERMS

 

1199SEIU

     7  

1199SEIU CBA

     78  

1199SEIU Liabilities

     7  

4204 Period

     61  

Acquired Leases

     26  

Acquired Regional Office Closing

     12  

Acquired Regional Offices

     4  

Acquired Store Approvals

     11  

Acquired Store Outside Date

     11  

Acquired Store Scheduled Closing Date

     11  

Acquired Stores

     78  

Acquisition Proposal

     42  

Additional Inventory Audit

     17  

Affiliate

     78  

Aggregate Inventory Amount

     78  

Agreement

     Preamble  

Allocation

     13  

Alternative Acquisition Agreement

     41  

Ancillary Agreements

     79  

Antitrust Approval

     67  

Antitrust Law

     79  

Applicable Date

     22  

Apportioned Taxes

     19  

Assumed Contracts

     4  

Assumed Employee Liabilities

     7  

Assumed Liabilities

     6  

Assumed Pre-Closing Liabilities

     7  

Bankruptcy and Equity Exception

     21  

Base Purchase Price

     12  

Bill of Sale, Assignment and Assumption Agreement

     48  

Book to Physical Adjustment Ratio

     79  

Business Day

     79  

Business Employee

     79  

CBA

     25  

Census Start Date

     55  

Census Summary

     56  

Choice Employee

     49  

Closing

     10  

Closing Date

     10  

Code

     13  

Company

     Preamble  

Company 401(k) Plan

     59  

Company Board

     1  

Company Credit Agreements

     79  

Company Disclosure Schedules

     20  

Company Expenses

     79  

Company FSA

     58  

Company Fundamental Representations

     76  

Company Indemnified Parties

     72  

Company Notice

     41  

Company Owned Real Property

     26  

Company Payment Programs

     31  

Company Regulatory Agreements

     30  

Company Rx Data

     3  

Company’s Insurance Policies

     66  

Competing Transaction Agreement

     39  

Competing Transaction Proposal

     39  

Confidentiality Agreement

     50  

Consents

     42  

Continuation Period

     56  

Contract

     80  

 

 

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control

     80  

Controlling Party

     73  

Copyrights

     80  

Debt Financing

     80  

Developed Testing Procedures

     65  

Distribution Center Closing

     11  

Distribution Center Closing Date

     11  

Distribution Center Inventory Amount

     80  

Distribution Centers

     80  

DOJ

     44  

Domain Names

     80  

Duplicate IT System

     80  

Employee Census

     55  

Employee Data Trigger Date

     60  

Employee Plans

     24  

Employment Start Date

     56  

End Date

     69  

Environmental Laws

     29  

Equity Financing

     80  

ERISA

     81  

ERISA Affiliate

     81  

Exchange Act

     21  

Excluded Assets

     4  

Excluded Employee

     81  

Excluded Employee Severance

     7  

Excluded Liabilities

     7  

Expense Reimbursement

     71  

Extrapolated Inventory Value

     81  

Financial Statements

     23  

Financing Sources

     81  

Foreign National Employees

     56  

FSA Balances

     58  

FSA Participants

     58  

FTC

     44  

GAAP

     81  

Government Program

     81  

Governmental Entity

     81  

Governmental Filings

     81  

Hazardous Materials

     29  

Healthcare Laws

     81  

HIPAA

     82  

HSR Act

     21  

HSR Filing

     42  

Inactive Employee Transfer Date

     56  

Inactive Employees

     82  

Indemnified Party

     73  

Indemnifying Party

     73  

Independent Accounting Firm

     82  

Initial Allocation

     13  

Intellectual Property

     82  

Inventory

     82  

Inventory Amount

     83  

Inventory Audit

     17  

Inventory Procedures

     17  

Inventory Service

     16  

Inventory Statement

     17  

Key Business Employee

     83  

Key IT Systems

     83  

knowledge

     83  

Law

     83  

Leased Real Property

     26  

Legal Restraints

     67  

Letter Agreement

     50  

Liabilities

     83  

License Approvals

     21  

Lien Release Letter

     63  

Liens

     26  

Losses

     83  

Material Adverse Effect

     84  

Material Permits

     22  

Merger Agreement

     67  

Multiemployer Plan

     7  

Non-Solicitation Period

     40  

Non-Union Employee Offer

     57  

Notice Period

     41  

Objection Notice

     13  

Operational Duplicate IT System Certificate

     85  

Original Agreement

     1  

Parent

     Preamble  

Parent Disclosure Schedule

     33  

Parent Fundamental Representations

     76  

Parent Indemnified Parties

     72  

Parties

     Preamble  

Party

     Preamble  

Patents

     85  

Permits

     22  

Permitted Liens

     85  

Person

     86  

Pharmacy Approvals

     86  

Post-Closing Tax Period

     19  

Pre-Closing Matters

     66  

 

 

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Pre-Closing Tax Period

     19  

Privacy and Security Laws

     29  

Proceeding

     86  

Prorated Charges

     18  

Protected Period

     54  

Purchase Price

     12  

Purchased Assets

     2  

Purchased Cash

     3  

Purchased Intellectual Property

     4  

Purchaser FSA

     58  

Purchaser Sub

     Preamble  

Purchaser Sub 401(k) Plan

     59  

Qualifying Offer

     57  

Reported Inventory Value

     86  

Representative

     86  

Restricted Period

     52  

Retail Inventory Value

     17  

Retail Pharmacy

     86  

Retail-to-cost Conversion Ratio

     86  

Retained Names and Marks

     51  

Retention Program

     60  

Sampled Location Inventory Value

     86  

Sampled Locations

     17  

SEC

     20  

SEC Reports

     86  

Second Request

     44  

Software

     86  

Subsequent Closing

     10  

Subsequent Closing Conditions

     11  

Subsequent Closing Date

     11  

subsidiary

     87  

Supply Agreement

     48  

Swap Remedy

     45  

Tax Return

     28  

Taxes

     28  

Technology

     87  

Third Party Claim

     73  

Trademarks

     87  

Transaction Accounting Principles

     87  

Transaction Agreements

     87  

Transaction Expenses

     87  

Transfer Expenses

     14  

Transfer Taxes

     14  

Transferred Employee

     56  

Transition Services Agreement

     48  

Transitional Trademark License Agreement

     48  

Union Employee Offer

     57  

Union-Represented Business Employee

     87  

WARN Act

     26  

Willful Breach

     87  

 

 

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AMENDED AND RESTATED ASSET PURCHASE AGREEMENT

This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT, dated as of September 18,
2017 (this “Agreement”), is entered into by and among Rite Aid Corporation, a
Delaware corporation (the “Company”), Walgreens Boots Alliance, Inc., a Delaware
corporation (“Parent”), and Walgreen Co., an Illinois corporation and a wholly
owned direct subsidiary of Parent (“Purchaser Sub” and, together with the
Company and Parent, the “Parties” and each, a “Party”).

RECITALS

WHEREAS, the Company, Parent and Purchaser Sub entered into that certain Asset
Purchase Agreement, dated as of June 28, 2017 (the “Original Agreement”);

WHEREAS, the Parties now intend to amend and restate the Original Agreement in
its entirety;

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

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

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

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

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

 

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ARTICLE I

PURCHASE AND SALE

SECTION 1.1 Purchased Assets. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date (or the applicable Subsequent Closing Date
or Distribution Center Closing Date), the Company shall, and shall cause its
Affiliates, to sell, transfer, assign, convey and deliver to Purchaser Sub, and
Purchaser Sub shall purchase from the Company and, as applicable, its
Affiliates, free and clear of all Liens (except for Permitted Liens) all right,
title and interest of the Company and its Affiliates, in, to and under all of
the assets, properties and rights owned, held or used by the Company and its
Affiliates, exclusively relating to or exclusively used in any Acquired Store or
Distribution Center, including the following assets to the extent exclusively
relating to any Acquired Store or Distribution Center (collectively, the
“Purchased Assets”):

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

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

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

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

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

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

 

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

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

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

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

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

 

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

(m) the Intellectual Property owned by the Company and its Affiliates and
exclusively related to any Acquired Store or Distribution Center, including
Intellectual Property set forth on Section 1.1(m) of the Company Disclosure
Schedules (the “Purchased Intellectual Property”);

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

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

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

(a) all notes and accounts receivable generated;

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

(c) all insurance policies;

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

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

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

 

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

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

(i) all Tax assets of the Company and its Affiliates (including any and all
credits or deposits in respect of Taxes, net operating loss carryforwards, and
refunds of Taxes for which the Company is liable pursuant to Section 2.2(d),
Section 2.6(d) or Section 6.4 or otherwise with respect to any periods (or
portions thereof) ending on or prior to the Closing (or the applicable
Subsequent Closing or Distribution Center Closing)), other than as set forth in
Section 1.1(k) above;

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

(d) any (i) Liabilities arising after the Closing Date and relating to (A) the
employment by Purchaser Sub or its Affiliates or termination of employment by
Purchaser Sub or its Affiliates of a Transferred Employee after the Closing (or
the applicable Subsequent Closing, Distribution Center Closing or Inactive
Employee Transfer Date) or (B) Purchaser

 

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

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

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

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

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

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

 

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

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

(f) except for the Assumed Employee Liabilities, any Liabilities relating to
(i) any Transferred Employee to the extent arising on or prior to the Closing
(or the applicable Subsequent Closing, Distribution Center Closing or Inactive
Employee Transfer Date), (ii) current or former employees of the Company or any
of its Affiliates who are not Transferred Employees or (iii) the incurrence or
triggering of any withdrawal liability and/or funding obligation under ERISA by
the Company or any of its ERISA Affiliates (including any contingent or
secondary withdrawal liability) to any multiemployer plan (within the meaning of
Section 3(37) of ERISA) to which the Company or any of its ERISA Affiliates
contribute or has ever had an obligation to contribute or with respect to which
the Company or any of its ERISA Affiliates has borne any liability (a
“Multiemployer Plan”), and any withdrawal liability and/or funding obligation
incurred by Purchaser Sub or any of its ERISA Affiliates on or after the Closing
with respect to any Multiemployer Plan to the extent that such withdrawal
liability and/or funding obligation relates to the Company’s or any of its ERISA
Affiliates’ contribution history with respect to such Multiemployer Plan;

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

 

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

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

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

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

 

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

ARTICLE II

CLOSING MECHANICS

SECTION 2.1 Closing.

(a) The closing of the transactions contemplated by this Agreement will take
place in a series of separate closings, as set forth in this Article II. Subject
to Section 2.1(b), Section 2.1(c) and Section 2.1(d), on or prior to the fifth
(5th) Business Day following the satisfaction or waiver of the conditions set
forth in Article VII (other than such conditions which, by their nature, are to
be satisfied at Closing), or on such other date as the Company and Purchaser Sub
may mutually agree in writing, the sale and purchase of the Purchased Assets and
the assumption of the Assumed Liabilities contemplated by this Agreement with
respect to which such conditions have been satisfied or waived as of such date
shall take place at an initial closing (the “Closing”) that will be held at the
offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New
York, at 9:00 a.m., New York City time, or such other time, place and date as
the Company and Purchaser Sub may agree in writing or remotely via the exchange
of executed documents or closing deliverables (the date on which the Closing
takes place being the “Closing Date”), provided that, in any event, the Closing
Date shall not occur prior to October 17, 2017. The Acquired Stores to be
transferred at the Closing are set forth in Section 2.1(c) of the Company
Disclosure Schedules.

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

 

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first Subsequent Closing, as applicable, and (D) solely with respect to the
first Subsequent Closing, the condition that Parent shall have had a reasonable
opportunity to test the operational readiness of the Duplicate IT System with
respect to the Acquired Stores transferred at the Closing using the Developed
Testing Procedures and shall have reasonably determined that (i), with respect
to the Duplicate IT System, the results of such test were consistent with the
Operational Duplicate IT System Certificate and (ii), with respect to the Key IT
Systems, the Key IT Systems with respect to the Acquired Stores transferred at
the Closing operate in a manner that is substantially consistent with the
Company’s past practice (except as may be otherwise contemplated by the
Transition Services Agreement) and support the operation of all critical areas
of the Company’s business (including pharmacy, front of store operations,
employee scheduling and management, procurement, supply chain, finance and
accounting and data warehousing); provided that, if Parent (or the Company)
shall have reasonably determined that any of the conditions set forth in this
clause (D)(ii) have not been satisfied such that there is a material impact on
the operation of the Acquired Stores to be transferred at the Closing, Parent
(or the Company, as the case may be) shall promptly provide notice thereof to
the other party specifying any deficiencies in reasonable detail, and the
parties shall use reasonable best efforts to cooperate to promptly cure any such
deficiencies; and (iii) the delivery to Purchaser Sub of the Inventory Statement
and the report specified in Section 2.5(b) (the “Subsequent Closing
Conditions”), pursuant to the terms and conditions of this Agreement. The date
on which a Subsequent Closing occurs is hereinafter referred to as the
“Subsequent Closing Date”; provided, however, that the sale and purchase of the
Distribution Centers (and the assets in the Distribution Centers to the extent
Purchased Assets) (the “Distribution Center Closing”) shall occur on the last
day of the Transition Period (as defined in the Transition Service Agreement) or
such earlier date as mutually agreed by the Parties (such date, the
“Distribution Center Closing Date”), subject to receipt by Purchaser Sub of a
certificate of the Company signed by a duly authorized representative of the
Company, with respect to the Distribution Centers (and the Purchased Assets
therein), certifying that the representations and warranties contained in
Section 3.17 are true and correct in all respects as of the Distribution Center
Closing as if made on the Distribution Center Closing Date, except for breaches
or inaccuracies, as the case may be, as to matters that, individually or in the
aggregate, have not had a Material Adverse Effect. Assuming the conditions
applicable to the first Subsequent Closing described in this Section 2.1(b) are
satisfied, the first Subsequent Closing shall occur within the later of the date
that is (i) thirty (30) days after the Closing Date and (ii) fourteen (14) days
after the end of the calendar month in which the Closing occurred.

(c) Notwithstanding anything herein to the contrary, with respect to any
Acquired Store, (i) in no event shall the Parties complete, or be obligated to
complete, the Closing or a Subsequent Closing with respect to such Acquired
Store prior to the later of (A) the date set forth with respect to such Acquired
Store on Section 2.1(c) of the Company Disclosure Schedules (the “Acquired Store
Scheduled Closing Date”), (B) the Closing Date and (C) the earlier of (x) the
date on which all required Pharmacy Approvals relating to such Acquired Store,
if any, and all required consents under any Acquired Lease relating to such
Acquired Store, if any, (collectively, the “Acquired Store Approvals”) have been
obtained and (y) the date that is sixty (60) days after the Acquired Store
Scheduled Closing Date (the later of (A), (B) and (C), the “Acquired Store
Outside Date”), (ii) if any required Acquired Store Approvals have not been
obtained with respect to such Acquired Store as of the applicable Acquired Store
Outside Date and the Acquired Store Approvals outstanding with respect to such
Acquired Store include any

 

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required consents under any Acquired Lease relating to such Acquired Store,
then, at Parent’s election, (A) such Acquired Stores and all of the related
assets and Liabilities shall be retained by the Company and the Purchase Price
shall be reduced as set forth on Section 2.2 of the Company Disclosure Schedules
(and the amounts payable pursuant to Section 2.7 shall be reduced accordingly)
or (B) to the extent mutually agreed among the Parties, such Acquired Store
shall be replaced with one or more other stores of the Company, and each such
replacement store shall thereafter be deemed an Acquired Store for purposes
hereof and shall be subject to an Acquired Store Scheduled Closing Date as the
Parties shall reasonably agree with respect to such replacement store and
(iii) if the only Acquired Store Approval outstanding with respect to such
Acquired Store is a Pharmacy Approval, then at the Company’s election,
(A) Parent shall acquire the prescription and customer records related to such
Acquired Store consistent with a “file buy” acquisition and all Inventory
located at such Acquired Store and shall assume all obligations under the
Acquired Lease relating to such Acquired Store, and Parent shall bear all costs
and expenses (including severance, if applicable) in connection with the
shutdown of such Acquired Store (and, for the avoidance of doubt, the Purchase
Price shall not be reduced as a result thereof) or (B) to the extent mutually
agreed among the Parties, such Acquired Store shall be replaced with one or more
other stores of the Company, and each such replacement store shall thereafter be
deemed an Acquired Store for purposes hereof and shall be subject to an Acquired
Store Scheduled Closing Date as the Parties shall reasonably agree with respect
to such replacement store.

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

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

 

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SECTION 2.2 Purchase Price.

(a) The aggregate “Purchase Price” for the Purchased Assets shall be (i) an
amount in cash equal to $4,375,000,000, as may be reduced in accordance with
Section 6.28 hereof (the “Base Purchase Price”) plus (ii) the assumption of the
Assumed Liabilities. Section 2.2 of the Company Disclosure Schedules shall set
forth an allocation of the Base Purchase Price among each of the Acquired Stores
and collectively the Distribution Centers for purposes of Section 2.1(b) and
this Section 2.2(a).

(b) As soon as reasonably practicable and in no event later than ninety
(90) days after the Closing Date, Parent shall provide the Company with an
allocation of the Purchase Price for federal income tax purposes, including any
Assumed Liabilities properly included therein among the Purchased Assets and the
agreements provided for herein, for federal, state and local income tax purposes
(the “Initial Allocation”). Within thirty (30) days of the receipt of the
Initial Allocation, the Company shall deliver notice (the “Objection Notice”) to
Parent, setting forth in reasonable detail those items in the Initial Allocation
that the Company disputes, if any. If prior to the conclusion of such 30-day
period, the Company notifies Parent that it will not provide any Objection
Notice or if the Company does not deliver an Objection Notice within such thirty
(30) day period, then Parent’s proposed Initial Allocation shall be deemed
final, conclusive and binding upon each of the Parties. Within fifteen (15) days
of the Company’s delivery of the Objection Notice, the Company and Parent shall
attempt to resolve in good faith any disputed items and failing such resolution,
the unresolved disputed items shall be referred for final binding resolution to
the Independent Accounting Firm. The costs, fees and expenses of the Independent
Accounting Firm shall be borne equally by Purchaser Sub and the Company. Such
determination by the Independent Accounting Firm shall be (i) in writing,
(ii) furnished to Parent and the Company as soon as practicable (and in no event
later than thirty (30) days after the items in dispute have been referred to the
Independent Accounting Firm), (iii) made in accordance with the principles set
forth in this Section 2.2(b) and (iv) non-appealable and incontestable by Parent
and the Company. As used herein, the “Allocation” means the allocation of the
Purchase Price, the Assumed Liabilities and other related items among the
Purchased Assets and the agreements provided for herein as finally agreed
between Parent and the Company or ultimately determined by the Independent
Accounting Firm, as applicable, in accordance with this Section 2.2(b). The
Allocation shall be reasonable and shall be prepared in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”) and
the Treasury Regulations thereunder (and any similar provision of state, local
or foreign Law, as appropriate). If the Purchase Price is required to be
adjusted after the Allocation is initially determined, then appropriate
adjustments shall be made to the Allocation to reflect any such adjustments, in
a manner consistent with the principles utilized in the Allocation. Each of the
Parties shall report the federal, state and local income and other Tax
consequences of the transactions contemplated hereby in a manner consistent with
the Allocation, including, if applicable, the preparation and filing of
Forms 8594 under Section 1060 of the Code (or any successor form or successor
provision of any future tax Law) with their respective federal income Tax
Returns for the taxable year which includes the Closing Date, and none of the
Parties will take any position inconsistent with the Allocation on any Tax
Return, before any Governmental Entity or in any Proceeding, in each case unless
otherwise required under applicable Law or pursuant to a “determination” under
Section 1313 of the Code (and any similar provision of state, local or foreign
Law, as appropriate). Each of the Parties shall notify the other if it receives
notice that any Governmental Entity proposes any allocation different than that
set forth on the Allocation.

 

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

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

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

SECTION 2.3 Deliveries by the Company .

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

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

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

 

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

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

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

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

(ii) a certificate dated as of each Subsequent Closing Date or Distribution
Center Closing Date, as applicable, executed by the Company regarding the
accuracy of the matters set forth in Section 7.2(b) and, solely with respect to
the first Subsequent Closing, Section 7.2(d) and where, for purposes of this
Section 2.3(b)(ii), each reference therein to “Closing Date” in Section 7.2(b)
and, solely with respect to the first Subsequent Closing, Section 7.2(d), as
applicable, shall be deemed to be such Subsequent Closing Date or Distribution
Center Closing Date, as applicable, solely with respect to the Acquired Stores
or Distribution Centers (and Purchased Assets therein) to be transferred at such
Subsequent Closing and the Distribution Center Closing (as applicable);

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

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

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

SECTION 2.4 Deliveries by Purchaser Sub.

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

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

 

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

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

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

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

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

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

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

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

 

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SECTION 2.5 Inventory Valuation.

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

(i) The parties shall commission WIS International or another mutually
acceptable inventory valuation firm (the “Inventory Service”) to conduct a
physical inventory (with a representative of each of the Company and Purchaser
Sub present thereat in order to observe such Inventory Audit) at certain
Acquired Stores to be inventoried at the Closing or such Subsequent Closing
(which shall be such Acquired Stores as are mutually agreed in good faith by the
Company and Purchaser Sub prior to the Closing Date (or the applicable
Subsequent Closing Date)) (such Acquired Stores so sampled are collectively
referred to as the “Sampled Locations”), as described herein (each, an
“Inventory Audit”). The Inventory Service shall also conduct a physical
inventory (with a representative of each of the Company and Purchaser Sub
present thereat in order to observe such Inventory Audit) at each Distribution
Center prior to the Distribution Center Closing Date. The Inventory Audits shall
be performed within the ten (10) days prior to the Closing Date or applicable
Subsequent Closing Date or Distribution Center Closing Date. The Inventory
Audits will be performed as of the close of business at each selected location
on the date of its Inventory Audit. In the case of a 24-hour store, the
Inventory Audit will be performed as of 11:59 p.m. store time. The Inventory
Audits will be performed in accordance with the inventory count and valuation
procedures set forth on Exhibit A attached hereto (the “Inventory Procedures”).
The fees and expenses of the Inventory Service shall be borne equally by
Purchaser Sub and the Company. The Inventory Service shall conduct a physical
inventory of at least 20% of the aggregate number of Acquired Stores being
transferred at the Closing and any applicable Subsequent Closing.

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

 

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

SECTION 2.6 Prorations.

(a) As of the Closing Date, each Subsequent Closing Date, the Distribution
Center Closing Date and each Acquired Regional Office Closing Date (as
applicable), all items set forth on Section 2.6 of the Company Disclosure
Schedules, and all other items for which proration is necessary, shall be
prorated as of the Closing, such Subsequent Closing or Distribution Center
Closing (collectively, the “Prorated Charges”). On a monthly basis, the Company
shall calculate the applicable Prorated Charges and deliver a notice of payment
due to the Buyer within fifteen (15) Business Days of the end of each month with
respect to the applicable Closing, Subsequent Closings and/or Distribution
Center Closing that occurred during such month. Purchaser Sub shall pay to the
Company the amount set forth on such notice of payment within five (5) Business
Days of receipt of such notice of payment. Whenever possible, such prorations
shall be based on actual, current payments by the Company or its Affiliates and
to the extent such actual amounts are not available, such prorations shall be
estimated as of the Closing, such Subsequent Closing and Distribution Center
Closing (as applicable) based on actual amounts for the most recent comparable
billing period. When the actual amounts become known, such prorations shall be
recalculated by Purchaser Sub and the Company, and Purchaser Sub or the Company,
as the case may be, promptly (but not later than ten (10) Business Days after
notice of payment due) shall make any additional payment or refund so that the
correct prorated amount is paid by each of Purchaser Sub and the Company.

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

 

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

(d) Notwithstanding anything to the contrary in this Agreement, including this
Section 2.6, all real property, personal property and similar ad valorem Taxes,
if any, levied with respect to the Purchased Assets with respect to a taxable
period beginning on or before the Closing Date and ending after the Closing Date
(collectively, the “Apportioned Taxes”) shall be apportioned between the Company
and Parent based on the number of days of such taxable period before and
including the Closing Date (such portion of such taxable period, the
“Pre-Closing Tax Period”) and the number of days of such taxable period after
the Closing Date (such portion of such taxable period, the “Post-Closing Tax
Period”). The Company shall be responsible for the proportionate amount of such
Apportioned Taxes that is attributable to the Pre-Closing Tax Period and such
amount shall be an Excluded Liability, and Parent and Purchaser Sub shall be
responsible for the proportionate amount of such Apportioned Taxes that is
attributable to the Post-Closing Tax Period and such amount shall be an Assumed
Liability. Any Apportioned Taxes shall be timely paid, and all applicable Tax
Returns shall be timely filed, as provided by applicable Law. The paying Party
(including through the use of any prepayment or credit or carryforward) shall be
entitled to reimbursement from the non-paying Party for the non-paying Party’s
portion of the Apportioned Taxes in accordance with this Section 2.6(d). Upon
payment (or use of a prepayment or credit or carryforward) of any such
Apportioned Taxes, the paying Party shall present a statement to the non-paying
Party setting forth the amount of reimbursement to which the paying Party is
entitled under this Section 2.6(d), together with such supporting evidence as is
reasonably necessary to calculate the amount to be reimbursed. The non-paying
Party shall make such reimbursement by wire transfer in immediately available
funds within ten (10) Business Days of receipt of such statement to an account
designated by the paying Party. The provisions of this Section 2.6(d) shall
survive the Closing Date until the expiration of the statute of limitations
applicable to any such Apportioned Tax.

SECTION 2.7 Purchased Cash; Aggregate Inventory Amount Adjustment.

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

 

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(b) No later than three (3) Business Days following the final Subsequent Closing
Date, either (i) Purchaser Sub shall deliver to the Company an amount of cash
equal to the amount, if any, by which the Aggregate Inventory Amount is greater
than $1,344,000,000 (provided that if any stores included within the Acquired
Stores as of the date hereof are not sold to Parent or Purchaser Sub such number
will be reduced by the number of such stores that are not sold multiplied by
$695,134.58) or (ii) the Company shall deliver to Purchaser Sub an amount, if
any, by which the Aggregate Inventory Amount is less than $1,278,000,000
(provided that if any stores included within the Acquired Stores as of the date
hereof are not sold to Parent or Purchaser Sub such number will be reduced by
the number of such stores that are not sold multiplied by $660,973.08).
Section 2.7(b) of the Company Disclosure Schedules sets forth an illustrative
example of the inventory valuation process, for reference purposes only.

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

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

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

 

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

SECTION 3.3 No Conflict; Required Filings and Consents.

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

(b) The execution, delivery and performance of the Transaction Agreements by the
Company and the completion of the sale of the Purchased Assets and the other
transactions contemplated by the Transaction Agreements by the Company do not
require any Governmental Filings, except for (i) filings required under, and
compliance with other applicable requirements of, the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and the rules and regulations promulgated
thereunder, and state securities, takeover and “blue sky” laws; (ii) filings or
notifications required under, and compliance with other applicable requirements
of, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”) (including the filing of a “Notification and Report Form” by the
Company under the HSR Act); (iii) filings required under, and compliance with
other applicable requirements of, the New York

 

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Stock Exchange; (iv) the Governmental Filings described in Section 3.3(b) of the
Company Disclosure Schedules (collectively, the “License Approvals”); and
(v) any such Governmental Filings the failure of which to make or obtain would
not prevent or materially delay the consummation by the Company of the
transactions contemplated by, or the performance by the Company of any of its
material obligations under, the Transaction Agreements. The execution and
delivery by the Company of the Transaction Agreements do not, and the
performance by the Company of, and the consummation by the Company of the
transactions contemplated by, the Transaction Agreements will not require the
vote or consent of the Company’s stockholders.

SECTION 3.4 Compliance with Laws; Permits; Investigations.

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

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

(c) As of the date hereof, no investigation or review by any Governmental Entity
with respect to the Purchased Assets is pending or, to the knowledge of the
Company, threatened, except for such investigations or reviews the outcome of
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. As

 

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of the date hereof, neither the Company nor any of its subsidiaries has since
the Applicable Date been charged by any Governmental Entity with, or to the
knowledge of the Company, investigated for, a violation of any Antitrust Law
applicable to the Purchased Assets or entered any settlement, memorandum of
understanding or similar agreement with a Governmental Entity with respect to
the Purchased Assets in respect of a violation or alleged violation of any such
Antitrust Law, except, in each case, for any such violation that would not,
individually or in the aggregate, reasonably be expected to be material to the
Purchased Assets, taken as a whole.

SECTION 3.5 Financial Statements; Undisclosed Liabilities. Section 3.5 of the
Company Disclosure Schedules sets forth a statement of profits and losses with
respect to each Acquired Store for the twelve-month period ended April 29, 2017
(collectively, the “Financial Statements”). The Financial Statements
collectively present fairly, in all material respects, the results of operations
of the applicable Acquired Store at their respective dates and for the periods
covered by such statements, which are in conformity with the Transaction
Accounting Principles, applied consistently, and are consistent with the
historical accounting principles, practices, methodologies and policies of the
Company or the Company’s applicable Affiliates, subject to normal year-end
adjustments. The Financial Statements have been derived from the financial books
and records of the Company and the Company’s applicable Affiliates. Neither the
Company nor any of the Company’s Affiliates (with respect to the Acquired Stores
or Distribution Centers) has received any written notification from its
independent accountants that the Company or any of the Company’s Affiliates
(with respect to the Acquired Stores or Distribution Centers) has used any
improper accounting practice that would have the effect of not reflecting or
incorrectly reflecting in the books and records of the Company, any Affiliate of
the Company (with respect to the Acquired Stores or Distribution Centers) or any
of their subsidiaries any material properties, assets, liabilities, revenues,
expenses, equity accounts or other accounts with respect to the Acquired Stores,
except as has not had, and would not reasonably be expected to have, a Material
Adverse Effect.

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

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

 

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SECTION 3.8 Employee Benefit Plans.

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

(b) No circumstance exists which would reasonably be expected to result in a
material Liability to the Purchaser Sub or its Affiliates on or after the
Closing Date under ERISA with respect to any Business Employee. Section 3.8(b)
of the Company Disclosure Schedules sets forth a list of all Multiemployer Plans
to which the Company or any of its Affiliates contribute as of the Closing (the
“Company Multiemployer Plans”). As of or prior to the date hereof, neither the
Company nor any of its ERISA Affiliates has incurred or triggered any withdrawal
liability (including any contingent or secondary withdrawal liability) within
the meaning of Section 4201 or 4204 of ERISA. The Company and its Affiliates
have timely made all contributions required to be made by them to a Company
Multiemployer Plan under the terms of the Company Multiemployer Plan and/or the
applicable CBA. For each Company Multiemployer Plan, the Company has made
available to the Purchaser Sub true and correct copies of all material
correspondence for the previous six (6) years from each such Company
Multiemployer Plan, relating to its funded status, relating to, or describing
the existence of, any minimum funding violation or application for waiver of a
minimum funding violation, or containing any reference to or description of any
rehabilitation plan or default plan adopted under applicable law, and with a
copy of any letter received from the administrator of the Company Multiemployer
Plan setting forth the estimated withdrawal liability which would be imposed by
the Company Multiemployer Plan if the Company or its ERISA Affiliate, as
applicable, were to withdraw from the Company Multiemployer Plan in a complete
withdrawal.

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

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

 

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

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

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

SECTION 3.9 Labor and Employment Matters.

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

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

 

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

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

SECTION 3.10 Properties.

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

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

 

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

SECTION 3.11 Tax Matters.

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

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

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

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

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

 

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(f) For purposes of this Agreement:

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

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

SECTION 3.12 Sufficiency of Purchased Assets. Except as set forth on
Section 3.12 of the Company Disclosure Schedules, except for the Excluded Assets
and except as is not material and adverse to the Purchased Assets, the Assumed
Liabilities and to the business and operations at the Acquired Stores (taken as
a whole), the Purchased Assets and the Transferred Employees, when taken
together with the rights of the Company under the Transition Services Agreement
constitute all of the material rights, property and assets and employees
necessary to conduct such business in substantially the same manner as currently
conducted, except with respect to any Permits that are prohibited by Contract or
applicable Law from being transferred.

SECTION 3.13 Environmental Matters.

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

 

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

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

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

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

SECTION 3.14 Privacy and Data Security; Company Rx Data. As of the date hereof,
the collection, use, transfer, import, export, storage, disposal and disclosure
by the Company of personally identifiable customer information, or other
information relating to Persons protected by Law, has not violated any
applicable Law or any contractual obligation of the Company or the Company’s
Affiliates (with respect to the Purchased Assets) relating to the collection,
use, privacy, security or protection of such information (collectively, “Privacy
and Security Laws”), except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company is in compliance with the privacy and
security provisions of the Health Insurance Portability and Accountability Act
of 1996, as amended by the Health Information Technology for Economic and
Clinical Health Act of 2009 with respect to the Purchased Assets, except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has created and maintained written policies
and procedures reasonably designed to protect the privacy and security of all
customer information and to comply with all Privacy and Security Laws, and has
implemented an information security program that includes commercially
reasonable security procedures, including physical and electronic safeguards, to
protect all customer information stored or transmitted by the Company in
electronic form with respect to the Purchased Assets, in each case except as
would not reasonably be expected to have a Material Adverse Effect. Since, to
the Company’s knowledge as of the date hereof, the Applicable Date, there have
been no security breaches relating to, or violations of any privacy policy or
security policy of the Company or the Company’s Affiliates regarding, or any
unauthorized access to or disclosure of, any data or information stored,
transmitted or otherwise used by the Company (in each case, with respect to the
Acquired Stores or the Distribution Centers), except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Since the Applicable Date, the Company and its subsidiaries have maintained
Company Rx Data in all material respects in the ordinary course of business
consistent with past practice.

 

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

SECTION 3.16 Compliance with Healthcare Legal Requirements.

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

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

 

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Assets; and (vi) all reports, documents, applications, and notices required to
be filed, maintained or furnished to any Governmental Entity or any private or
government payment program, in each case in respect of or related to the
Purchased Assets, have been so filed, maintained or furnished and all such
reports, documents, applications and notices were true, complete and correct in
all material respects on the date filed (or were corrected or supplemented by a
subsequent filing).

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

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

 

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

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

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

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

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

 

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

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF

PARENT AND PURCHASER SUB

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

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

SECTION 4.2 Authority. Each of Parent and Purchaser Sub has all requisite
corporate power and authority, and has taken all corporate or other action
necessary, to execute and deliver the Transaction Agreements, to perform its
obligations thereunder and to complete the transactions contemplated hereby.
This Agreement has been duly and validly executed and

 

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delivered by each of Parent and Purchaser Sub and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of Parent and Purchaser Sub enforceable
against each of Parent and Purchaser Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception.

SECTION 4.3 No Conflict; Required Filings and Consents.

(a) The execution, delivery and performance of the Transaction Agreements by
Parent and Purchaser Sub do not, and the completion of the transactions
contemplated hereby will not (i) conflict with or violate the certificate of
incorporation or bylaws of Parent or Purchaser Sub, (ii) assuming that all
consents, approvals, authorizations and Permits contemplated by clauses
(i) through (v) of subsection (b) below have been obtained, and all filings and
notifications described in such clauses of subsection (b) below have been made
and any waiting periods thereunder have terminated or expired, conflict with or
violate any Law applicable to Parent, Purchaser Sub or any of their or their
respective subsidiaries’ assets or properties or (iii) result in any breach or
violation of or constitute a default (or an event, which with notice or lapse of
time or both, would become a default) or result in the loss of a benefit to
which Parent, Purchaser Sub or any of their respective subsidiaries are entitled
under, give rise to any right of termination, cancellation, adverse amendment or
acceleration of, require notice or consent under, or result in the creation of a
Lien (except a Permitted Lien) on any of the material assets or properties of
Parent, Purchaser Sub or any of their respective subsidiaries pursuant to, any
Contract to which Parent or Purchaser Sub, or any of their subsidiaries is a
party or by which Parent or Purchaser Sub or any of their subsidiaries or its or
their respective assets or properties are bound, except, in the case of clauses
(ii) and (iii), for any such conflict, violation, Lien, breach, default, loss,
right, requirement of notice or consent or other occurrence which would not
prevent, materially delay or materially impair the ability of Parent or
Purchaser Sub to perform its obligations under the Transaction Agreements or
complete the transactions contemplated by the Transaction Agreements.

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

SECTION 4.4 Absence of Litigation. As of the date hereof, there are no
Proceedings pending or, to the knowledge of Parent, threatened in writing
against Parent or Purchaser Sub or any of their respective subsidiaries, other
than any such Proceeding that would not, individually or in the aggregate with
other such Proceedings, reasonably be expected to prevent, materially

 

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delay or materially impair the ability of Parent or Purchaser Sub to perform its
obligations under this Agreement or complete the other transactions contemplated
by this Agreement. As of the date hereof, neither Parent nor any of its
subsidiaries nor any of their respective material assets or properties is or are
subject to any order, writ, judgment, injunction, decree or regulatory
restriction (other than those of general application that apply to similarly
situated companies or their subsidiaries and are not disproportionately adverse
to Parent and its subsidiaries), except for those that would not reasonably be
expected to prevent, materially delay or materially impair the ability of Parent
or Purchaser Sub to perform its obligations under this Agreement or complete the
other transactions contemplated by this Agreement.

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

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

SECTION 4.7 No Other Representations or Warranties. Except for the
representations and warranties contained in Article III or in any certificate
delivered by the Company to Parent or Purchaser Sub (and notwithstanding the
delivery or disclosure to Parent or its Representatives of any documentation,
projections, estimates, budgets or other information), each of Parent and
Purchaser Sub acknowledges that (x) none of the Company, the Company
subsidiaries or any other Person on behalf of the Company makes, or has made,
any representation or warranty relating to itself or its business or otherwise,
in connection with this Agreement or the transactions contemplated by this
Agreement, and Parent and Purchaser Sub are not relying on any representation or
warranty of any Person except for those expressly set forth in this Agreement,
(y) no person has been authorized by the Company, the Company subsidiaries or
any other Person on behalf of the Company to make any representation or warranty
relating to itself or its business or otherwise in connection with this
Agreement, and if made, such representation or warranty shall not be relied upon
by Parent or Purchaser Sub as having been authorized by such entity, and (z) any
estimate, projection, prediction, data, financial information, memorandum,
presentation or any other materials or information provided or addressed to
Parent, Purchaser Sub or any of their Representatives, including any materials
or information made available to Parent and/or its Representatives in connection
with presentations by the Company’s management, are not and shall not be deemed
to be or include representations or warranties. Each of Parent and Purchaser Sub
acknowledges that it has conducted, to its satisfaction, its own independent
investigation of the condition, operations and business of the Company and in
making its determination to proceed with the transactions contemplated by this
Agreement, each of Parent and Purchaser Sub has relied solely on the results of
its own independent investigation and the terms of this Agreement and has not
relied, directly or

 

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indirectly, on any materials or information made available to Parent and/or its
Representatives by or on behalf of the Company. Each of Parent and Purchaser Sub
acknowledges and agrees that, except as expressly set forth in this Agreement,
Purchaser Sub shall acquire the Purchased Assets and the Assumed Liabilities
without any representation or warranty, express or implied, as to
merchantability, satisfactory quality or fitness for any particular purpose, in
“as is” condition and on a “where is” basis.

ARTICLE V

CONDUCT OF BUSINESS PENDING THE SALE

SECTION 5.1 Conduct of Business of the Company Pending the Sale. From the date
of this Agreement until the earlier of the Closing (or, with respect to
Purchased Assets to be transferred at a Subsequent Closing, such Subsequent
Closing or, to the extent related to the Distribution Centers, the Distribution
Center Closing) and the termination of this Agreement in accordance with Article
VIII, except (i) as expressly contemplated or permitted by this Agreement,
(ii) as set forth in Section 5.1 of the Company Disclosure Schedules, (iii) as
required by applicable Laws, or (iv) as consented to by Parent in writing (such
consent not to be unreasonably withheld, conditioned or delayed), the Company
shall, and shall cause its subsidiaries, subject to the exceptions in the
restrictions set forth below, to (a) conduct its business at the Acquired Stores
and the Distribution Centers in the ordinary course of business consistent with
past practice (including regular repair and maintenance efforts), (b) use its
commercially reasonable efforts to preserve intact its business organization and
to preserve the current significant business relationships with Business
Employees, suppliers and customers of the Acquired Stores and (c) not:

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

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

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

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

 

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

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

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

 

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

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

(x) waive any claim or compromise, settle or agree to settle any Proceeding
related to the Acquired Stores or the Distribution Centers that would result in
an admission of liability or remedies or payment obligations that would be
binding on Parent or Purchaser Sub following the Closing, Subsequent Closing or
Distribution Center Closing, as applicable;

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

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

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

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

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

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

 

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

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

ARTICLE VI

ADDITIONAL AGREEMENTS

SECTION 6.1 Competing Transaction Proposals; Acquisition Proposals.

(a) Competing Transaction Proposals.

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

(ii) For purposes of this Agreement, “Competing Transaction Proposal” means any
proposal or offer from any Person or group of Persons (other than Parent)
relating to any business combination, sale transaction or similar transaction
that involves the sale or disposition, directly or indirectly, of the Purchased
Assets or any

 

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material portion thereof (whether by merger, consolidation, dissolution,
liquidation, recapitalization, reorganization, share exchange, business
combination, purchase or other similar transaction); provided, however, that any
transaction in which any remaining obligations of the Company under this
Agreement, the Transition Services Agreement and the Transitional Trademark
License Agreement will be assumed (including by operation of Law, if applicable)
shall not be considered a Competing Transaction Proposal.

(b) Acquisition Proposals.

(i) From the date of the Original Agreement until the sixty (60) day anniversary
of the date of the Original Agreement (the “Non-Solicitation Period”), the
Company shall not, and shall cause its subsidiaries and its and its
subsidiaries’ Representatives not to, directly or indirectly, (i) initiate,
solicit, knowingly encourage, knowingly induce or knowingly facilitate
(including by providing non-public information relating to the Company and its
subsidiaries) the making of any Acquisition Proposal or any inquiry, offer or
proposal that would reasonably be expected to lead to an Acquisition Proposal or
(ii) engage or otherwise participate in any negotiations or discussions (other
than, in response to a bona fide Acquisition Proposal or other inquiry, offer or
proposal after the date hereof that was not initiated, solicited, encouraged or
facilitated in, and did not otherwise result from a, material violation of this
Section 6.1(b), contacting such Person and its advisors for the purpose of
clarifying the material terms of any such Acquisition Proposal or inquiry, offer
or proposal and the likelihood and timing of consummation thereof) concerning,
or provide access to its properties, books and records or any confidential or
nonpublic information or data to, any Person in connection with, relating to or
for the purpose of encouraging or facilitating an Acquisition Proposal or any
inquiry, offer or proposal that would reasonably be expected to lead to an
Acquisition Proposal, and the Company shall not resolve or agree to do any of
the foregoing. Without limiting the foregoing, it is agreed that any violation
of any of the restrictions set forth in the preceding sentence by any
Representatives of the Company or any of its subsidiaries shall be a breach of
this Section 6.1(b) by the Company.

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

 

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from a, material violation of this Section 6.1(b) or (B) following the
Non-Solicitation Period, without limitation, if, in the case of each of (1), (2)
or (3), during the Non-Solicitation Period, the Company Board shall have
determined in good faith, after consultation with its outside legal counsel,
that the failure to take such action or make such disclosure would be reasonably
likely to be inconsistent with the Company Board’s fiduciary duties under
applicable Law or following the Non-Solicitation Period, without limitation.

(iii) Notwithstanding anything in this Agreement to the contrary, if, at any
time during the Non-Solicitation Period the Company Board determines in good
faith, after consultation with its outside legal counsel, in response to a bona
fide Acquisition Proposal that was made after the date hereof and was not
initiated, solicited, encouraged or facilitated in, and did not otherwise result
from a, material violation of this Section 6.1(b), that the failure to take such
action would be reasonably likely to be inconsistent with the Company Board’s
fiduciary duties under applicable Law, the Company or the Company Board may (and
may resolve or agree to) enter into a definitive merger agreement, acquisition
agreement or other similar written agreement relating to any Acquisition
Proposal (an “Alternative Acquisition Agreement”), subject to clauses (iv) and
(v) below.

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

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

(vi) The Company agrees to notify Parent promptly if it determines during the
Notice Period not to enter into the Alternative Acquisition Agreement referred
to in the Company Notice. Any amendment to the financial terms or any other
material amendment to the terms and conditions of a proposed Alternative
Acquisition Agreement that are reasonably relevant to Parent will be deemed to
be a new proposal or proposed Alternative Acquisition Agreement for purposes of
this Section 6.1(b) requiring a new

 

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Company Notice and an additional Notice Period; provided, however, that such
additional Notice Period shall expire at 11:59 p.m., New York City time, on the
second (2nd) Business Day immediately following the day on which the Company
delivers such new Company Notice (it being understood and agreed that in no
event shall any such additional two (2) Business Day Notice Period be deemed to
shorten the initial Notice Period).

(vii) For purposes of this Agreement, “Acquisition Proposal” means any proposal
or offer (including a tender offer or exchange offer) from any Person or group
of Persons (other than Parent or Merger Sub) relating to (A) any merger,
consolidation, dissolution, liquidation, recapitalization, reorganization, share
exchange, business combination, purchase, or similar transaction with respect to
the Company or (B) any direct or indirect acquisition or purchase, in one
transaction or a series of related transactions, of assets (including equity
securities of any subsidiary of the Company) or businesses that constitute all
or substantially all of the consolidated revenues, net income or assets of the
Company and its subsidiaries, taken as a whole, after taking into account the
effect of the transactions contemplated by this Agreement, or fifty percent
(50%) or more of the total voting power of the equity securities of the Company.

SECTION 6.2 Further Action; Efforts.

(a) Subject to the terms and conditions of this Agreement, including
Section 6.2(d) and Section 6.2(e), each party shall use its reasonable best
efforts to take, or cause to be taken, and to assist and cooperate with the
other parties in taking or causing to be taken, all actions and to use its
reasonable best efforts to do, or cause to be done, all things reasonably
necessary, proper or advisable under this Agreement and applicable Law to
complete and make effective the sale of the Purchased Assets and the other
transactions contemplated by this Agreement in the most expeditious manner
practicable. Without limiting the foregoing sentence, each party agrees to
(i) (A) within five (5) Business Days after the date of this Agreement (unless a
later time is mutually agreed between the Parties), make or amend appropriate
filings, if required, of “Notification and Report Forms” pursuant to the HSR Act
(the “HSR Filing”), (B) as promptly as practicable after the date of this
Agreement (unless a later time is mutually agreed between the Parties), make
appropriate filings with appropriate insurance Governmental Entities and (C) as
promptly as practicable and advisable, after the date of this Agreement, make
appropriate filings under any Healthcare Law that are necessary or advisable in
connection with the completion of the transactions contemplated by this
Agreement; and (ii) as promptly as practicable and advisable, after the date of
this Agreement, prepare and submit all other filings, notifications, information
updates and other presentations required by or in connection with seeking, and
obtain, all consents, approvals, clearances, expirations or terminations of
waiting periods, non-actions, waivers, exemptions, Permits, orders, change of
ownership approvals or other authorizations (“Consents”) from any Governmental
Entity or other third party, in each case that are necessary or advisable in
connection with the completion of the transactions contemplated by this
Agreement (including Pharmacy Approvals), and to assist and cooperate with the
other party in connection with the foregoing; provided, that the Company shall
have no obligation to pay any fee to any third party for the purpose of
obtaining any such Consent, or pay any costs and expenses of any third party
resulting from the process of obtaining such Consent. Each of Parent and the
Company shall use its commercially reasonable efforts to give all notices

 

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to, and obtain all consents from, all landlords party to the Acquired Leases,
and the Parties shall bear the costs of any payments made to landlords party to
the Acquired Leases in accordance with Section 2.2(e). Upon request from the
Company, Parent agrees to provide a guarantee of Purchaser Sub’s obligations
under any or all of the Acquired Leases in form and substance reasonably
satisfactory to the landlord party to such Acquired Lease and the Company.
Parent and Purchaser Sub shall collectively be solely responsible for all filing
fees and other costs associated with such requests and applications, including
attorney fees and other costs incurred by Parent and Purchaser Sub in connection
with the preparation of such requests and applications. The Company shall not,
and shall not permit any of its subsidiaries to, engage in, publicly propose or
enter into any transaction that would reasonably be expected to (x) result in
any material delay in the obtaining or materially increase the risk of not
obtaining any required Consent from any Governmental Entity with respect to the
transactions contemplated by this Agreement or (y) materially increase the risk
of any Governmental Entity entering a Legal Restraint prohibiting or materially
delaying the completion of the transactions contemplated by this Agreement;
provided, that nothing in this Agreement shall limit the ability of the Company
or its Affiliates or subsidiaries to (i) engage in (A) “buy and operate”
acquisitions involving acquisitions of ten (10) or fewer Retail Pharmacies in
one transaction or a series of related transactions, or (B) “file buy”
acquisitions, in the case of clauses (A) and (B), in the ordinary course of
business consistent with past practice and after obtaining advice from the
Company’s outside antitrust counsel, who shall have previously consulted with
Parent’s outside antitrust counsel, that any such acquisition would not have the
impact described in clauses (x) or (y) above, (ii) engage in or enter into any
agreement providing for any acquisition (whether by merger, consolidation,
business combination or otherwise) of the assets or equity interests of any
Person that does not engage in commerce or affect commerce in the U.S. or
(iii) engage in, consummate or enter into an Alternative Acquisition Proposal,
or following the Non-Solicitation Period, engage in, enter into or consummate a
definitive agreement relating to an Acquisition Proposal, in each case, in
accordance with Section 6.1. Parent shall not, and shall not permit any of its
subsidiaries to, engage in or enter into any acquisition (whether by merger,
consolidation, business combination or otherwise) of the assets or equity
interests of any Person involving the acquisition of Retail Pharmacies in the
U.S., provided, that nothing in this Agreement shall limit the ability of Parent
or its Affiliates or subsidiaries to (i) engage in (A) “buy and operate”
acquisitions involving acquisitions of ten (10) or fewer Retail Pharmacies in
one transaction or a series of related transactions, or (B) “file buy”
acquisitions, in the case of clauses (A) and (B), in the ordinary course of
business consistent with past practice and after obtaining advice from Parent’s
outside antitrust counsel, who shall have previously consulted with the
Company’s antitrust counsel, that any such acquisition would not have the impact
described in clauses (x) or (y) in the preceding sentence, (ii) engage in or
enter into any agreement providing for any acquisition (whether by merger,
consolidation, business combination or otherwise) of the assets or equity
interests of any Person that does not engage in commerce or affect commerce in
the U.S. or (iii) engage in, consummate or enter into any agreement providing
for any of the transactions set forth on Section 6.2(a) of the Parent Disclosure
Schedules.

(b) Subject to Section 6.2(d) and Section 6.2(e), each of Parent, on the one
hand, and the Company, on the other hand, shall in connection with the
reasonable best efforts referenced in Section 6.2(a) and Section 6.2(c), as
applicable, (i) cooperate in all respects with each other and their respective
Representatives in connection with any filing or submission and in connection
with any Proceeding by or before a Governmental Entity, including any

 

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Proceeding initiated by a private party; (ii) promptly inform the other party
and/or its counsel, and provide copies, of any substantive communication
received by such party from, or given by such party to, the Federal Trade
Commission (the “FTC”), the Antitrust Division of the Department of Justice (the
“DOJ”) or any other Governmental Entity or such private party, in each case
regarding any such filing, submission, Proceeding or the transactions
contemplated hereby; (iii) comply, as early as practicable, with any request for
information, documents or other materials received by such Party or any of its
subsidiaries from the FTC, the DOJ or any such other Governmental Entity, and
without limiting the foregoing, to the extent there is a Request for Additional
Information from the FTC or DOJ (a “Second Request”) following the HSR Filing,
the parties shall certify substantial compliance with the Second Request no
later than sixty (60) days following receipt of the Second Request; (iv) not
directly or indirectly extend any waiting period under the HSR Act or agree to
any timing agreement with the FTC, DOJ or any other Governmental Entity, in each
case except with the prior written consent of the other Party (such consent not
to be unreasonably withheld, conditioned or delayed); (v) permit the other party
and/or its counsel to review and discuss reasonably in advance, and consider in
good faith the views of the other party and/or its counsel in connection with,
any proposed substantive communication to be given by it to the DOJ, the FTC or
any such other Governmental Entity or, in connection with any Proceeding by such
private party, any other person; and (vi) to the extent not prohibited by the
DOJ, the FTC or such other Governmental Entity, give the other party and/or its
counsel reasonable advance notice of any in-person meeting, and any conference
call that is initiated by such Party or scheduled in advance, with such
Governmental Entity or such private party and not participate independently
therein without first giving the other party and/or its counsel reasonable
opportunity to attend and participate therein or, in the event such other party
and/or its counsel does not attend or participate therein, consulting with such
other party and/or its counsel reasonably in advance and considering in good
faith the views of such other party and/or its counsel in connection therewith.
Parent and the Company may, as each deems advisable and necessary, reasonably
designate any competitively sensitive material provided to the other under this
Section 6.2(b) as “Antitrust Counsel Only Material.” Such materials and the
information contained therein shall be given only to the outside antitrust
counsel (or previously agreed outside consultant, as applicable) of the
recipient and shall not be disclosed by such outside counsel (or previously
agreed outside consultant, as applicable) to employees, officers or directors of
the recipient unless express permission is obtained in advance from the source
of the materials (Parent or the Company, as the case may be) or its legal
counsel. Materials provided by a Party to the other Party pursuant to this
Section 6.2(b) may be redacted (x) to remove references concerning the valuation
of Parent, the Company or any of their respective subsidiaries, (y) as necessary
to comply with contractual arrangements and (z) as necessary to address
privilege or confidentiality concerns.

(c) Subject to Section 6.2(d) and Section 6.2(e), in the event that any
Proceeding is commenced or threatened by a Governmental Entity or other Person
challenging the transactions contemplated by this Agreement under Antitrust Law,
each of Parent and the Company shall cooperate in all material respects with
each other in connection therewith and use its respective reasonable best
efforts in the most expeditious manner practicable to (i) contest, resist,
oppose and resolve any such Proceeding; and (ii) avoid the entry of or have
vacated, lifted, reversed or overturned any Legal Restraint that would
reasonably be expected to prevent, make illegal, prohibit, restrain, enjoin,
materially delay or materially impair completion of the transactions
contemplated by this Agreement. To the extent necessary to obtain the requisite

 

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Consents of Governmental Entities under Section 6.2(a) or take the other actions
contemplated under this Section 6.2(c) sufficiently in advance of the End Date
(taking into account any extension) to permit the completion of the transactions
contemplated by this Agreement by the End Date (taking into account any
extension), the Company shall commence to take the actions contemplated under
this Section 6.2(c) no later than four (4) months after the date of the Original
Agreement.

(d) Notwithstanding anything in this Agreement to the contrary, nothing in this
Agreement shall require Parent or any of its Affiliates to, (A) (1) sell, lease,
license, transfer, dispose of, divest or otherwise encumber, or hold separate
pending any such action, or (2) proffer, propose, negotiate, substitute, offer
to effect or consent, commit or agree to any sale, lease, licensing, transfer,
disposal, divestiture, or other encumbrance of, or hold separate, in each case
before or after the Closing, the Purchased Assets or the assets, licenses,
properties, businesses and interests of Parent and any of its Affiliates or
(B) take or agree to take any other action, and agree or consent to any
limitations or restrictions on freedom of actions with respect to, or its
ability to own, control, retain or make changes in, the Purchased Assets or the
assets, licenses, properties, businesses and interests of Parent or its
Affiliates; provided, that in each case to the extent necessary in order to
obtain the requisite Consents of Governmental Entities, Parent and the Company
shall, and shall cause their respective subsidiaries to, in the most expeditious
manner practicable, agree to replace up to ten (10) stores included within the
Acquired Stores with other stores of the Company, which stores are mutually
agreed upon in good faith by the Company and Parent, and each such replacement
store shall thereafter be deemed an Acquired Store for purposes hereof and shall
be subject to an Acquired Store Scheduled Closing Date as the Parties shall
reasonably agree with respect to such replacement store (the “Swap Remedy”), and
to the extent such stores are not replaced, to exclude up to ten (10) stores
from the Acquired Stores (and the Purchase Price shall be reduced as set forth
on Section 2.2 of the Company Disclosure Schedules (and the amounts payable
pursuant to Section 2.7 shall be reduced accordingly)) and provided, further, in
the event that, if following Parent and the Company first attempting to utilize
the Swap Remedy, it is necessary for the Company to retain certain Acquired
Stores (not to exceed an amount of stores equal to ten (10) minus the number of
stores that were replaced in the Swap Remedy) in order for the Parties to obtain
any required Consent from any Governmental Entity with respect to the
transactions contemplated by this Agreement, Parent, in consultation with the
Company, shall, sufficiently in advance of the End Date to permit the completion
of the transactions contemplated by this Agreement by the End Date, and no later
than within two (2) months from the date of this Agreement, designate such
Acquired Stores, and such designated Acquired Stores and all of the related
assets shall be retained by the Company and the Purchase Price shall be reduced
as set forth on Section 2.2 of the Company Disclosure Schedules (and the amounts
payable pursuant to Section 2.7 shall be reduced accordingly).

(e) Notwithstanding anything in this Agreement to the contrary, with respect to
the matters covered in this Section 6.2, it is agreed that Parent and the
Company shall jointly make all strategic decisions and jointly participate in
all discussions, negotiations and other proceedings, and jointly coordinate all
activities with respect to any requests that may be made by, or any actions,
consents, undertakings, approvals, or waivers that may be sought by or from, any
Governmental Entity, including determining the strategy for contesting,
litigating or otherwise responding to objections to, or Proceedings challenging,
the completion of the

 

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transactions contemplated by this Agreement. Each of the Company and Parent
shall not, and shall not permit any of their respective Representatives to, make
any offer, acceptance or counter offer to or otherwise engage in negotiations or
discussions with any Governmental Entity with respect to any proposed
settlement, consent decree, commitment or remedy or, in the event of litigation,
discovery, admissibility of evidence, timing or scheduling, except as
specifically requested by or agreed with such other Party.

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

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

SECTION 6.4 Taxes.

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

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

 

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

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

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

SECTION 6.5 Ancillary Agreements.

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

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

 

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

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

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

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

(b) From and after the Closing Date, in connection with any reasonable business
purpose, including the preparation of any financial statements or Tax Returns,
any audit or other examination by any taxing authority, any judicial or
administrative proceedings relating to Taxes, claims relating to Assumed
Liabilities or Excluded Liabilities, financial statements, or the determination
of any matter relating to the rights or obligations of the Parties or any of
their respective Affiliates under any of the Transaction Agreements, upon
reasonable prior written notice, and except as determined in good faith to be
necessary to (i) ensure compliance with any applicable Law, (ii) preserve any
applicable privilege (including the attorney-client privilege), or (iii) comply
with any contractual confidentiality obligations, each Party shall, and shall
use reasonable best efforts to cause its Affiliates and its Representatives to,
(A) afford the Representatives of the other Party and its Affiliates reasonable
assistance and reasonable access, during normal business hours, to the offices,
properties, books and records of such Party and its Affiliates in respect of the
Acquired Stores and the Purchased Assets (and related Liabilities), (B) retain
and furnish to the Representatives of the other Party and its Affiliates such
additional financial and other information regarding the Acquired Stores and the
Purchased Assets (and related Liabilities) as such Party or its Representatives
may from time to time reasonably request and abide by all record retention
agreements entered into with any taxing authority with respect thereto, (C) make
available to the Representatives of the other Party and its Affiliates, during
normal business hours, those employees of such Party and its Affiliates whose
assistance, expertise, testimony, notes and recollections or presence may be
reasonably necessary to assist the other Party, its Affiliates or its or their
respective Representatives in connection with its reasonable inquiries,
including the presence of such persons as witnesses in hearings or trials for
such purposes and (D) in the case of the Company, give to the Representatives of
Parent and its Affiliates reasonable written notice prior to transferring,
destroying or discarding any books and records regarding the Acquired Stores and
the Purchased Assets (and related Liabilities) if such transferring, destroying
or discarding is not in compliance with the Company’s record retention policy
and, if requested and permissible by Law, allow Parent and its Affiliates to
take possession of such books and records; provided, however, that such
investigation shall not unreasonably interfere with the business or operations
of such Party or any of its Affiliates; provided, further, that the auditors and
accountants of each Party or its Affiliates shall not be obligated to make any
work papers available to any Person except in accordance with such auditors’ and
accountants’ normal disclosure procedures and then only after such Person has
signed a customary agreement relating to such access to work papers in form and
substance reasonably acceptable to such auditors or accountants. If so requested
by either Party, the other Party or one of its Affiliates shall enter into a
customary joint defense agreement with such Party and its Affiliates with
respect to any information to be provided to such Party pursuant to this
Section 6.6(b).

 

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

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

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

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

 

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SECTION 6.9 Cooperation.

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

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

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

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

(b) hiring or communicating with any Transferred Employee or employee of the
Company who is not a Transferred Employee, as applicable, who applies for
employment with the Company or any of its Affiliates, whether or not such
employee was involuntarily terminated, so long as such employee was not
solicited by the other Party or any of its Affiliates in violation of this
Section 6.10.

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

 

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Parent mutually agree that the Company shall not sell, transfer, assign, convey
or deliver to Purchaser Sub one or more Acquired Stores, the Parties shall
negotiate in good faith to amend the terms of this Agreement and any other
Transaction Agreement as necessary to appropriately reflect the terms of such
arrangement, and “Purchased Assets” shall be deemed to be modified to exclude
any facility that was to be “Purchased Assets” because such facility was an
Acquired Store, and “Assumed Liabilities” shall be deemed to be modified to
exclude any Liabilities that were to be “Assumed Liabilities” because such
facility was an Acquired Store.

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

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

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

(c) To protect the goodwill associated with the Purchased Assets to be acquired
by Parent and Purchaser Sub pursuant to this Agreement and to ensure an orderly
transition of the Purchased Assets to Parent and Purchaser Sub, during the
applicable Protected Period with respect to any Acquired Store, the Company
shall not, and shall not permit any of its Affiliates to, directly or
indirectly, lease, acquire or operate a retail pharmacy within five (5) miles of
such Acquired Store; provided, that notwithstanding the foregoing, nothing
herein shall prevent the Company or any of its Affiliates from continuing to
lease, own or operate a retail pharmacy that is (i) owned, leased or operated by
the Company or any of its Affiliates as of the date of this Agreement and not an
Acquired Store, (ii) owned, leased or operated by the Company or any of its
Affiliates as a result of the acquisition of the Company by any Person or

 

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group of Persons (other than Parent) after the date of this Agreement not in
violation of Section 6.1 or the acquisition by the Company of any Person or the
assets of any Person after the date of this Agreement not in violation of
Section 6.2(a); provided, that in each case such retail pharmacy is not operated
under the Retained Names and Marks and is owned, leased or operated by such
Person as of the date of such acquisition, (iii) relocated by the Company or its
Affiliates after the date of this Agreement to a new location within five
(5) miles of the original location thereof as of the date of this Agreement;
provided, that in each case such new location is closer to such original
location than the location of the Acquired Store nearest to such original
location as of the date of this Agreement and such new location is not within
one-tenth (0.1) of a mile of the location of any Acquired Store unless such
Acquired Store was converted to the “Walgreens” banner or Parent, Purchaser Sub
or their applicable Affiliate discontinues its pharmacy operations with respect
to such Acquired Store no less than 180 days prior to such relocation or
(iv) set forth on Section 6.12(c) of the Company Disclosure Schedules. For
purposes of this Section 6.12, the term “Protected Period” shall mean, with
respect to any Acquired Store, the period from the Closing Date until the
earliest of (i) the date that is 180 days after such Acquired Store has been
converted to the “Walgreens” banner, (ii) the end of the Transition Period (as
defined in the Transition Service Agreement), (iii) the date that is 180 days
after the date on which Parent, Purchaser Sub or their applicable Affiliate
discontinues its pharmacy operations with respect to such Acquired Store and
(iv) the date that is thirty (30) months after the Closing Date.

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

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

SECTION 6.14 Employee Matters.

(a) Purchaser Sub shall make an offer of employment or communicate to each
Business Employee its transfer of employment to Purchaser Sub, in either case,
in a manner reasonably determined by Purchaser Sub, and the Company shall, upon
request, use commercially reasonable efforts to assist Purchaser Sub in
preparing and delivering the applicable offer or communication. Such offer of
employment or communication of transfer of employment shall be provided to each
Business Employee (as listed on an employee census (the “Employee Census”)) at
least five (5) Business Days prior to the Closing Date, Subsequent Closing Date
or Distribution Center Closing Date, as applicable; provided, that in each case,
any offer or transfer of employment with respect to a Business Employee is
subject to the condition that such Business Employee is employed by the Company
or an Affiliate of the Company on the

 

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Closing Date, Subsequent Closing Date or Distribution Center Closing Date, as
applicable, and employment for such Business Employee shall begin on the first
Business Day following such date (the “Census Start Date”); provided, further,
that with respect to any Inactive Employee, any offer of employment or
communication of transfer of employment shall be made with a commencement date
of the date that such employee actively returns to work in accordance with the
applicable leave policy within twelve (12) months of the Closing Date,
Subsequent Closing Date or Distribution Center Closing Date, as applicable, and
if such Inactive Employee does not so return within twelve (12) months, then the
offer or communication of transfer shall expire or become invalid, as
applicable, unless required by Law to remain open for a longer period; provided,
further, that the Employee Census shall state each Business Employee’s name,
title, current service credit with the Company and its Affiliates,
classification, salary or pay rate, short-term and long-term bonus eligibility,
status with respect to whether he or she is currently an Inactive Employee (and
the reason such Business Employee is in Inactive Employee status) and each
Employee Plan for which such Business Employee is then eligible. Each offer of
employment or transfer of employment shall be for a substantially comparable
position held by such Business Employee (subject to the requirements of any
applicable collective bargaining agreement), and at the same location(s) at
which such Business Employee worked while employed with the Company or an
Affiliate of the Company. Notwithstanding the foregoing, Parent and Purchaser
Sub shall indemnify and hold the Company harmless with respect to any Losses
related to any claim or threatened claim by or on behalf of any Excluded
Employees arising out of Purchaser or Purchaser Sub’s failure to offer
employment to or hire any such Excluded Employee or any claim for Excluded
Employee Severance; provided that, for the avoidance of doubt, Parent and
Purchaser Sub shall not indemnify and hold the Company harmless with respect to
any Losses related to a claim for compensation or benefits arising under any
compensation or benefit plan, agreement or arrangement maintained by the Company
or its Affiliates, other than Excluded Employee Severance. The Company shall
deliver a census summary (which shall comply with Section 6.14(a) of the Company
Disclosure Schedules) (the “Census Summary”) on or prior to date of this
Agreement, which Census Summary shall be as of a date not more than ten
(10) days prior to the date of this Agreement. The Employee Census shall first
be delivered to Purchaser Sub on the applicable Employee Data Trigger Date and
shall be updated by the Company no earlier than three (3) weeks prior to the
Census Start Date for any Business Employee and with respect to any Business
Employee added to the Employee Census pursuant to such an update, Purchaser Sub
shall make an offer of employment or communicate a transfer of employment as
soon as practicable thereafter but no later than the Census Start Date.

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

 

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(c) Each Business Employee that accepts an offer of employment from Purchaser
Sub or whose employment is transferred effective at his or her Census Start Date
or, with respect to an Inactive Employee, upon commencement of employment on the
terms set forth in Section 6.14(a) (the “Inactive Employee Transfer Date”)
(collectively referred to hereinafter as the “Employment Start Date”) shall be
referred to as a “Transferred Employee”. The employment by Purchaser Sub of a
Transferred Employee shall be on an employment “at-will” basis (except as
required under any collective bargaining agreement). For a period beginning on
the first Subsequent Closing Date and ending on the twelve (12) month
anniversary of the first Subsequent Closing Date (the “Continuation Period”),
Purchaser Sub shall provide, or shall cause its Affiliates to provide, to each
Transferred Employee that is a non-Union-Represented Business Employee (solely
during any period a Transferred Employee is employed by Purchaser Sub during
such twelve (12) month period), (A) an annual base salary or wage rate and
target annual incentive opportunities that are no less favorable in the
aggregate than those provided by the Company or one of its Affiliates
immediately prior to the Employment Start Date and (B) employee benefits that
are substantially comparable in the aggregate to those that were provided to
such Transferred Employee immediately prior to the Employment Start Date (taking
into account only the employee benefits listed under the “Pension Plans,”
“401(k) Plans” and “Health and Welfare and Other Plans” headings of
Section 3.8(a) of the Company Disclosure Schedules), taking into account prior
service with the Company or its Affiliates and to Purchaser Sub’s right to
change employee contribution rates in the ordinary course of business consistent
with coverage cost changes as a result of contract cost negotiation with vendors
(which changes apply to employees of Purchase Sub and its Affiliates other than
the Transferred Employees) (a “Non-Union Employee Offer”). With respect to each
Transferred Employee that is a Union-Represented Business Employee, for a period
beginning on the first Subsequent Closing Date and ending on the twelve
(12) month anniversary of the first Subsequent Closing Date, Purchaser Sub shall
provide, or shall cause its Affiliates to provide, compensation and employee
benefits in accordance with the terms of the applicable collective bargaining
agreement in effect as of the first Subsequent Closing Date; provided, that as
of the effective date of a successor collective bargaining agreement applicable
to such Transferred Employee, Purchaser Sub shall instead provide, or cause its
Affiliates to provide, compensation and employee benefits in accordance with the
terms of such applicable successor collective bargaining agreement (a “Union
Employee Offer, and each Union Employee Offer and Non-Union Employee Offer,
together with the requirements set forth in Section 6.14(a), a “Qualifying
Offer”). Notwithstanding anything in this Agreement to the contrary, nothing in
this Section 6.14 shall be construed as requiring Purchaser Sub or its
Affiliates to (x) provide benefits under a defined benefit pension plan or
(y) provide any specified level of compensation or benefits to a Transferred
Employee following the Continuation Period, regardless of whether the Employment
Start Date occurs on or after the Closing Date. Except for Excluded Employee
Severance, the Company shall be responsible for (and Purchaser Sub shall have no
responsibility) to pay any severance pay or benefits claimed to be owed to its
employees as a result of the transactions that are the subject of the
Transaction Agreements; provided, that Purchaser Sub has offered employment to,
or transferred the employment of, Business Employees in accordance with this
Section 6.14. Without limiting the generality of the foregoing, during the
Continuation Period,

 

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Purchaser Sub shall provide, or shall cause its Affiliates to provide, severance
payments and benefits to each Transferred Employee whose employment is
terminated during such period that are no less favorable than those severance
and benefits set forth in Section 6.14(c) of the Company Disclosure Schedules.
For the avoidance of doubt, Parent and its Affiliates shall be solely
responsible for all employment decisions relating to a Transferred Employee on
and following the applicable Employment Start Date.

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

(e) Effective as of the last day of the month in which an Employment Start Date
occurs, a Transferred Employee shall no longer be eligible to contribute to any
Employee Plan that is a flexible spending account plan except as otherwise
provided by and in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1986 (“COBRA”) (such accounts, “Company FSA” and such
participants in the Company FSA, “FSA Participants”). Effective as of the
Closing Date, Purchaser Sub or one of its Affiliates shall maintain a flexible
spending account plan (the “Purchaser FSA”) that shall (i) permit participation
as of the first day of the month immediately following an Employment Start Date
for FSA Participants commencing employment with Purchaser Sub or its Affiliates
on such date and (ii) accept for reimbursement any claims related to the Company
FSA plan year in which the Employment Start Date occurs and eligible for
reimbursement on the basis of participant elections initially made under the
Company FSA, to the extent such claims have not been previously reimbursed by
the Company or its Affiliates. The salary reduction election of an FSA
Participant under the Company FSA will be continued by the Purchaser FSA for the
remainder of the Purchaser FSA plan year following an Employment Start Date
(subject to limitations under applicable Law). The

 

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Company shall provide to Purchaser Sub as soon as administratively feasible
following a Closing Date, Subsequent Closing Date or Distribution Center Closing
Date, as applicable, a schedule setting forth the relevant FSA Participants and
the amount each FSA Participant has elected to contribute to the Company FSA for
the current Company FSA plan year and the amount reimbursed by the Company FSA
to the FSA Participant (or eligible dependent) (the “FSA Balances”). To the
extent the FSA Balances in the aggregate are positive, the Company shall make a
payment to Purchaser Sub equal to the aggregate FSA Balances by the thirtieth
(30th) Business Day following the Closing Date, Subsequent Closing Date or
Distribution Center Closing Date, as applicable. To the extent the FSA Balances
in the aggregate are negative, Buyer shall make a payment to the Company equal
to the aggregate negative FSA Balances by the thirtieth (30th) Business Day
following the Closing Date, Subsequent Closing Date or Distribution Center
Closing Date, as applicable. Notwithstanding the foregoing, the Company and
Purchaser Sub agree to make reasonable adjustments to the terms of this
Section 6.14(e) as necessary to account for the difference in plan year end
dates of the Company FSA and Purchaser FSA. Notwithstanding the foregoing, no
Transferred Employee who elects COBRA continuation coverage with respect to such
person’s flexible spending account under the Company FSA shall be considered an
FSA Participant, and any such person’s flexible spending account balance shall
not be an FSA Balance.

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

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

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

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

 

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

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

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

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

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

 

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SECTION 6.15 [Intentionally Omitted].

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

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

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

SECTION 6.19 Financing Cooperation.

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

 

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

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

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

 

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

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

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

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

 

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

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

SECTION 6.25 1199SEIU Arbitration. Following the Closing Date, notwithstanding
anything in Section 9.3 to the contrary, the Company shall allow Parent a
reasonable opportunity to participate in the defense of the Company’s
outstanding arbitration initiated by 1199SEIU by a demand letter dated
October 14, 2016 with its own counsel and at its own expense. With respect to
any new or replacement counsel, contractors and consultants of the Company hired
after the Closing for purposes of defending, supporting or advising in
connection with such arbitration, the Company shall select counsel, contractors
and consultants of recognized standing and competence after consultation with
Parent, and the Company shall take all steps reasonably necessary in the defense
or settlement of such arbitration. Parent shall, and shall cause its Affiliates
and Representatives to, cooperate reasonably with the Company in the defense of
such arbitration. The Company shall be authorized to consent to a compromise or
settlement of such arbitration in full; provided, however, that, unless such
compromise or settlement provides for no relief other than the payment of
monetary damages by the Company or its Affiliates in an amount not to exceed the
amount set forth on Section 6.25 of the Company Disclosure Schedules and makes
no admission, the Company shall give Parent advance notice of any proposed
compromise or settlement and in no event shall the Company compromise or settle
such arbitration without the prior written consent of Parent.

SECTION 6.26 Insurance Coverage. To the extent that (i) any insurance policies
issued for the benefit of the Company or its Affiliates (the “Company’s
Insurance Policies”) cover any Loss, Liability, claim, damage or expense
relating to the Purchased Assets and relating to or arising out of occurrences
on or prior to the Closing (or such Subsequent Closing or the Distribution
Center Closing, as applicable) (“Pre-Closing Matters”) and (ii) the Company’s
Insurance Policies continue after the Closing (or such Subsequent Closing or the
Distribution Center Closing, as applicable) to permit claims to be made
thereunder with respect to Pre-Closing Matters, the Company shall cooperate and
cause its Affiliates to cooperate with Parent in submitting claims with respect
to Pre-Closing Matters on behalf of Parent under the Company’s Insurance
Policies; provided, that if such a claim in respect of a Pre-Closing Matter is
rejected under the Company’s Insurance Policies, at the reasonable request and
sole cost of Parent, the Company shall use commercially reasonable efforts to
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claim and that Parent shall reimburse, indemnify and hold the Company harmless
from all liabilities, costs and expenses actually incurred by the Company or its
Subsidiaries as a result of such claims made under the Company’s Insurance
Policies and provided, further, that Parent shall not make any such claims if,
and to the extent that, such claims are covered by insurance policies held by
Parent or its Affiliates. The Company shall, with respect to any claim arising
from an Assumed Liability that is covered or potentially covered the Company’s
Insurance Policies, (i) report such claim to the appropriate insurer as promptly
as practicable after such claim is reported to the Company, and (ii) instruct
that any proceeds of such insurance policy are paid directly to Parent, the
attorneys handling the defense of such claim and/or, where applicable, to the
claimant as a result of any judgment or settlement, rather than to the Company
or its Affiliates; provided, that Parent shall notify the Company promptly of
any such claim or potential claim and shall reasonably cooperate in the
investigation and pursuit of any such claim or potential claim. The Company
shall not release, commute, buy-back, or otherwise eliminate the coverage
available to any of the Purchased Assets under any occurrence based policy with
respect to Pre-Closing Matters.

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

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

SECTION 6.29 Termination Fee. The Parties acknowledge that, in accordance with
Section 8.2(b)(iv) of the Agreement and Plan of Merger, dated as of October 17,
2015, by and among the Company, Parent and Victoria Merger Sub, Inc., as amended
by Amendment No. 1 thereto, dated as of January 29, 2017 (the “Merger
Agreement”), prior to the date of this Agreement, Parent has paid the Company a
termination fee in the amount of $325 million.

ARTICLE VII

CONDITIONS TO CLOSING

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

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

 

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

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

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

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

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

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

(e) Duplicate IT System. Solely with respect to the obligations of Parent and
Purchaser Sub to complete the Closing, the Company shall have (i) tested the
Duplicate IT System with respect to the Acquired Stores to be transferred at the
Closing using the Developed

 

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

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

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

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

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

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

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

 

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

ARTICLE VIII

TERMINATION

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

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

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

(c) by either Parent or the Company if the Closing shall not have occurred on or
before the date that is six (6) months from the date of this Agreement (the “End
Date”); provided, that the right to terminate this Agreement pursuant to this
Section 8.1(c) shall not be available to a Party whose breach of this Agreement
was the primary cause of, or primarily resulted in, the failure of the Closing
to occur on or before the End Date; provided, further, that if on the End Date
all of the conditions set forth in Section 7.1, Section 7.2 and Section 7.3 have
been satisfied (or, with respect to the conditions that by their terms must be
satisfied at the Closing, would have been so satisfied if the Closing would have
occurred) or remain capable of being satisfied but any of the conditions set
forth in Section 7.1(a) (but only if the Legal Restraint causing such condition
not to be satisfied is issued under or pursuant to any Antitrust Law) and/or
Section 7.1(b) has not been satisfied, then (x) in the event that any
Governmental Entity brings an action seeking to preliminarily enjoin the
transactions contemplated by this Agreement, then the End Date will
automatically be extended until ten (10) Business Days after the date on which a
decision is rendered by such U.S. Federal District Court on whether to issue a
preliminary injunction of any transaction contemplated by this Agreement,
provided that each Party shall have complied in all material respects with its
obligations to make the HSR Filing and to certify substantial compliance with
any Second Request, as applicable, in accordance with the terms of Section 6.2
hereof, and provided, further, that the pendency of any administrative
litigation that may be pending under Part 3 of the FTC’s rules of practice to
challenge the transactions contemplated by this Agreement shall not be relevant
or considered for purposes of this Section 8.1(c) and (y) Parent and the Company
may mutually agree to extend the End Date to a date to be determined at such
time (in the case of any such extension pursuant to clause (x) or (y), the End
Date shall be deemed for all purpose to be such later date);

 

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

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

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

SECTION 8.2 Effect of Termination.

(a) In the event of the termination of this Agreement pursuant to Section 8.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any Party hereto, except as provided in
Section 6.6(c), Section 6.7, this Section 8.2, Section 8.3 and Article X, which
shall survive such termination; provided, however, that nothing herein shall
relieve any Party hereto of any liability for damages resulting from a Willful
Breach prior to such termination by any Party hereto (which the Parties
acknowledge and agree shall be determined by a court of competent jurisdiction
in accordance with Section 10.14 applying the governing Law in accordance with
Section 10.9), in which case the aggrieved Party shall be entitled to all rights
and remedies available at law or equity. Notwithstanding anything contained in
this Agreement to the contrary, Parent expressly acknowledges and agrees that
Parent’s and Purchaser Sub’s obligations hereunder are not conditioned in any
manner upon Parent or Purchaser Sub obtaining any financing. The failure, for
any reason, of Parent or Purchaser Sub to complete the transactions contemplated
by this Agreement on the date that the Closing is required to occur pursuant to
Section 2.1 hereof shall constitute a Willful Breach of this Agreement by Parent
and Purchaser Sub. The Parties acknowledge and agree that (i) nothing in this
Section 8.2 shall be deemed to affect their right to specific performance under
Section 10.13 and (ii) no termination of this Agreement shall affect the
obligations of the Parties contained in the Confidentiality Agreement and Letter
Agreement.

 

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

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

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

ARTICLE IX

INDEMNIFICATION

SECTION 9.1 Indemnification by the Company. From and after the Closing (with
respect to the Acquired Stores to be transferred on the Closing Date) and each
Subsequent Closing (with respect to the Acquired Stores to be transferred on
such Subsequent Closing Date), and subject to Section 9.3, Section 9.5,
Section 9.6, Section 9.7, Section 9.8 and Section 10.1, the Company shall
indemnify, defend and hold harmless Parent, Purchaser Sub and their respective
Affiliates and Representatives (collectively, the “Parent Indemnified Parties”)
against, and reimburse any Parent Indemnified Party for, all Losses that such
Parent Indemnified Party may suffer or incur, or become subject to, as a result
of (i) any breach of any warranty or the

 

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inaccuracy of any representation contained in the Company Fundamental
Representations as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing Date, any
Subsequent Closing Date or the Distribution Center Closing Date (except that for
representations and warranties that expressly relate to a specified date, the
inaccuracy in or breach of such representation or warranty will be determined
with reference to such specified date), (ii) the matters set forth in
Section 2.2(e) and Section 6.4 with respect to which the Company may be
obligated to provide indemnification thereunder or (iii) any Excluded Liability.

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

SECTION 9.3 Notification of Claims.

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

(b) Upon receipt of a notice of a claim for indemnity from an Indemnified Party
pursuant to Section 9.3(a), with respect to any Third Party Claim, the
Indemnifying Party shall have the right (but not the obligation) to assume the
defense and control of any Third Party Claim and, in the event that the
Indemnifying Party assumes the defense and control of such claim, it shall allow
the Indemnified Party a reasonable opportunity to participate in the defense of
such Third Party Claim with its own counsel and at its own expense; provided,
further, that notwithstanding the foregoing, the Indemnifying Party shall only
be entitled to direct the defense (i) for so long as the Indemnifying Party
conducts the defense in an active and diligent manner, (ii) if the Third Party
Claim is not in respect of any matter involving potential criminal liability

 

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

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

(d) If any Indemnifying Party receives a notice of a claim for indemnity from an
Indemnified Party pursuant to Section 9.3(a) that does not involve a Third Party
Claim, the Indemnifying Party shall notify the Indemnified Party within thirty
(30) days following its receipt of such notice if the Indemnifying Party
disputes its liability to the Indemnified Party under this Article IX. If the
Indemnifying Party does not so notify the Indemnified Party, the claim specified
by the Indemnified Party in such notice shall be conclusively deemed to be a
Liability of the Indemnifying Party under this Article IX, and the Indemnifying
Party shall pay the amount of such Liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any portion
of the claim) is estimated, on such later date when the amount of such claim (or
such portion of such claim) becomes finally determined. If the Indemnifying
Party has timely disputed its liability with respect to such claim as provided
above, the Indemnifying Party and the Indemnified Party shall resolve such
dispute in accordance with Section 10.9 and Section 10.14.

 

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

SECTION 9.5 Additional Indemnification Provisions.

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

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

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

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

SECTION 9.6 Mitigation. Each of the Parties shall, and shall cause its
applicable Affiliates and Representatives to, take all reasonable steps to
mitigate their respective Losses upon and after becoming aware of any event or
condition that would reasonably be expected to give rise to any Losses that are
indemnifiable hereunder.

 

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

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

ARTICLE X

GENERAL PROVISIONS

SECTION 10.1 Survival of Representations, Warranties, Covenants and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and agreements, shall survive the Closing, except for
(a) representations and warranties made in Section 3.1, Section 3.2,
Section 3.15 and Section 3.17 (the “Company Fundamental Representations”) and in
Section 4.1 and Section 4.2 (the “Parent Fundamental Representations”), which
shall survive until the expiration of the statute of limitations applicable to
the matters related thereto, (b) those covenants and agreements contained herein
that by their terms apply or are to be performed in whole or in part after such
date or after the termination of this Agreement (in the event of a termination
of this Agreement pursuant to its terms), which shall survive in accordance with
their respective terms, and (c)

 

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those contained in Article IX and this Article X. For the avoidance of doubt,
except as expressly set forth in Article IX, Parent and Purchaser Sub shall have
no right to (and Parent and Purchaser Sub agree not to) seek indemnification or
make any claim or bring any Proceeding with respect to any breach of
representations, warranties, covenants or agreements contained herein.

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

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

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

 

  (a) if to the Company:

Rite Aid Corporation

30 Hunter Lane

Camp Hill, PA 17011

  Attention: James J. Comitale

  Facsimile: (717) 760-7867

  Email: jcomitale@riteaid.com

 

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

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, NY 10036

  Attention: Paul T. Schnell

    Marie L. Gibson

  Facsimile: (212) 735-2000

  Email: paul.schnell@skadden.com

    marie.gibson@skadden.com

 

  (b) if to Parent or Purchaser Sub:

Walgreens Boots Alliance, Inc.

108 Wilmot Road

Deerfield, IL 60015

  Attention: Marco Pagni

  Facsimile: (847) 315-8570

  Email: marco.pagni@wba.com

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

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

  Attention: Mario A. Ponce

  Facsimile: (212) 455-2502

  Email: mponce@stblaw.com

and

Simpson Thacher & Bartlett LLP

600 Travis Street, Suite 5400

Houston, TX 77002

  Attention: Christopher R. May

  Facsimile: (713) 821-5602

  Email: cmay@stblaw.com

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

 

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

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

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

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

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

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

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

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

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

(i) “Business Employee” means any employee of the Company or its subsidiaries,
other than an Excluded Employee, who (i) provides services exclusively related
to the Acquired Stores or the Distribution Centers, including those employed at
a regional or district office of the Company or its subsidiaries, (ii) is a
retail operations or pharmacy field district leader or a field district support
team member, serving in a function related to asset protection, human resources
or administration in one or more districts, with respect to whom Acquired Stores
comprise 35% or more of the total stores assigned to such leader or team member,
(iii) is a floater pharmacist across one or more districts, with respect to whom
Acquired Stores comprise 50% of more of the total stores assigned to such
floater pharmacist, or (iv) is a Choice Employee who Purchaser Sub determines,
in its sole discretion, to make an offer of employment;

 

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

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

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

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

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

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

(p) “Distribution Center Inventory Amount” means (x) the Retail Inventory Value
of the Inventory at the Distribution Centers to be transferred at the
Distribution Center Closing less any Inventory thereat that is damaged, obsolete
or unsalable as determined in a manner consistent with the Company’s historical
valuation practices multiplied by (y) the acquisition cost per unit, as
reflected in the books and records of the Company;

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

 

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

(ff) “Independent Accounting Firm” means KPMG;

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

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

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

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

(kk) “Key IT Systems” means the IT systems of the Company (other than the
Company’s prescription dispensing system as of Closing, which is commonly
referred to as “NextGen”) that are necessary or reasonably required to (x) cause
the Acquired Stores to operate substantially consistent with the Company’s past
practice (except as may be otherwise contemplated by the Transition Services
Agreement) and (y) support the operation of all critical areas of the Company’s
business (including pharmacy, front of store operations, employee scheduling and
management, procurement, supply chain, finance and accounting and data
warehousing);

 

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

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

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

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

(pp) “Material Adverse Effect” means any event, development, circumstance,
change, effect, condition or occurrence that, individually or in the aggregate,
with all other events, developments, circumstances, changes, effects, conditions
or occurrences, (A) has, or would reasonably be expected to have, a material
adverse effect on or with respect to the business, assets, liabilities or
results of operations of the Acquired Stores and the Distribution Centers, taken
as a whole, or (B) prevents, materially delays or materially impairs the ability
of the Company to complete the transactions contemplated by this Agreement;
provided, however, that in the case of clause (A), any event, development,
circumstance, change, effect, condition or occurrence to the extent arising out
of or resulting from any of the following after the date hereof shall not be
deemed, either alone or in combination, to constitute or be taken into account
in determining whether there has been, a Material Adverse Effect: (i) any change
or development generally affecting the economy or the financial, debt, capital,
credit or securities markets in the United States or elsewhere in the world,
including as a result of changes or developments in prevailing interest or
exchange rates or the disruption of any securities markets, (ii) national or
international political or social conditions, (iii) the execution and delivery
of this Agreement or the public announcement or pendency of the transactions
contemplated hereby, including the impact thereof on relationships, contractual
or otherwise, with customers, suppliers, distributors, or employees of the
Acquired Stores or the Distribution Centers, (iv) any change in any

 

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applicable Laws or applicable accounting regulations or principles, including
GAAP, or interpretations thereof, (v) any hurricane, tornado, earthquake, flood,
tsunami or other natural disaster or outbreak or escalation of hostilities or
war (whether or not declared), military actions or any act of sabotage,
terrorism or other international or national emergency, or other force majeure
event or natural disaster or act of God or other comparable events, (vi) any
change in the price or trading volume of the common stock, par value $1.00 per
share, of the Company or the credit rating of the Company, in and of itself,
(vii) any failure by the Company to meet (x) any published analyst estimates,
expectations, projections or forecasts of the Company’s revenue, earnings, cash
flow, cash positions or other financial performance or results of operations for
any period or (y) its internal or published projections, budgets, plans,
forecasts, guidance, estimates, milestones of its revenues, earnings or other
financial performance or results of operations, in and of itself, (viii) any
change or development in the industries in which the Company and its
subsidiaries operate, (ix) the identity of Parent or its subsidiaries, (x) any
communication by Parent or its subsidiaries regarding the plans or intentions of
Parent with respect to the conduct of the business of the Acquired Stores or the
Distribution Centers after the Closing, (xi) any action taken by the Company, or
which the Company causes to be taken by any of its subsidiaries, in each case
which is expressly required or permitted by this Agreement (other than pursuant
to clause (a) of Section 5.1) or at Parent’s express written request, (xii) any
change in pharmacy reimbursement rates or (xiii) the termination of one of the
series of contracts listed on Section 10.5(oo) of the Company Disclosure
Schedules, except (A) to the extent (and only to the extent) any such event,
development, circumstance, change, effect, condition or occurrence described in
clauses (i), (ii), (iv), (v) or (viii) is disproportionately adverse to the
business, assets, liabilities or results of operations of Acquired Stores and
the Distribution Centers, taken as a whole, as compared to other participants in
the industries in which the Company and its subsidiaries operate and (B) that
clauses (vi) and (vii) shall not prevent or otherwise affect a determination
that any events, developments, circumstances, changes, effects, conditions or
occurrences underlying such changes or failures constitute or contribute to a
Material Adverse Effect; provided, further, that the exceptions in clause
(iii) above shall not apply with respect to references to Material Adverse
Effect in those portions of the representations and warranties contained in
Section 3.3(a) (and in Section 7.2(a) and Section 8.1(e) to the extent related
to such portions of such representation) to the extent the purposes of such
representations and warranties is to address the consequences resulting from the
execution, delivery and performance of this Agreement by the Company or the
completion of the sale of the Purchased Assets and the other transactions
contemplated by this Agreement, provided, further, that the exception in clause
(xiii) above shall not apply if more than one of the series of contracts listed
on Section 10.5(oo) of the Company Disclosure Schedules is terminated;

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

 

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

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

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

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

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

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

 

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

(yy) “Retail Pharmacy” means with respect to any Person or business, any Person
who does or will, any Person who does or will manage or operate any business
that does or will, or any business that does or will, dispense prescriptions,
other than by mail order or through a centrally fulfilled closed door specialty
pharmacy and other than any Person or business that does not engage in commerce
or affect commerce in the U.S.

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

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

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

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

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

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

(fff) “Trademarks” means United States and non-U.S. trademarks, service marks,
trade dress, logos, trade names, corporate names, brand names, product names,
slogans, moral rights, designs and other indicia of source or origin and general
intangibles of like nature,

 

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whether registered or unregistered, including the goodwill of the business
symbolized thereby or associated therewith, all common law rights thereto,
registrations, pending registrations and applications for registration thereof
throughout the world, all rights therein provided by international treaties and
conventions, and all other rights associated therewith;

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

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

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

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

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

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

SECTION 10.7 Entire Agreement; Assignment. This Agreement (including the
Exhibits hereto and the Company Disclosure Schedules and the Parent Disclosure
Schedule), the Confidentiality Agreement and the Letter Agreement constitute the
entire agreement among the Parties with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and undertakings, both
written and oral, among the Parties, or any of them, with respect to the subject
matter hereof and thereof. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of each of the other Parties,
and any assignment without such consent shall be null and void; provided, that
(x) Parent and/or Purchaser Sub may assign their respective rights to acquire
any of the Purchased Assets to any wholly-owned, domestic subsidiary or
Affiliate of Parent, in Parent’s sole discretion (it being acknowledged and
agreed that no such assignment shall (i) relieve Parent of any of its
obligations hereunder, (ii) materially delay or impede the consummation of the
transactions

 

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contemplated hereby or (iii) increase the amount of any unreimbursed Taxes or
other costs that may be imposed on the Company or any of its Affiliates); and
(y) Parent may (in connection with any Debt Financing) collaterally assign and
transfer to the applicable Financing Sources, for the benefit of the secured
parties under such Debt Financing, this Agreement and any Ancillary Agreement
(including all rights, remedies, powers and authority of Parent under this
Agreement and any Ancillary Agreement).

SECTION 10.8 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement. The representations and warranties in this Agreement are the product
of negotiations among the Parties and are for the sole benefit of the Parties.
Any inaccuracies in such representations and warranties are subject to waiver by
the Parties in accordance with Section 10.3 without notice or liability to any
other Person. In some instances, the representations and warranties in this
Agreement may represent an allocation among the Parties of risks associated with
particular matters regardless of the knowledge of any of the Parties.
Consequently, Persons other than the Parties may not rely upon the
representations and warranties in this Agreement as characterizations of actual
facts or circumstances as of the date of this Agreement or as of any other date.
Notwithstanding the foregoing, (x) the Company Indemnified Parties and Parent
Indemnified Parties are express third party beneficiaries of, and shall be
entitled to rely on and enforce, Article IX.

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

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

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

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

 

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

SECTION 10.14 Jurisdiction. Each of the Parties irrevocably (a) consents to
submit itself to the exclusive jurisdiction of the Delaware Court of Chancery
and any state appellate court therefrom within the State of Delaware (unless the
Delaware Court of Chancery shall decline to accept jurisdiction over a
particular matter, in which case, in any Delaware state or federal court within
the State of Delaware), in connection with any matter based upon or arising out
of this Agreement or any of the transactions contemplated by this Agreement or
the actions of Parent, Purchaser Sub or the Company in the negotiation,
administration, performance and enforcement hereof and thereof, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (c) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than the courts of the State of Delaware, as
described above, and (d) consents to service being made through the notice
procedures set forth in Section 10.4. Each of the Company, Parent and Purchaser
Sub hereby agrees that service of any process, summons, notice or document by
U.S. registered mail to the respective addresses set forth in Section 10.4 shall
be effective service of process for any suit or proceeding in connection with
this Agreement or the transactions contemplated hereby. Each Party hereto hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any Proceeding with respect to this Agreement, any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance with
this Section 10.14, that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable Law, that the Proceeding in
any such court is brought in an inconvenient forum, that the venue of such
Proceeding is improper or that this Agreement, or the subject matter hereof or
thereof, may not be enforced in or by such courts and further irrevocably
waives, to the fullest extent permitted by applicable Law, the benefit of any
defense that would hinder, fetter or delay the levy, execution or collection of
any amount to which the Party is entitled pursuant to the final judgment of any
court having jurisdiction. Each Party agrees that a final judgment in any such
Proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by Law, a certified copy of
which shall be conclusive evidence of the fact and

 

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amount of such judgment. Without in any way limiting other provisions relating
to the Financing Sources and notwithstanding anything herein to the contrary,
the Company agrees that it will not bring or support or permit any of its
controlled Affiliates to bring or support any action, cause of action, claim or
third party claim of any kind or description, whether in Law or in equity,
whether in contract or in tort or otherwise, against the Financing Sources in
any way relating to this Agreement or any of the transactions contemplated by
this Agreement, including any dispute arising out of or relating in any way to
the Debt Financing or the performance thereof, in any forum other than the
Supreme Court of the State of New York, County of New York, or, if under
applicable Law jurisdiction is vested in the federal courts, the U.S. District
Court for the Southern District of New York (and the appellate courts thereof)
and each party hereto further agrees that the adjudication of any such action,
claim or third-party claim shall be governed by and in accordance with the laws
of the State of New York.

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

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

SECTION 10.17 Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.” The words “hereof,” “herein,” “hereby,” “hereunder” and
“hereinafter” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, unless the context otherwise requires. The word “or” shall not be
exclusive.

 

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References to “dollars” or “$” are to United States of America dollars. Any
capitalized terms used in any schedule or exhibit but not otherwise defined
therein shall have the meaning given to them as set forth in this Agreement. Any
reference in this Agreement to gender shall include all genders and the neuter.
This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the Party drafting or causing
any instrument to be drafted. Any agreement, instrument, statute, rule or
regulation defined or referred to herein means such agreement, instrument,
statute, rule or regulation as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver of
consent and (in the case of statutes, rules or regulations) by succession or
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein; provided, that for purposes of any
representations and warranties contained in this Agreement that are made as of a
specific date or dates, references to any statute, rule or regulation shall be
deemed to refer to such statute, rule or regulation, as amended (and, in the
case of statutes, any rules and regulations promulgated under such statutes), in
each case, as of such date. Neither the specification of any dollar amount in
any representation or warranty contained in this Agreement nor the inclusion of
any specific item in any schedule is intended to imply that such amount, or
higher or lower amounts, or the item so included or other items, are or are not
material, and no Party shall use the fact of setting forth of any such amount or
the inclusion of any such item in any dispute or controversy between the Parties
as to whether any obligation, item or matter not described herein or included in
any schedule is or is not material for purposes of this Agreement. Neither the
specification of any item or matter in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in schedule is intended
to imply that such item or matter, or other items or matters, are or are not in
the ordinary course of business, and no Party shall use the fact of the setting
forth or the inclusion of any specific item or matter in any dispute or
controversy between the Parties as to whether any obligation, item or matter not
described herein or included in any schedule is or is not in the ordinary course
of business for purposes of this Agreement.

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

SECTION 10.19 Misdirected Funds. Following the Closing Date, any payments for
services provided by or on behalf of Purchaser Sub or any of its subsidiaries
made to the Company or any of its subsidiaries shall be collected and recorded
by the Company or such subsidiary of the Company and held on behalf of Purchaser
Sub and its subsidiaries, and the Company shall forward or cause to be forwarded
to Purchaser Sub or its designee all such payments collected on behalf of
Purchaser Sub or its subsidiaries within five (5) Business Days of the Company’s
knowledge of receipt thereof. If so requested by Purchaser Sub, Parent shall
cause such funds received on behalf of Purchaser Sub or its subsidiaries to be
deposited within five (5) Business Days of the Company’s knowledge of receipt
thereof into a lock-box account designated by Purchaser Sub and under the sole
and exclusive control of Purchaser Sub in accordance with the terms of a
customary lock-box agreement with a third-party depository as reasonably
acceptable to Purchaser Sub and the Company. If, after the Closing Date, the
Company shall receive any remittance from any account debtors with respect to
any notes or accounts receivable exclusively relating to the Purchased Assets
that have been conveyed to Parent or Purchaser Sub at the time of such receipt
(including payment from Medicare and Medicaid programs), the Company, as soon as
reasonably practicable, shall endorse such

 

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remittance to the order of Parent and forward it to Parent promptly following
receipt thereof. If, after the Closing Date, Parent or Purchaser Sub shall
receive any remittance from or on behalf of any account debtor with respect to
any notes or accounts receivable, which such receivable constitutes an Excluded
Asset, Parent or Purchaser Sub shall, as soon as reasonably practicable, endorse
such remittance to the order of the Company and forward it to the Company
promptly following receipt thereof.

[Remainder of Page Intentionally Left Blank]

 

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

 

COMPANY: Rite Aid Corporation By:  

/s/ James J. Comitale

  Name: James J. Comitale   Title: Senior Vice President, General Counsel and
Secretary PARENT: Walgreens Boots Alliance, Inc. By:  

/s/ Marco Pagni

  Name: Marco Pagni   Title: Executive Vice President, Global Chief
Administrative Officer & General Counsel PURCHASER SUB: Walgreen Co. By:  

/s/ Mark E. Vainisi

  Name: Mark E. Vainisi   Title: Senior Vice President, M&A

[Signature Page to Amended and Restated Asset Purchase Agreement]