Document:

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***]

  	
   

  
													

 

1

 

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.

 

2

 

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

  
											

 

3Exhibit 10.2

 

AMENDMENT
NO. 1 TO

EMPLOYMENT
AGREEMENT

 

THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT,
by and between Rite Aid Corporation, a Delaware Corporation (the “Company”) and
Robert B. Sari (“Executive”) is entered into as of the 18th day of December,
2008.

 

WHEREAS, Executive and the Company previously
entered into that certain employment agreement, dated as of February 28,
2001 (the “Employment Agreement” or “Agreement”); and

 

WHEREAS, the Company and the Executive now
desire to amend the Employment Agreement to: (i) reflect the change in
Executive’s duties, compensation and other benefits in connection with his
transition from his current position as Executive Vice President, General
Counsel; and (ii) to ensure compliance with Internal Revenue Code Section 409A
and the final regulations promulgated thereunder;

 

NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Executive hereby agree as follows:

 

1.             New Section 14.  Effective as of January 1, 2005, the
following new Section 14 shall be inserted into the Employment
Agreement.  In the event of an
inconsistency between this new Section 14 and the remaining provisions of
the Employment Agreement, Section 14 shall govern.

 

“14.         COMPLIANCE WITH CODE SECTION 409A  Notwithstanding anything in this Employment
Agreement to the contrary, effective as of January 1, 2005, the following
provisions shall govern:  The provisions
listed below are intended to be compliant with Internal Revenue Code (“Code”) Section 409A
and the final regulations promulgated thereunder (‘409A’) and shall be
construed to be so compliant.

 

(a)                                  Good Reason: Any termination for ‘Good Reason’ shall
comply with the safe harbor definition of ‘good reason’ in 409A, including the
condition giving rise to such termination and the notice and cure period
provided for in 409A.  Without limiting
the generality of the foregoing, the following specific provisions will be
effective as of January 1, 2005:

 

(I)                                    The final paragraph of Section 5.4 of
the Agreement shall be modified to read as follows:

 

 

‘provided, however that the Executive has provided written notice
(which shall set forth in reasonable detail the specific conduct of the Company
that constitutes Good Reason and the specific provisions of this Agreement on
which Executive relies) to the Company of the existence of any condition
described in any one of subparagraphs a, b, or c within 30 days of the initial
existence of such condition, and the Company has not cured the condition within
30 days of the receipt of such notice. 
Any termination of employment by the Executive for Good Reason pursuant
to Section 5.3 must occur no later than the date that is the second
anniversary of the initial existence of the condition giving rise to the
termination right.’

 

(b)                                 Payment of Benefits:  To
the extent necessary to avoid adverse tax consequences, and except as described
below, any payment to which the Executive becomes entitled under the Agreement,
or any arrangement or plan referenced in this Agreement, that constitutes “deferred
compensation” under 409A, and is (a) payable upon the Executive’s
termination; (b) at a time when the Executive is a “specified employee” as
defined by 409A shall not be made until the earliest of:

 

(1)                                  the expiration of the six month period (the “Deferral
Period”) measured from the date of the Executive’s ‘separation from service’
under 409A; or

(2)                                  the date of the Executive’s death.

 

Upon the expiration of the Deferral Period, all payments that would
have been made during the Deferral Period (whether in a single lump sum or in
installments) shall be paid as a single lump sum to the Executive or, if
applicable, his beneficiary.  This
section shall not apply to any payment which constitutes “separation pay” as
described in Internal Revenue Regulations Section 409A-1(b)(9) (in
general, payments (i) that are made on an involuntary separation from
service which (ii) do not exceed the lesser of two times (x) the
Executive’s annualized compensation for the taxable year preceding the year in
which the separation from service occurs or (y) the Code Section 401(a)(17)
limit on compensation for the year in which separation from service occurs and (iii) are
paid in total by the end of the second calendar year following the calendar
year in which the separation from service occurs.)

 

Without limiting the generality of the foregoing, the following
specific provisions will be effective as of January 1, 2005:

 

 

‘The Company shall pay to the Executive the Accrued Benefits, within
ten (10) days after the Date of Termination.  Notwithstanding the foregoing, if the
Executive is a ‘specified employee’, as defined in 409A, the Company shall pay
to the Executive the Accrued Benefits on the six (6) month anniversary of
the Date of Termination.

 

To the extent permissible by law, each payment and each installment
described in this Agreement shall be considered a separate payment from each
other payment or installment’

 

(c )                               Reimbursements:  To
the extent required by 409A, with regard to any provision that provides for the
reimbursement of costs and expenses, or for the provision of in-kind benefits:

 

(1)           The right to such
reimbursement or in-kind benefit shall not be subject to liquidation or
exchange for another benefit;

(2)           The amount of
expenses or in kind benefits available or paid in one year shall not affect the
amount available or paid in any subsequent year; and

(3)           Such payments shall
be made on or before the last day of the Executive’s taxable year in which the
expense occurred.

 

Without limiting the generality of the foregoing, the following
specific provisions will be effective as of January 1, 2005:

 

Section 4.2 of the Agreement shall be modified to insert the
following sentence at the end thereof:

 

‘The provisions of Section 14(c)  shall apply to all
reimbursements made under this Section 4.2.’

 

(d)                                 Medical Benefits:  The
provision of medical benefits after separation from service shall be done in a
manner to, to the extent possible, exempt such benefits from the application of
409A.  Without limiting the generality of
the foregoing, the following specific provisions will be effective as of January 1,
2005:

 

Section 5.3(a) and 5.5(a) of the Agreement shall be
modified by adding the following to the end thereof:

 

‘For any period during which the Executive would be entitled to
continuation coverage through the application of 

 

 

Internal Revenue Code Section 4980B (‘COBRA’), this coverage shall
be provided at the expense of the Company. 
For any period after the expiration of the period required by COBRA, but
prior to the end of the month in which the second anniversary of the Date of
Termination occurs, this coverage will be provided at the expense of the
Executive (or his beneficiaries or estate). 
Executive (or his beneficiaries or estate) shall remit payment by check
to the Company in the amount of the then current amount used to calculate
premiums for participants entitled to receive continuation coverage under
COBRA.  The Company shall, on the last
day of each month, provide the Executive (or his beneficiaries or estate) with
a payment sufficient to place the Executive (or his beneficiaries or estate) in
the same economic position had such individuals or entity not been required to
pay the premium described in the preceding sentence.’”

 

2.   Term.   Executive shall continue to perform the
services and fulfill the duties, position and responsibilities under his
Employment Agreement or as assigned to him by the Chief Executive Officer until July 1,
2009 or such earlier separation date that Executive designates on no less than
30 days’ advance written notice to Company (the “Separation Date”). On the
Separation Date, Executive’s employment with the Company shall terminate.

 

3.  Compensation and Benefits.
In consideration for the continued services to be provided by the Executive,
the Company shall provide to Executive the following compensation and benefits:
(i) commencing January 1, 2009 through the Separation Date, Executive
will work on a full time basis from the Company’s headquarters three weeks per
month. One week per month Executive may perform his duties from Portland,
Oregon, if he so desires; (ii) commencing January 1, 2009 through the
Separation Date, Executive’s salary will be adjusted to a rate of $550,000.00
per year, paid on a bi weekly basis. Executive will not be eligible for a
salary increase effective March 2009; (iii) Fiscal Year 2009 bonus
(if earned) will be paid to the Executive consistent with the Rite Aid
Corporate Bonus Plan document. Executive will not be eligible for a fiscal 2010
bonus; (iv) Executive will be eligible for a retention bonus in the amount
of $330,000.00 (60% incentive target), to be paid as follows; (a) $165,000.00
to be paid by March 1, 2009, (b) $165,000.00 to be paid by July 1,
2009. If Executive voluntarily resigns his position prior to these payment
dates, he will not be eligible for the retention; (v) any earned vacation
will be cashed out following separation as per Company policy.

 

 

4.             Employment
Agreement to Remain in Effect.           Except
as modified by this Amendment No. 1, the Employment Agreement shall remain
in full force and effect in accordance with its terms.  In the event of a conflict between the
provisions of this Amendment No. 1 and the Employment Agreement, this
Amendment No. 1 shall be controlling.

 

 

	
   

  	
  RITE AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert B. Sari

  
	
   

  	
  Its:

  	
  Executive Vice President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ROBERT B. SARI

  
	
   

  	
   

  
	
   

  	
  /s/ Robert B. Sari

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