Exhibit 10.1

 

Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omissions have been indicated by “[***Redacted***]”, and the omitted text has
been filed separately with the Securities and Exchange Commission.

 

SECOND AMENDMENT TO SUPPLY AGREEMENT

 

This Second Amendment to the Supply Agreement (the “Second Amendment”) is
entered into the 7th day of November, 2008, by and between Rite Aid Corporation
(“Rite Aid”) and McKesson Corporation (“McKesson”).

 

INTRODUCTION

 

Pursuant to the terms of the Supply Agreement dated December 22, 2003 (the “Rite
Aid Agreement”) as amended by the First Amendment to the Supply Agreement dated
December 8, 2007 (the “First Amendment”) (collectively referred to herein as the
“Agreement”), McKesson and Rite Aid entered into an agreement to establish a
program for McKesson’s supply of pharmaceutical and OTC products to Rite Aid.

 

AGREEMENT

 

For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, McKesson and Rite Aid hereby agree as follows:

 

1.                                       Effective as of the first day of the
first full month following the Second Amendment Effective Date (as hereinafter
defined), Section 3.1 of the Agreement is hereby deleted and replaced with the
following:

 

3.1                               Warehouse.  The Cost of Goods for Warehouse
purchases of Products, other than Branded Rx Warehouse Repackaged Products and
OneStop Generics, shall be the [***Redacted***].

 

2.                                       Effective as of the first day of the
first full month following the Second Amendment Effective Date (as hereinafter
defined), the following is hereby added as Section 3.9(a) of the Agreement:

 

3.9                               Additional Rebates.

 

(a)                                  Buy Profit Rebate.  McKesson will issue to
Rite Aid a rebate, in the form of a credit, in an amount equal to
[***Redacted***] of the Cost of Goods for Branded Rx Warehouse purchases (net of
Branded Rx Warehouse returns as provided in Section 8.1 and excluding Branded Rx
Warehouse Repackaged Merchandise) (the “Buy Profit Rebate”). The Buy Profit
Rebate shall be paid each week on Tuesday for purchases made from Saturday to
Friday of the previous week, unless Tuesday is a McKesson recognized holiday, in
which case the rebate shall be paid on the next business day.  An illustration
of the Buy Profit Rebate calculation is set forth below:

 

Total monthly
Branded Rx
Warehouse
Purchases

 

(-)
Branded Rx
Warehouse
Returns
(Includes
returns to
vendors)

 

(-)
Branded Rx
Warehouse
Repackaged
purchases

 

(X)
Buy Profit
Rebate of
[***Redacted***]

 

(=)
Buy Profit Rebate

 

$

100,000,000

 

$

100,000

 

$

8,000,000

 

[***Redacted***]

 

[***Redacted***]

 

 

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3.                                       Effective as of the first day of the
first full month following the Second Amendment Effective Date (as hereinafter
defined), the fourth paragraph of Section 3.9(b) of the Agreement is hereby
deleted and replaced with the following:

 

(b)                                 Additional Rebates on Branded Rx Warehouse
Purchases.  For the Contract Year which ended on November 30, 2007 (“Contract
Year Ended 11/30/07”), the Annual Market Basket rebate shall be paid on
[***Redacted***] of Branded Rx Products purchases (net of Branded Rx Warehouse
returns as provided in Section 8.1 and rebates or other incentives hereunder and
excluding Branded Rx Warehouse Repackaged purchases) by the three original Rite
Aid warehouses designated as Perryman, Tuscaloosa and Woodland.

 

For subsequent Contract Years following the Contract Year Ended 11/30/07, all
purchases from Rite Aid warehouses shall be included in the calculation of the
Market Basket Rebate.  The purchases eligible for the Market Basket Rebate shall
be reduced by the amount of the previous twelve (12) months of the Buy Profit
Rebate.

 

For the subsequent Contract Years following the Contract Year Ended 11/30/07,
the Annual Market Basket Index Adjustment chart found in Section 3.9(b) shall be
replaced by the chart below.

 

Annual Market Basket Index Adjustment

 

Rite Aid’s Achieved Annual Market

 

 

 

Basket Price Increase Rate

 

Rebate on Annual Branded

 

From

 

To

 

Rx Warehouse purchases

 

 

 

 

 

 

 

[***Redacted***]

 

 

 

[***Redacted***]

 

 

[***Redacted***]

 

In this example, McKesson would pay Rite Aid a [***Redacted***] on purchases of
Branded Rx Warehouse purchases (less the Buy Profit Rebate) during this Contract
Year no later than [***Redacted***].

 

($1,000,000.00 - [***Redacted***]) X [***Redacted***] = [***Redacted***]

 

Dollar volume – Buy Profit Rebate X applicable Market Basket Rebate %

 

4.                                       In consideration of various purchase
commitments set forth in this Agreement, Rite Aid shall be eligible to earn a
one-time rebate equal to [***Redacted***] of the dollar volume of DSD and
Warehouse purchases (less all returns) by Rite Aid, during the first thirty (30)
days after the Second Amendment Effective Date (as hereinafter defined)
(“Purchase Volume Rebate”).  Notwithstanding anything in the foregoing, in no
event shall such Purchase Volume Rebate exceed [***Redacted***].  Such Purchase
Volume Rebate shall be paid to Rite Aid no later than fifteen (15) days
following the close of the above-referenced 30 day period.

 

5.                                       This Second Amendment shall become
effective on the first date on which both Rite Aid and McKesson shall have
executed said Second Amendment (“Second Amendment Effective Date”).

 

6.                                       Except as amended above, the Agreement
remains unchanged and in full force and effect.  Capitalized terms used in this
Second Amendment and not otherwise defined herein shall have the meaning given
to them in the Agreement.

 

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7.                                       This Second Amendment may be executed
in counterparts, each of which shall constitute an original.

 

8.                                       This Second Amendment, together with
the Rite Aid Agreement and the First Amendment , embodies the entire agreement
between the parties with regard to the subject matter hereof and supersedes all
prior agreements understanding and representations with the exception of any
promissory note, security agreement or other credit or financial related
document(s) executed by or between Rite Aid and McKesson.

 

IN WITNESS WHEREOF the parties have caused this Second Amendment to be duly
executed as of the date and year written below and the persons signing warrant
that they are duly authorized to sign for and on behalf of the respective
parties.  This Second Amendment shall be deemed accepted by McKesson only upon
execution by a duly authorized representative of McKesson.

 

RITE AID CORPORATION

 

McKESSON CORPORATION

 

 

 

By:

/s/ Robert B. Sari

 

By:

/s/ Paul C. Julian

 

 

 

Name:

Robert B. Sari

 

Name:

Paul C. Julian

 

 

 

Title:

Executive Vice President, General Counsel

 

Title:

Executive Vice President, Group President

 

General Counsel and Secretary

 

 

 

 

 

Date:

November 7, 2008

 

Date:

November 7, 2008

 

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