1
EXHIBIT 10
Confidential treatment with respect to certain information in this Exhibit has
been requested of the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended. The bracketed portions of
the Exhibit have been omitted from material filed in accordance with Rule 24b-2
and have been filed separately with the Commission.
2
Agreement
between
Rite Aid Corporation
and
McKesson Corporation
3
TABLE OF CONTENTS
-----------------
1. DEFINITIONS AND EXHIBITS.................................................................................1
1.1 Definitions.....................................................................................1
1.2 Exhibits.......................................................................................14
2. AGREEMENT TO BUY AND SELL...............................................................................16
2.1 Sole Source Products...........................................................................16
2.2 Non-Sole Source Products.......................................................................17
2.3 Free Goods.....................................................................................17
2.4 DSD Product Mix. .............................................................................18
3. PRICE...................................................................................................18
3.1 Warehouse......................................................................................18
3.2 DSD Products...................................................................................18
3.3 Contract Products..............................................................................19
3.4 [ ] Products....................................................................20
3.5 DSD Purchases of Generic Rx Products...........................................................20
3.6 [ ]...................................................21
3.7 [ ]...................................................21
3.8 [ ]...........................21
3.9 [ ]........................................22
3.10 [ ]................................................................22
3.11 Price Reporting................................................................................23
3.12 Landed Costs...................................................................................23
4. ORDERS..................................................................................................23
4.1 Warehouse......................................................................................23
4.2 DSD............................................................................................23
4.3 Out-of-Stock Items.............................................................................23
4.4 McKesson ASV Program...........................................................................24
4.5 Emergency Needs................................................................................25
4.6 Special Orders.................................................................................25
4.7 Purchase Reporting.............................................................................25
5. DELIVERIES..............................................................................................26
5.1 Warehouse......................................................................................26
5.2 DSD............................................................................................26
5.3 [ ] Distribution..........................................................................26
5.4 Acquired Facilities............................................................................26
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4
6. INVOICES................................................................................................26
6.1 EDI Invoices...................................................................................26
6.2 Store Invoices.................................................................................27
7. PAYMENT.................................................................................................27
7.1 Warehouse......................................................................................27
7.2 DSD............................................................................................28
7.3 Non-Business Days..............................................................................28
7.4 Offsets........................................................................................28
7.5 Price Corrections. ...........................................................................30
7.6 Payment Method.................................................................................30
7.7 Late Payments..................................................................................30
7.8 Quarterly Accounting...........................................................................30
7.9 Payment for Purchases..........................................................................31
7.10 Payment Adjustments. .........................................................................31
8. RETURNS.................................................................................................31
8.1 Regular Warehouse Returns......................................................................31
8.2 Regular DSD Returns............................................................................31
8.3 Regular Return Policies........................................................................31
8.4 [ ]....................................................................32
9. TRANSITION..............................................................................................33
9.1 General........................................................................................33
9.2 [ ]....................................................................34
9.3 Conversion Allowance...........................................................................34
9.4 Development Allowances.........................................................................34
9.5 Repayment Events...............................................................................34
10. GENERIC DRUGS...........................................................................................35
10.1 Generic Autosubstitution.......................................................................35
10.2 Changes to Rite Aid Generic Formulary..........................................................35
10.3 [ ]........................................................36
10.4 [ ]..................................................38
11. [ ].........................................................................39
11.1 [ ]..................................................39
11.2 [ ]..................................................39
11.3 [ ]......................................................40
11.4 [ ].........................................40
11.5 [ ]...........................................................43
11.6 [ ]....................................................43
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12. MCKESSON SERVICES.......................................................................................43
12.1 Service Level Agreement........................................................................43
12.2 Customer Support...............................................................................44
12.3 Contract Management............................................................................45
12.4 System Services and Equipment..................................................................46
13. CONFIDENTIAL INFORMATION................................................................................47
13.1 Non-Disclosure.................................................................................47
13.2 Non-Use........................................................................................48
14. LIMITATION ON LIABILITY.................................................................................48
15. TERM AND TERMINATION....................................................................................48
15.1 Initial Term...................................................................................48
15.2 Renewal Term...................................................................................48
15.3 Termination....................................................................................48
15.4 Consequences of Termination....................................................................50
16. RECORDS AND AUDIT.......................................................................................50
16.1 Records........................................................................................50
16.2 Audits.........................................................................................50
17. MISCELLANEOUS...........................................................................................51
17.1 Force Majeure..................................................................................51
17.2 DEA............................................................................................51
17.3 Regulation.....................................................................................51
17.4 Notices........................................................................................51
17.5 Taxes..........................................................................................52
17.6 Outstanding Amounts............................................................................52
17.7 Independent Contractors........................................................................52
17.8 Assignment.....................................................................................53
17.9 Indulgences....................................................................................53
17.10 Severability...................................................................................53
17.11 Interpretation.................................................................................53
17.12 Counterparts...................................................................................53
17.13 Announcement...................................................................................53
17.14 Entire Agreement...............................................................................53
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AGREEMENT
---------
This Agreement ("Agreement") is entered into as of April 10, 1998 ("Effective
Date") by and between McKesson Corporation ("McKesson") and Rite Aid Corporation
("Rite Aid").
BACKGROUND
----------
X. XxXxxxxx supplies a broad range of prescription drugs (including both
branded and generic prescription drugs), over-the-counter drugs,
non-prescription diabetic products, [ ] products and health and
beauty care products.
B. Rite Aid operates retail stores with pharmacies that sell products of
the type supplied by McKesson, and regional warehouse distribution
centers that supply such products to Rite Aid retail facilities.
C. Rite Aid and McKesson wish to enter into a supply arrangement upon the
terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound hereby, Rite Aid and McKesson agree as follows:
1. DEFINITIONS AND EXHIBITS
1.1 DEFINITIONS. The following defined terms are used in this Agreement
and, except as otherwise noted therein, in the Exhibits attached to this
Agreement:
"[ ]" means a [
]
"Actual Price Increase" means, [
]
"Adjusted Generic Price" means [
]
"[ ] WAC" means, for any Product for DSD or Warehouse, respectively,
the WAC for such Product in effect as of the time of determination thereof,
reduced by [ ] for DSD or Warehouse, respectively, in effect as of the
time of determination thereof. The [ ] WAC for a Product will be
determined based upon the Product Identification Number for such Product.
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"Approved [ ] Manufacturers" mean [
]
"ASV" means any vendor of a Product to Rite Aid other than McKesson.
"AWP" means the average wholesale price of a Product in effect as of
the time of determination thereof. The AWP for a Product will be based on the
Product Identification Number for such Product. For purposes of this Agreement,
the AWP for a Product shall be the AWP reported in the First Data Bank Price
List, provided that (i) if McKesson is notified of a change to the WAC for such
Product prior to the time that the AWP in the First Data Bank Price List is
updated, McKesson will adjust the AWP for the Product so that the percentage
difference between the new WAC and the adjusted AWP for the Product is the same
percentage difference that existed between the pre-change WAC and non-adjusted
AWP, and (ii) no less than weekly, McKesson shall update all AWP prices for this
Agreement to reflect the AWP reported in the First Data Bank Price List and
shall override any prior WAC-based calculation of AWP for which there is an
updated AWP reported in the First Data Bank Price List for the new WAC. In the
event that there is no updated AWP reported in the First Data Bank Price List,
McKesson shall continue to apply the WAC-based calculation of AWP.
Notwithstanding the foregoing, with respect to any Products for which there is
no AWP listed on the First Data Bank Price List, the AWP for such Product will
be the AWP from the McKesson National Item File; provided that if there is no
AWP in the McKesson National Item File or the AWP is the same or less then the
EDI Invoice Price for such Product under the terms of this Agreement, than the
AWP for such Product shall be [ ]
"Base [ ] Price" means [
]
"bps" means a percentage adjustment expressed in basis points. One bps
shall equal one hundredth of one percent (0.01%). Cumulative percentage
adjustments shall be determined by adding basis points (i.e.
there are no percentage upon percentage adjustments).
"Brand Name Prescription Drug Litigation" means the lawsuits entitled
In Re Brand Prescription Drug Antitrust Litigation, 94-C-897 MDL-997 (N.D.Ill.).
"Branded Rx Products" mean brand-name prescription pharmaceuticals,
none of which are generic prescription pharmaceuticals.
"Business Day" means any day that is not a Saturday, Sunday or Holiday.
"Calendar Quarter" means the three month calendar periods of January,
February and March; April, May and June; July, August and September; and,
October, November and December; provided that any
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determination regarding the initial and final Calendar Quarter of this Agreement
shall be appropriately adjusted to reflect the partial calendar quarter.
"Composite Performance Measure" means the Composite Performance Measure
contained in the Service Level Agreement set forth in Exhibit D.
"Confidential Information" means (a) this Agreement and the terms and
conditions hereof, (b) all accounts, records, books, files and lists regarding
any transaction contemplated by this Agreement, (c) operating manuals, customer
lists, procedures, formulas and other legally protected materials that are
confidential and proprietary, and (d) any other confidential information of
either party that is exchanged pursuant to the terms of this Agreement.
Confidential Information does not include information which: (i) was in the
receiving party's possession without restrictions of confidentiality prior to
receipt from the other party to this Agreement; (ii) is or becomes public
knowledge because of events other than an act or failure to act by the receiving
party or anyone under the receiving party's direct or indirect control; or (iii)
is or has been independently developed by the receiving party, provided that
such development was accomplished by the receiving party or on its behalf
without the use of, or any reference to, Confidential Information.
"Contract Product" means a Product for which a manufacturer has granted
Rite Aid a negotiated contract price and McKesson provides contract management
services under Section 12.3.
"Contract Year" means any twelve-month period ending on an anniversary
of the Effective Date.
"[ ]" means [
]
"Cut-off Time" means the prevailing local time on or before which an
Order must be placed by a Rite Aid store in order to have delivery on the
immediately succeeding Delivery Day, provided that all orders from Rite Aid
stores initially received by Rite Aid and passed on to McKesson must be
available for McKesson pick up by the Pass-through Time in order to receive for
such delivery. The Cut-off Time for each Rite Aid store is set forth in Exhibit
B and may be changed only by mutual agreement of the parties.
"Dating Adjustment" means:
(a) with respect to quantities to be purchased immediately by
Rite Aid pursuant to Section 3.10 (a) or (b), the product of: (i) the
quantity of such Product to be purchased immediately, (ii) the
Post-Increase WAC for such Product, (iii) the 90-Day LIBOR divided by
360 and (iv) the Excess Dating; and
(b) with respect to quantities to be purchased ratably by Rite
Aid pursuant to Section 3.10 (a), the product of: (i) the quantity of
such Product to be purchased ratably, (ii) the
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Post-Increase WAC for such Product, (iii) the 90-Day LIBOR divided by
360, and (iv) the Excess Dating less [ ] times (the [ ]
minus 1)).
An example of the determination of the Dating Adjustment is set forth in Exhibit
I-2.
"[ ] List" means McKesson's listing of all [
] in the form set forth in Exhibit A. During the Term, the
[ ] List shall be updated and provided to Rite Aid on a
weekly basis. In addition, whenever McKesson receives any modifications or
additional [
] such changes must be categorized consistent with this
Agreement and Exhibit A and such modifications or additional [
] shall be provided to Rite Aid on a daily basis. Each such change
shall identify whether such [
]
"Delivery Day" for each Rite Aid store means a calendar day between
Monday and Friday, inclusive, that is not a Holiday, unless Rite Aid has
specified on the DSD Order and Delivery Schedule that such day of the week is
not a Delivery Day for that store. Rite Aid shall be entitled to amend and
supplement Exhibit B by written notice to McKesson at any time and from time to
time in its sole discretion, so long as (a) no Rite Aid store is assigned a
Delivery Day that is a Saturday or Sunday and (b) no Rite Aid store is assigned
more than [ ] Delivery Days per week.
"DPD" means the mail order facility operated by Direct Prescription
Delivery, LLC.
"DSD" means the delivery of any Product to any Rite Aid-owned or
-operated facility which makes sales to an end-user pursuant to an Order that
specifies that facility as the shipping destination.
"DSD Base Purchase Price" means the [ ] WAC for all Products purchased
by Rite Aid for DSD plus the Base Xxxx-Up set forth in Section 3.2(a).
"DSD Invoice Date" means the invoice date appearing on any EDI Invoice
for DSD. The DSD Invoice Date shall be the same invoice date that appears on the
Store Invoice.
"DSD Order and Delivery Schedule" means the Order and Delivery Schedule
for DSD purchases attached to this Agreement as Exhibit B.
"DSD Scheduled Delivery Date" means the day on which any Product, for
which an Order is placed for DSD, is scheduled to be received at the applicable
Rite Aid store, as follows: (a) if the Order is placed by the Cut-off Time for
the Rite Aid store, then the DSD Scheduled Delivery Date for that Order is the
immediately succeeding Delivery Day for that store; and (b) if the Order is
placed after such Cut-off Time, then the DSD Scheduled Delivery Date for that
Order is the Delivery Day next following the immediately succeeding Delivery Day
for that store.
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"DSD Volume" means, for any period after the transition under Section
9.1, the aggregate DSD Base Purchase Price for all Products ordered by Rite Aid
for DSD from McKesson during such period (including 100% Return items, except
for items ordered in error), less orders that are canceled by Rite Aid, plus an
amount equal to Rite Aid's actual acquisition cost for all Products ordered by
Rite Aid for DSD during such period from ASVs pursuant to Section 2.1(c)(i),
Section 2.1(c)(ii) and Section 17.1 (such ASV orders shall not include
substitute orders for Orders previously made by Rite Aid to McKesson and Rite
Aid will provide McKesson with reasonably detailed documentation of such
acquisition costs).
"EDI" means electronic data interchange in the formats on the EDI
Schedule attached to this Agreement as Exhibit L, or such other formats adopted
by Rite Aid and approved by McKesson, provided that McKesson's approval shall
not be withheld if such formats are reasonably consistent with the needs of Rite
Aid's business and with prevailing industry standards and McKesson shall be
deemed to have approved such other formats unless McKesson objects to such
format within [ ] of notice by Rite Aid.
"EDI Invoice Price" means the price for a Product set forth in an EDI
Invoice, determined in accordance with Sections 3.1 through 3.6 and Exhibit A,
as applicable.
"EDI Invoices" mean invoices for payment by Rite Aid transmitted by EDI
stating the EDI Invoice Price for Products purchased by Rite Aid and the due
date for such EDI Invoice Price.
"[ ]" means [
]
"[ ]" means [
]
"First Data Bank Price List" means the price list published by First
Data Bank, and its supplements, or by any successor price list published by
First Data Bank, any successor entity to First Data Bank or any alternative
national data source meeting prevailing industry standards specified by Rite Aid
to McKesson; provided that such change shall be effective on the later of (i)
the date Rite Aid specifies in its notice to McKesson of such change, or (ii)
[ ] after McKesson's receipt of such notice.
"Free Goods" mean Products as to which the manufacturer or distributor
from which Rite Aid or McKesson obtains such goods does not require any payment.
"[ ]" means [
]
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"Generic Rx Products" mean generic prescription drugs which are not
Branded Rx Products.
"[ ]" means
]
"[ ]" means all Generic Rx Products
listed by GCN. Generic Rx Products shall be: (i) added automatically to the
[ ] when the patent for such Branded Rx Product
expires and (ii) deleted when a Generic Rx Product is no longer sold by any
manufacturer.
"GCN" means the five digit generic code number that identifies generic
product equivalency.
"HBC Products" mean non-prescription health and beauty care products
carried in Rite Aid warehouses.
"Holiday" means any day between Monday and Friday, inclusive, on which
banks are legally authorized to close in New York State.
"[ ]" means [
]
"[ ]" means [
]
"[ ]" means [
]
"[ ]"mean [
]
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"[ ]" means [
]
"[ ]" means [ ]
"[ ]" means
]
"[ ]" mean
]
"Manufacturer Cannot Supply" shall have the meaning set forth in the
Service Level Agreement.
"[ ]" means
]
"[ ] mean [
]
"[ ]" means
]
"McKesson ASV Products" means any Product that McKesson has made
available for resale through a Trading Company Catalog.
"McKesson Average Weekly Orders" means McKesson's average weekly orders
for a Product during the most recent prior consecutive eight (8) calendar week
period. McKesson Average Weekly Orders
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[
]
"McKesson Credit" means the amount of any credit to be provided by
McKesson to Rite Aid that is due and outstanding under the terms of this
Agreement.
"McKesson Item Catalog" means a list of products that McKesson carries
in its distribution centers. The catalog will list, at a minimum, the
Economost/Econotone Number, the NDC number, the item description including
strength and package size, and the AWP.
"McKesson Multi-Source Generic" means the Generic Rx Products on
McKesson's Multi-Source Generic formulary. McKesson may update the McKesson
Multi-Source Generic formulary from time to time during this Agreement and shall
provide Rite Aid with notice of such change through the McKesson
Select/Multi-Source Weekly Update.
"McKesson National Item File" means the electronic data base and price
list of all items carried by McKesson.
"McKesson Payment Adjustment" means the adjustment with respect to
certain amounts payable by McKesson to Rite Aid as set forth in Exhibit W. The
McKesson Payment Adjustment shall equal the amount payable by McKesson to Rite
Aid multiplied by (i) the 90-Day LIBOR divided by 360 and (ii) the Payment
Adjustment Days set forth in Exhibit W for such amount.
"[ ]" means[
]
"McKesson Repackaging Agreement" means the Repackaging Agreement of
even date herewith between Rite Aid and McKesson.
"McKesson Select Generic" means the Generic Rx Products on McKesson's
Select Generic Formulary. McKesson may update the McKesson Select Generic
Formulary from time to time during this Agreement and shall provide Rite Aid
with notice of such change through the McKesson Select/Multi-Source Weekly
Update.
"[ ] Products" mean SunMark Durable Medical Equipment and other
Home Health Care Products (not including Non-Rx Diabetic Products), McKesson
Private Label Products, Trade Show specials, Close-out Merchandise, General
Sundry Products (including without limitation general merchandise and paper
products), RxPak repackaged pharmaceuticals (except to the extent such
pharmaceuticals are subject to the McKesson Repackaging Agreement) and Pharmacy
Supplies (including bottles and vials).
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"90-Day LIBOR" means the Three Month London Interbank Offered Rate as
reported in the Wall Street Journal.
"Non-Rx Diabetic Products" mean products used in the treatment of
diabetes that are generally available from pharmacies without a doctor's
prescription.
"100% Return" means any return of Products by Rite Aid to McKesson that
satisfies any of the following conditions: (a) the Product was (i) shipped in
error (including miss-picks); (ii) recalled by the manufacturer or McKesson;
(iii) received by Rite Aid with six (6) months or less dating; or (iv) damaged
(other than by Rite Aid) and, in each case (except for recalls) [
]; or (b)
the Product was ordered in error by Rite Aid and was phoned into McKesson's
Customer Care Center within three (3) Business Days after store receipt.
"Order" means an order for Products under this Agreement. Orders for
Warehouse shall be transmitted by EDI. Orders for DSD shall be transmitted
through Telxon electronic ordering equipment, or if unavailable, telephone or
other means of transmission mutually agreed by McKesson and Rite Aid.
"Order Credits" mean credits to Rite Aid based on unit-of- measure
based price errors in the Store Invoice or order shortages of the Products
actually received by Rite Aid from McKesson for DSD Orders. Order Credits are
required to be phoned into McKesson's Customer Care Service Center[
] of Rite Aid's receipt of the Store Invoice containing the
unit-of-measure based price error or order shortage.
"OTC Products" mean non-prescription drugs sold over-the-counter.
"Pass-through Time" means the prevailing local time on or before which
an Order must be placed by Rite Aid for an order that Rite Aid receives from a
Rite Aid store and passes on to McKesson in order to have delivery in such store
on the immediately succeeding Delivery Day. The Pass-through Time for all such
Orders from Rite Aid shall be [ ]m. and may be changed only by mutual
agreement of the parties.
"Post-Increase WAC" means the [ ] WAC in effect immediately
following a manufacturer price increase or immediately prior to the beginning of
a manufacturer special deal period as the case may be.
"Pre-Increase WAC" means the [ ] WAC in effect immediately prior
to a manufacturer price increase or immediately prior to the termination of a
manufacturer special deal period as the case may be.
"[ ]" means
]
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"Product Identification Number" means the eleven (11) digit NDC Number
for a Product provided, if there is no NDC Number for such Product, the Product
Identification Number shall be the ten (10) digit UPC number; provided further
that if there is no NDC or UPC number for such Product, the Product
Identification Number will be the McKesson Economost/Econotone number set forth
in the McKesson Item Catalog.
"Products" mean Rx Products, OTC Products, Non-Rx Diabetic Products, [
] Products and HBC Products.
"Purchase Price" of any Product means the EDI Invoice Price therefor,
as adjusted to reflect [ ]
"[ ]" means [
]
"[ ]" means
]
"[ ]" means [
]
"Rite Aid" means Rite Aid Corporation and all subsidiaries and
affiliates in which Rite Aid Corporation owns, directly or indirectly fifty
percent (50%) or more of the outstanding voting securities of such company,
including without limitation, all Rite Aid stores and DPD facilities.
"Rite Aid [ ] Orders" means Rite Aid's [
] Orders of a Product for Warehouse during the most recent prior [
] period. Rite Aid [ ] Orders
shall include all Orders for such Product by Rite Aid from McKesson during such
period [ ]
"Rite Aid Forecasted Usage" means Rite Aid's estimated future Orders
for a Product based on the Rite Aid Average Weekly Orders for such Product,
calculated using McKesson's replenishment system as the basis for forecasting,
with appropriate adjustments for anticipated, verifiable seasonal shifts in
demand, changes in Rite Aid store count, and inventory build-up for holiday
periods and year-end.
"Rite Aid Generic Formulary" means the formulary established by Rite
Aid for Generic Rx Products that consists of the Generic Rx Products that Ride
Aid carries in its warehouses for shipment to its stores, [ ]
Rite Aid may update the Rite Aid Generic
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Formulary from time to time during this Agreement and shall notify McKesson of
any such change as set forth in Section 10.2.
"Rite Aid Payment Adjustment" means the adjustment with respect to
certain amounts payable by Rite Aid to McKesson as set forth in Exhibit W. The
Rite Aid Payment Adjustment shall equal the amount payable by Rite Aid to
McKesson multiplied by (i) the 90-Day LIBOR divided by 360 and (ii) the [
] set forth in Exhibit W for such amount.
"Rite Aid's Pro Rata Share" with respect to any Product means a
fraction whose numerator is the Rite Aid [ ] Orders of such Product and
whose denominator is McKesson's [ ] Orders of such Product.
"[ ]" means, [
]
"[ ]" means [
]
"[ ]" means [
]
"[ ]" means [
]
"Rx Products" mean Branded Rx Products and Generic Rx Products.
"Salable Products" means, as of the date made available for pickup by
McKesson, Products that are undamaged, without price stickers, with at least
[ ] dating, in current manufacturer's packaging, unopened, and if
repackaged, repackaged by or for McKesson.
"Service Level Agreement" means the terms and conditions defining the
standards for the services to be performed by McKesson under this Agreement and
is attached hereto as Exhibit D.
"SFAC" means McKesson's [ ]
determined in accordance with Exhibit P-1. The SFAC for a Product will be based
on the Product Identification Number for such Product.
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"Special Returns" mean Products returned by Rite Aid under Section 8.4.
"[ ]" means [
]
"[ ]" means, [
]
"[ ]" means [
]
"Spot Purchase" means the purchase of a defined quantity of one Product
for a specified price. Specifically, a Spot Purchase shall not include: (i) a
supply agreement for an indeterminate quantity of a Product; or (ii) a purchase
agreement requiring the purchase of more than one Product as part of the
agreement to purchase such Product; or (iii) any series of single purchases
entered into for purposes of circumventing such Spot Purchase limitations.
"Store Invoices" mean invoices transmitted in hard copy form to each
Rite Aid store with each shipment for DSD, reflecting the AWP for each Product
listed on the invoice.
"[ ]" means [
]
"[ ]" means [
]
"[ ]" means [
]
"[ ]" means [
]
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18
"[ ]" means [
]
"Term" shall mean the term of this Agreement beginning on the Effective
Date and terminating as set forth in Section 15, including the Initial Term and
any Renewal Terms set forth therein.
"Third Party Contract Sales" mean sales by McKesson to chains or to
independent retail pharmacies utilizing a buying group (excluding Value-Rite and
similar groups) that are based on the chain's or buying group's contract prices
negotiated by such parties directly with manufacturers, and sales to hospitals,
nursing homes and other institutions based on contracts prices negotiated with
manufacturers by such institutions directly or through group purchasing
organizations for such institutions.
"Trading Company Catalogs" mean the catalogs which list McKesson ASV
Products.
"Transition Start Date" means the date that McKesson identifies to Rite
Aid as the Transition Start Date.
"[ ] Notice" means the notice provided by Rite Aid to McKesson in
accordance with the terms of Sections 9.2 and 17.4 upon attaining the ability to
commence Warehouse purchases of Rx Products at Rite Aid's warehouse facility
[ ]
"WAC" means the manufacturer's published acquisition cost of a Product
in effect as of the time of determination thereof, whether expressed as the
wholesale acquisition cost or the direct price. In the event of a disagreement
between the parties as to the WAC for any Product, such disagreement shall be
resolved by resort to the manufacturer of such Product.
"Warehouse" means the distribution of any Products to a Rite Aid
warehouse pursuant to an Order that specifies a Rite Aid warehouse as the
shipping destination.
"Warehouse Invoice Date" means the invoice date appearing on any EDI
Invoice for Warehouse.
"Warehouse Order and Delivery Schedule" means the Order and Delivery
Schedule for Warehouse purchases attached to this Agreement as Exhibit C.
"Weekly [ ] Report" means the weekly report provided by McKesson to
Rite Aid [ ] substantially in the form
attached hereto as Exhibit E-3 (with additional fields to be defined by mutual
agreement of the parties). [
]
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"[ ]" means [
]
1.2 EXHIBITS. The following Exhibits are attached to this
Agreement:
Exhibit A: [ ]
Exhibit B: DSD Order and Delivery Schedule
Exhibit C: Warehouse Schedule
C-1: Warehouse Order and Delivery Schedule
C-2: Warehouse Packaging and Delivery Requirements
Exhibit D: [ ]
Exhibit E: [ ]
E-1: [ ]
E-2: [ ]
[ ]
[ ]
]
E-3: [ ]
E-4: [ ]
E-5: [ ]
E-6: [ ]
E-7: [ ]
E-8: [ ]
Exhibit F: [No Exhibit]
Exhibit G: [ ]
Exhibit H: [No Exhibit]
Exhibit I: [ ]
I-1: [ ]
I-2: [ ]
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Exhibit J: Transition Plan
J-1: Rite Aid Market Area Transition Plan
J-2: Warehouse Transition Plan
J-3: Transition Penalties
Exhibit K: Repackaged Product Pricing Methodology for DSD
Exhibit L: McKesson/Rite Aid EDI Document of Understanding
Exhibit M: [ ]
M-1: [ ]
M-2: [ ]
Exhibit N: [No Exhibit]
Exhibit O: [ ]
Exhibit P: [ ]
P-1: [ ]
P-2: [ ]
Exhibit Q: [No Exhibit]
Exhibit R: [No Exhibit]
Exhibit S: [No Exhibit]
Exhibit T: [No Exhibit]
Exhibit U: [No Exhibit]
Exhibit V: [No Exhibit]
Exhibit W: Payments To Rite Aid/Payments to McKesson
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2. AGREEMENT TO BUY AND SELL
2.1 SOLE SOURCE PRODUCTS.
(a) Warehouse. During the Term, McKesson agrees to sell,
supply and deliver to Rite Aid, upon Rite Aid's Orders therefor from
time to time, and Rite Aid agrees to purchase from McKesson (subject to
paragraph (c) below), only for the purpose of dispensing by Rite Aid,
upon the terms and subject to the conditions of this Agreement, all of
Rite Aid's requirements for Branded Rx Products for Rite Aid purchases
for Warehouse.
(b) DSD. During the Term, McKesson agrees to sell, supply and
deliver to Rite Aid, upon Rite Aid's Orders therefor from time to time,
and Rite Aid agrees to purchase from McKesson (subject to paragraph (c)
below), only for the purpose of dispensing by Rite Aid, upon the terms
and subject to the conditions of this Agreement, all of Rite Aid's
requirements for Rx Products for Rite Aid purchases for DSD that are
not supplied to Rite Aid stores from Rite Aid warehouses.
(c) Exceptions. Notwithstanding paragraphs (a) and (b) above
or anything else to the contrary contained in this Agreement, Rite Aid
shall have no obligation to purchase any Rx Product from McKesson if
such Rx Product falls into one of the following categories:
(i) [
]
(ii) [
]
(iii) [
]
(iv) [
]
(v) [
]
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(vi) [
]
(vii) [
]
(viii) [
]
(ix) [
]
(x) [
]
2.2 NON-SOLE SOURCE PRODUCTS.
(a) General. During the Term, McKesson agrees to sell, supply
and deliver to Rite Aid, subject to availability and upon Rite Aid's
Orders therefor from time to time, upon the terms and subject to the
conditions of this Agreement, any Product that is not an Rx Product
other than General Sundry Products.
(b) DPD. Notwithstanding anything to the contrary herein,
during the Term, McKesson agrees to sell, supply and deliver to Rite
Aid, subject to availability and upon Rite Aid's Orders therefor from
time to time, upon the terms and subject to the conditions of this
Agreement, any Product for DPD, at the prices and on the terms
applicable to DSD purchases hereunder. McKesson recognizes that as of
the Effective Date, McKesson will be the second source for DPD after
Rite Aid warehouses and Cardinal Health, Inc. Sales for DPD will not be
included in any of the service level calculations for purposes of the
Service Level Agreement.
2.3 FREE GOODS. McKesson shall be obligated, at no cost to Rite Aid, to
take, process, handle and ship to Rite Aid all Free Goods that are destined for
Rite Aid warehouses, but only (i) if Rite Aid has used reasonable commercial
efforts to convert such goods to dollar credits from their source and such
dollar credits have not timely been obtained, (ii) Rite Aid has used reasonable
commercial efforts to have such Free
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Goods drop shipped directly to Rite Aid and cannot obtain such delivery, and
(iii) such Free Goods are Rx Products then carried in any Rite Aid warehouse.
Free Goods received by Rite Aid are not subject to return under the provisions
of Section 8.
2.4 DSD PRODUCT MIX. Between the Effective Date and the end of
the Term, and provided that Rite Aid timely receives a monthly DSD Volume Report
from McKesson for each month during the Term identifying the aggregate Purchase
Price of its purchases of all Products for DSD and all HBC Products for DSD,
Rite Aid agrees that the aggregate Purchase Price of its purchases of Products
other than HBC for DSD shall [ ]
except for mutually agreed business opportunities to purchase additional HBC
Products. For purposes of this Section 2.4, Products for DSD in Alaska and
Hawaii shall be excluded from the calculation under this Section 2.4.
3. PRICE
3.1 WAREHOUSE. Subject to Section 3.3, the EDI Invoice Price for all
Products purchased by Rite Aid for Warehouse [ ] from which
Rite Aid places an EDI Order shall be equal to the [ ] in effect at
[ ]m. [ ] local time on the calendar day that Rite Aid places
the EDI Order.
3.2 DSD PRODUCTS. Except for Contract Products, [ ] Products and
Generic Rx Products, the EDI Invoice Price for a Product purchased by Rite Aid
for DSD shall be equal to [ ] in effect at [
] which invoice shall be issued no later than the DSD Scheduled
Delivery Date for that Product at such Rite Aid store; provided that such
Products for DSD shall be subject to the following [ ]
expressed in basis points (bps), which shall be determined as of the time that
the [ ] is determined:
(a) Base Markup. A base markup shall be added as
follows, based on the type of Product:
PRODUCT TYPE BASE MARKUP
------------ -----------
Branded Rx Products, OTC Products, Non-Rx
Diabetic Products, Contract Products.................. [ ]
HBC Products.......................................... [ ]
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(b) Incentive Adjustments. Incentive Adjustments shall be
deducted from the EDI Invoices on a line for line basis (except for [
] Products, with respect to which the Incentive
Adjustments will be provided as a credit in accordance with Exhibit W)
as follows:
(i) a volume incentive for all Products purchased for
DSD of [ ] bps shall be deducted for[ ].
Beginning in the [ ] a volume incentive for all
Products purchased for DSD shall be deducted in each Contract
Year, based upon the annual DSD Volume for the immediately
preceding Contract Year according to the following schedule:
DSD VOLUME FOR PRECEDING CONTRACT YEAR VOLUME INCENTIVE
-------------------------------------- ----------------
[ ] [ ]
[ ] [ ]
[ ] [ ]
(ii) in consideration of Rite Aid's agreement [
] a return
incentive of [ ] bps shall be deducted for all Products
purchased for DSD;
(iii) [
]
(iv) [
]
3.3 CONTRACT PRODUCTS.
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(a) Warehouse. The EDI Invoice Price for all Contract
Products purchased for Warehouse will be [
]
(b) DSD. The EDI Invoice Price for all Contract Products
purchased DSD will be the [
] The EDI Invoice Price for
such Contract Products shall be determined as of the time of McKesson's
issuance of a Store Invoice for such Product, which invoice shall be
issued no later than the DSD Scheduled Delivery Date for that Product
at such Rite Aid store.
3.4 [ ] PRODUCTS. The EDI Invoice Price for all [ ]
Products purchased by Rite Aid for DSD shall be equal to the McKesson's [ ]
price for such Products; provided that the EDI Invoice Price for repackaged
[ ] Products for DSD shall be determined in accordance with Exhibit K.
[ ] Products are not covered by the [ ] WAC pricing specified in Section
3.2 or the Base Markup set forth in Section 3.2(a) or the [ ]
described in Section 3.6, provided that Rite Aid shall be provided with a credit
for the [ ] set forth in Section 3.2(b) for such [ ]
Products in accordance with Exhibit W. The EDI Invoice Price for such [
] Products shall be determined as of the time of McKesson's issuance of a Store
Invoice for such Product, which invoice shall be issued no later than the DSD
Scheduled Delivery Date for that Product at such Rite Aid store. The price
charged Rite Aid for [ ] Products shall not [
]
3.5 DSD PURCHASES OF GENERIC RX PRODUCTS.
(a) Accepted GSPs. The EDI Invoice Price for all Accepted GSPs
purchased by Rite Aid for DSD shall be equal to the prices set forth [
] and shall be determined as of the time of [
]for such Product, which invoice shall be issued no later
than the DSD Scheduled Delivery Date for that Product at such Rite Aid
store. Accepted GSPs ordered for DSD shall not receive any cash
discounts [
]
(b) Non-Accepted GSPs. The EDI Invoice Price for all Generic
Rx Products that are not Accepted GSPs and are purchased by Rite Aid
for DSD shall be equal to the SFAC, plus a Base Markup of [ ] bps and
less the [ ] set forth in Section 3.2(b). Such EDI Invoice
Price shall be determined as of the time of [ ]
for such Non-Accepted GSP, which invoice shall be issued no later than
the DSD Scheduled Delivery Date for that Product at such Rite Aid
store.
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3.6 [
]
3.7 [
]
3.8 [
]
--------------------------------------------------------------------------------
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[
]
3.9 [
]
3.10 [
]
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[
]
]
3.11 PRICE REPORTING. McKesson will provide Rite Aid with a complete
[ ] WAC price list, [ ] price list and
SFAC price list on a [ ]basis. The [ ] list shall be provided no later
than [ ] and shall identify all changes from the prior [ ] list. In
addition, McKesson will provide all changes to the [ ]
Warehouse Products no later than one Business Day after such change. Such price
reporting shall be delivered by McKesson to Rite Aid headquarters through a
method mutually agreeable to the parties.
3.12 LANDED COSTS. Except as set forth in Sections 3.2(b)(iii), 4.5 and
4.6, all EDI Invoice Prices for Products under this Section 3 shall be fully
landed costs at the store or warehouse to which they are delivered, and shall
include within the EDI Invoice Price all shipping and other similar expenses.
4. ORDERS
4.1 WAREHOUSE. Rite Aid may place Orders for Products for Warehouse at
any time and from time to time. Quantities ordered for Warehouse shall be
manufacturer's full case quantities or full innerpacks.
4.2 DSD. Rite Aid stores may place Orders for Products for DSD at any
time and from time to time. For every Product that is ordered by Rite Aid for
DSD that McKesson repackages or contracts to repackage, McKesson shall
automatically substitute such repackaged Product for the Product ordered. In the
event that McKesson is out of stock of such repackaged Product, McKesson shall
automatically substitute the manufacturer's original package.
4.3 OUT-OF-STOCK ITEMS.
(a) McKesson shall notify Rite Aid within [ ] after
receipt of any EDI Order for Warehouse of any Products on such Order
that are out-of-stock at the servicing McKesson distribution center
using McKesson's standard order acknowledgment form. McKesson shall
also provide Rite Aid's central office, by EDI or other form mutually
agreeable to the parties, a [ ] report identifying each out-of-stock
Products for Warehouse, including Manufacturer Cannot Supply Product
and the manufacturer's estimate as to when such Products will again be
available. The report shall include a separate listing for each Rite
Aid warehouse containing out-of-stock
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information for each McKesson distribution center the provides Products
to such Rite Aid warehouse.
(b) In the event that McKesson has part but not all of the
quantity of any Product ordered by Rite Aid for Warehouse, McKesson
shall provide Rite Aid with all quantities of the Product it has as of
the date of the Order in the servicing distribution centers for such
Order [
]
(c) If any Product is out-of-stock when Rite Aid places an
Order for Warehouse in a quantity consistent with Rite Aid's normal
replenishment requirements, with appropriate adjustments for
anticipated, verifiable seasonal shifts in demand, changes in Rite Aid
store count, and inventory build-up for holiday periods and year-end,
then [
]
(i) If such Product was out-of stock for any reason
other than Manufacturer Cannot Supply, Rite Aid's EDI Invoice
Price, to the extent of the unfilled quantity on the prior
Order, shall be adjusted to the [
]
(ii) If such Product was out-of-stock for
Manufacturer Cannot Supply, and if McKesson's subsequent
shipments of such Product from the manufacturer are at the
lower WAC which was in effect at the time of Rite Aid's
original Order, then Rite Aid's EDI Invoice Price for Rite
Aid's next Order, to the extent consistent with Rite Aid's
normal replenishment quantities with appropriate adjustments
for anticipated, verifiable seasonal shifts in demand, changes
in Rite Aid store count, and inventory build-up for holiday
periods and year-end, shall be [
]
4.4 MCKESSON ASV PROGRAM.
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30
(a) McKesson agrees that it shall give Rite Aid [ ]
advance notice of any McKesson ASV Products to be listed in a Trading
Company Catalog, and the opportunity to purchase the whole quantity, or
any lesser quantity, of each of the products listed therein, at a price
[ ] the price to be set forth in such Trading Company
Catalogs, [
]
(b) Orders for purchases of McKesson ASV Products under this
Section 4.4 may be placed by fax, phone or EDI. Orders placed at or
before 1:00 p.m. local Denver time, Monday through Friday will be
delivered within [ ] from the time Rite Aid transmits the Order.
Payment terms of Rite Aid's purchases of McKesson ASV Products by Rite
Aid shall be [ ] from the date of shipment of the Products.
McKesson shall provide Rite Aid with separate weekly and monthly
written reports summarizing Rite Aid's purchases of McKesson ASV
Products, in formats to be mutually agreed by the parties.
4.5 EMERGENCY NEEDS. If as a result of a McKesson filling or shipping
error, Rite Aid has an insufficient quantity of any Rx Product for Warehouse,
McKesson agrees to ship (at no additional expense) additional quantities of such
Rx Product by expedited next day delivery so that Rite Aid will have sufficient
quantities on hand to last until Rite Aid would normally have the product
available for store shipments based on the next customary available delivery
date. If Rite Aid requests an emergency shipment for Warehouse for any other
reason, McKesson agrees to make the shipment, and Rite Aid shall pay any
additional freight costs incurred by McKesson in connection therewith.
4.6 SPECIAL ORDERS. Rite Aid stores may from time to time issue
special Orders for OTC Products, Non-Rx Diabetic Products, [
] or HBC Products usually not
carried by McKesson (Orders for Rx Products shall never be special Orders), and,
if the manufacturer is acceptable to McKesson, McKesson will fill such Orders at
listed DSD terms if within the normal McKesson procurement cycle. If such
requests require McKesson to procure such special Orders outside of McKesson's
normal procurement cycle, Rite Aid will reimburse any special manufacturer's
delivery charges for the initial delivery. Any such request for any Products
except Rx Products will be subject to the condition that the applicable McKesson
distribution center sell at least [ ]
4.7 PURCHASE REPORTING.
(a) McKesson will provide Rite Aid with Consolidated Weekly,
Monthly, Quarterly and Annual Purchase Reports for all Rite Aid store
purchases, rolled-up based on Rite Aid's management hierarchy . Such
reports shall be delivered by McKesson to Rite Aid headquarters in
accordance with Rite Aid's delivery directions.
(b) McKesson will provide Rite Aid with two copies of a
monthly report of controlled substances purchased from McKesson for
each Rite Aid store. One copy of this report will be
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provided directly to the Rite Aid store and one copy will be provided
to the Rite Aid market manager responsible for such store.
5. DELIVERIES
5.1 WAREHOUSE. Subject to Section 5.3, each Rite Aid distribution
center shall receive deliveries from the corresponding McKesson distribution
center in accordance with the Warehouse Order and Delivery Schedule. The
Products subject to EDI Orders for Warehouse that are required to be included in
each delivery shall be determined based upon the EDI Order time and dates,
cut-off and dock-out times, delivery dates and times, and payment schedule
specified on the Warehouse Order and Delivery Schedule. In the event that an EDI
Order is received after the Cut-off Time, such EDI Order shall be aggregated
with the next Order for such Rite Aid distribution center.
5.2 DSD. Each Rite Aid store shall receive not more than one delivery
on each Delivery Day for that store from the corresponding McKesson distribution
center in accordance with the DSD Order and Delivery Schedule. Orders for DSD
that are transmitted prior to the Cutoff Time for the store for which the Order
is placed will be delivered to such store on the next Delivery Day. Products
subject to Orders that are transmitted after the Cutoff Time at the Rite Aid
store for which the Order is placed, will be delivered to such store on the
Delivery Day immediately following the next Delivery Day. CII turn-around times
for each store shall be as specified on the DSD Order and Delivery Schedule.
Except as set forth in the DSD Order and Delivery Schedule, [ ]
5.3 [ ] DISTRIBUTION. Rite Aid acknowledges and agrees that
McKesson may distribute any Product to a Rite Aid distribution center or store
[
]
5.4 ACQUIRED FACILITIES. McKesson agrees that it will solely use
the [
] distribution centers for Products supplied
under this Agreement and shall not use any warehouse facilities by any other
supplier that is acquired of McKesson after the Effective Date for Products
supplied under this Agreement until such warehouse facilities are fully
integrated into McKesson's warehouse distribution and reporting systems.
6. INVOICES
6.1 EDI INVOICES. McKesson shall invoice all amounts actually due and
payable by Rite Aid on EDI Invoices. EDI Invoices shall be computed in
accordance with Section 3 of this Agreement. No amount shall be due and payable
by Rite Aid with respect to any Product unless such amount is properly
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reflected on an EDI Invoice. The DSD Invoice Dates and Warehouse Invoice Dates
shall be as set forth on the DSD Order and Delivery Schedule and the Warehouse
Order and Delivery Schedule, respectively.
6.2 STORE INVOICES. For Rite Aid internal management purposes, each
shipment of Products for DSD shall be accompanied by a Store Invoice. No amount
shown on any Store Invoice shall be actually due and payable by Rite Aid; Rite
Aid shall only be obligated to pay EDI Invoices.
7. PAYMENT
7.1 WAREHOUSE.
(a) Subject to Section 5.3 and Exhibit C, EDI Invoices for
deliveries of Products for Warehouse to Rite Aid distribution centers
shall be due and payable as follows, but in no event before [ ] after
receipt by Rite Aid:
(i) EDI Invoices dated from the 1st to the 15th
day of the month, inclusive, shall be due and payable on [
]
(ii) EDI Invoices dated from the 16th to the end
of any month shall be due and payable on the [
]
Each EDI Invoice shall be dated on the date on which the truck
containing the Products subject to such EDI Invoice is scheduled to
leave the applicable McKesson distribution center, provided that if the
date of the EDI Invoice precedes the date on which the truck actually
leaves the applicable McKesson distribution center, then the payment
due date with respect to such EDI Invoice specified in clause (i) or
clause (ii) as applicable shall be deferred for the number of calendar
days by which the EDI Invoice precedes the date on which the truck
leaves (for purposes of this Section 7.1(a), if the schedule for
departure of trucks from such distribution center is changed so that
the truck containing the Products subject to such EDI Invoice leaves
the applicable McKesson distribution center after 9:00 p.m. prevailing
local time and the truck arrives after the Rite Aid Receiving Start
Time set forth in Exhibit C, [ ]
(b) McKesson shall pass through to Rite Aid [
]
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[
]
7.2 DSD. Unless Rite Aid elects to pay EDI Invoices under the
accelerated weekly payment incentive program under Section 3.2(b)(iv), EDI
Invoices for store deliveries of Products for DSD shall be due and payable as
follows: (a) on the [ ] of each month, with respect to EDI Invoices containing
DSD Invoice Dates from the 1st to the 15th day of the month, inclusive, and (b)
on the [ ] of the following month, with respect to EDI Invoices containing DSD
Invoice Dates from the 16th to the end of the month, inclusive, but in no event
sooner than [ ] after receipt of the EDI Invoices by Rite Aid.
7.3 NON-BUSINESS DAYS. Notwithstanding anything to the contrary in this
Section 7, if a payment is due pursuant to Section 7.1 or Section 7.2 on a day
specified as the "Scheduled Due Date" below, it shall instead be due on the
corresponding "Actual Due Date" specified below:
SCHEDULED DUE DATE ACTUAL DUE DATE
------------------ ---------------
Saturday Preceding Business Day
Sunday Following Business Day
Monday Holiday Preceding Business Day
Non-Monday Holiday Following Business Day
7.4 OFFSETS. Rite Aid agrees to render payment in full to McKesson's
designated bank on the applicable due date as specified in this Agreement
without making any deductions, offsets, short payments or other accounts payable
adjustments to such payment obligation; provided that Rite Aid may, to the
extent specifically set forth below in this Section 7.4, defer payment of the
specified portion of a McKesson EDI Invoice ("short pay"). All other setoffs,
adjustments, recoupments, short payments, excuses for delay by Rite Aid are
waived by Rite Aid as a ground for delaying payment.
(a) With respect to Warehouse Products:
(i) if the price stated on Rite Aid's Order for any
Product is lower than the price appearing on such EDI Invoice
for such Product, Rite Aid may short pay an amount equal to
the excess of the price for such Product appearing on the EDI
Invoice over the corresponding Order price until McKesson has
provided supporting documentation from the manufacturer for
such Product to Rite Aid;
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34
(ii) if Rite Aid's payment is accompanied by a credit
memorandum from the manufacturer of any Product subject to
such EDI Invoice that gives McKesson the right to receive
immediate corresponding dollar credit from that manufacturer
with respect to such Product, Rite Aid may short pay the
amount of such credit memorandum;
(iii) if Rite Aid has notified McKesson that it is
returning any Product directly to the manufacturer or through
McKesson and provided McKesson with reasonably detailed
documentation of return, Rite Aid may short pay in the amount
of such return [
] after such return and McKesson may take a corresponding
deduction from the manufacturer on its own account. Rite Aid
will repay any amount of such corresponding deduction that
McKesson thereafter repays to the manufacturer at the same
time that McKesson repays the manufacturer on its own account
for its own inventory (including penalties incurred by
McKesson for such disputed amount). If McKesson has not taken
a corresponding deduction with the manufacturer for its own
account, Rite Aid will repay the amount of Rite Aid's
deduction to the extent that, after McKesson uses commercially
reasonable efforts on Rite Aid's behalf to obtain credit for
such return, the manufacturer notifies McKesson that it will
not provide such credit.
(iv) if any shipment from McKesson contains fewer
units of any Product than the number billed for in the EDI
Invoice, Rite Aid may defer payment of the excess amount
appearing in the EDI Invoice attributable to such shortage,
provided that Rite Aid has notified [ ] by telephone of such
shortage within three Business Days of receipt of such
shipment, and has provided McKesson with a reasonably detailed
written description of such shortage within five (5) Business
Days following receipt of such shipment, including a cycle
count documenting such shortage. Upon receipt of such notice,
McKesson shall run a cycle count and use reasonable commercial
efforts to investigate the circumstances described in Rite
Aid's notice, and Rite Aid will reasonably cooperate in
providing information requested by McKesson in connection with
such investigation. Rite Aid may defer payment of the disputed
amount without additional charge until the earlier of (i)
McKesson's issuance of a credit in the amount of such shortage
or (ii) McKesson's written notice that it has determined that
no shortage has occurred or that the amount of the credit due
from McKesson is less than the amount claimed by Rite Aid. If
Rite Aid in good faith disputes McKesson's determination Rite
Aid may, upon written notice to McKesson, continue to defer
payment of such amount until resolution of such dispute,
provided that the withheld amount will be subject to the late
payment fees described in Section 7.7 from and after the date
of such notice to the extent it is subsequently determined
that the shortage did not occur or was less than that claimed
by Rite Aid;
(b) With respect to DSD Products:
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If McKesson has failed to provide Rite Aid with credit for: (i)
any 100% Returns within [ ] of McKesson's receipt of notice
that the returned Products are ready to be picked up from Rite
Aid, (ii) any Order Credits within [ ] of McKesson's
receipt of notice of such Order Credit, or (iii) any Special
Returns within within [ ] of McKesson's receipt of notice
that the returned Products are ready to be picked up from Rite Aid,
then Rite Aid may defer payment of an amount equal to such credits
until the earlier of McKesson's issuance of a credit memorandum to Rite
Aid in such amount or McKesson's written notice that it has determined
that no credit or a lower credit was required in accordance with the
terms of this Agreement. If Rite Aid in good faith disputes such
determination, Rite Aid may, upon written notice to McKesson, continue
to defer payment of such amount until resolution of such dispute,
provided that the deferred amount will be subject to the late payment
fees described in Section 7.7 from and after the date of such notice to
the extent it is subsequently determined that such credit was not
issuable to Rite Aid.
(c) With respect to DSD Products and Warehouse Products:
In the case of an EDI Invoice from McKesson which fails to reflect any
McKesson Credit applicable to such EDI Invoice, Rite Aid shall give
written notice thereof to McKesson within [ ] after receipt of such
invoice with supporting documentation, and Rite Aid may deduct the
amount of such McKesson Credit from its payment on such EDI Invoice.
7.5 PRICE CORRECTIONS. Provided that McKesson provides Rite Aid with
notice and documentation supporting such claim, McKesson may correct through
deduction or addition to any credit due to Rite Aid the amount of any pricing
error by McKesson for Products purchased under the terms of this Agreement.
7.6 PAYMENT METHOD. Payments by Rite Aid for all purchases under this
Agreement shall be via electronic funds transfer of immediately available funds
or such other means of providing McKesson with immediately available funds as
may be reasonably acceptable to McKesson. Credits or payments due Rite Aid under
this Agreement shall be subject to the methodologies set forth in Exhibit W or
such other means selected by Rite Aid that is reasonably acceptable to McKesson.
7.7 LATE PAYMENTS. Any payments or credits by either party made
after the due date set forth in this Agreement (including amounts wrongly
withheld by either party) shall be charged a [ ] fee (or the maximum
amount permissible under applicable law, if lower). An amount shall be deemed to
be wrongly withheld if the dispute to which the withholding relates is resolved
against the withholding party.
7.8 QUARTERLY ACCOUNTING. Every three (3) months after the Effective
Date of this Agreement each party shall submit to the other a reasonably
detailed summary of all late payments owed to it within the meaning of Section
7.7. [
]
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[ ]. Notwithstanding anything to the contrary
in Section 7.7, no late payment penalties shall accrue until [
]
7.9 PAYMENT FOR PURCHASES. Rite Aid Corporation shall be ultimately
responsible for payment for all purchases hereunder.
7.10 PAYMENT ADJUSTMENTS. With respect to any payment or credit to Rite
Aid on Exhibit W for which Payment Adjustment Days are identified, McKesson will
add a McKesson Payment Adjustment on such amount based on such number of Payment
Adjustment Days, provided that in the case of [
] under Section 3.9, the McKesson Payment Adjustment
will be calculated in accordance with Section 3.9. With respect to any payment
by Rite Aid on Exhibit W for which Payment Adjustment Days are identified,
McKesson will receive a Rite Aid Payment Adjustment on such amount in accordance
with the terms of Exhibit W.
8. RETURNS
8.1 REGULAR WAREHOUSE RETURNS. McKesson will accept returns of the
following Products purchased by Rite Aid for Warehouse: (a) items newly
introduced by manufacturers to the extent not sold by Rite Aid; (b) manufacturer
approved returns; (c) manufacturer returns where no advance authorization from
the manufacturer is required; and (d) returns of items whose manufacturer
requires returns to go through the wholesaler. McKesson shall provide Rite Aid
with [
] Credits will be
issued to the extent of Rite Aid's Pro Rata Share of amounts actually received
from manufacturers within [ ] after receipt from the manufacturer.
8.2 REGULAR DSD RETURNS. McKesson will accept returns of all 100%
Return Products purchased by Rite Aid for DSD. Credits for 100% Returns will be
issued within [ ]of McKesson's receipt of notice that the returned
Products are ready to be picked up from Rite Aid. Order Credits will be issued
within [ ] of McKesson's receipt of notice of such Order Credit. The amount
of credit allowed by McKesson for 100% Returns and Order Credits will be
determined based on [ ] for the returned Products or Order
Shortages or upon the [ ]Store invoice numbers are required for all 100%
Returns except recalls. Any return accepted by McKesson by Telxon shall be
picked up by McKesson and Rite Aid will receive a 100% credit. No credit will be
given for all other returned Products except for Special Returns and all "no
credit" items will be sent back to the store which initiated the return.
8.3 REGULAR RETURN POLICIES. In the event either party is able to
effect returns to any manufacturer on terms and conditions more favorable than
such manufacturer's published returns policy, then such party shall use
reasonable commercial efforts to make such favorable terms and/or conditions
available to the other party.
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8.4[
]
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[
]
9. TRANSITION
9.1 GENERAL.
(a) On or before the Transition Start Date, (i) McKesson shall
acquire sufficient inventory and take all other steps necessary to
provide Products to Rite Aid for DSD out of McKesson's own inventory in
compliance with the terms of the Accelerated Transition Plan for DSD
set forth in Exhibit J-1, and (ii) for Warehouse purchases, Rite Aid
and McKesson will develop a plan to notify manufacturers of the
additional McKesson purchase requirements based on this Agreement and a
plan to effect dock-to-dock transactions, as and when such transactions
may be required under this Section 9.1(a). In the event that external
conditions require Rite Aid to transition the Rite Aid warehouses
earlier than the times set forth in Schedule J-2, Rite Aid may place an
Order for any Rx Product for Warehouse with McKesson. If McKesson does
not have sufficient inventory to provide such Rx Product to Rite Aid,
McKesson may forward such Order to the manufacturer of such Rx Product
for delivery on a customary dock-to-dock basis in accordance with the
procedures developed by the parties. Except for delivery turn-around
periods, all pricing and all other terms regarding such Orders shall be
governed by the terms and conditions of this Agreement; provided
however, if McKesson forwards Orders for Warehouse of any Rx Product
for dock-to-dock delivery after the time set forth in Exhibit J-2 for
transitioning the manufacturer of such Rx Product, McKesson shall
provide [ ] in accordance with Exhibit W, equal to [
]
(b) Rite Aid and McKesson will use reasonable commercial
efforts to transition all Rite Aid Stores and Warehouses to this Supply
Agreement in accordance with the Transition Plans set forth in Exhibits
J-1 and J-2 attached to this Agreement. If, at the end of [ ]
following the Transition Start Date, McKesson has complied with the
terms of this Agreement, including the Transition Plan and Rite Aid has
failed to transition all of its stores and all of its warehouses
(except for Tuscaloosa) to McKesson, then McKesson may [
If, at the end of [ ]
following the Transition Start Date, McKesson has complied with the
terms of this Agreement, including the Transition Plan and Rite Aid
has failed to transition all of its stores and all of its warehouses
(except for Tuscaloosa) to McKesson, [
] In the event that McKesson
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fails to complete the transition as set forth in the Transition Plan,
McKesson's required service levels and penalty payments shall be
governed by the terms of Exhibit J-3.
9.2 [
]
9.3 CONVERSION ALLOWANCE. [ ] after the Effective Date,
McKesson will pay to Rite Aid a Conversion Allowance of [ ] In the
event of any termination of this Agreement prior to the end of the Initial Term
other than a termination by Rite Aid pursuant to Section 15.3(a), (b) or (d), or
upon the occurrence of a Repayment Event set forth in Section 9.5, Rite Aid
will, [ ] before the effective date of such termination or Repayment
Event, pay to McKesson, in immediately available funds, an amount equal to [
]
9.4 DEVELOPMENT ALLOWANCES. If at the end of the Initial Term hereof,
this Agreement is extended for an additional three year term, McKesson will pay
to Rite Aid, [ ] days after the first day of such extension term, a
Development Allowance in the amount of [ ]. In the event of any termination
of this Agreement prior to the end of such extension [
] or upon the occurrence of a
Repayment Event set forth in Section 9.5, Rite Aid will, [ ] before the
effective date of such termination or Repayment Event, pay to McKesson, in
immediately available funds, [
]
9.5 REPAYMENT EVENTS. The following shall constitute Repayment Events
for purposes of Sections 9.3 and 9.4: Rite Aid shall reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, or otherwise
dispose of (whether in one transaction or a series of transactions) all or
substantially all of its assets (whether now owned or subsequently acquired) to
any third party, provided that it shall not be a Repayment Event if the
corporation into which Rite Aid is merged or the corporation formed by such
consolidation or the third person acquiring all or substantially all of Rite
Aid's assets: (i) shall be a corporation organized and existing under the laws
of the United States of America or any state thereof, (ii) shall assume the
payment of the Conversion Allowance or Development Allowance, and the
performance of each covenant to be performed under this Agreement, as fully as
if such successor had been Rite Aid, and
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(iii) shall agree to engage in substantially the same volume of business under
this Agreement as Rite Aid immediately prior to such transaction.
10. GENERIC DRUGS
10.1 GENERIC AUTOSUBSTITUTION.
(a) Regardless of which Generic Rx Product or package size
thereof is ordered by any Rite Aid store, McKesson will automatically
substitute the corresponding Product Identification Number from the
Rite Aid Generic Formulary. For any Product Identification Number
within a GCN or package size ordered by a Rite Aid store under the Rite
Aid Generic Formulary for which McKesson is out of stock, McKesson will
automatically substitute the corresponding Product Identification
Number from the McKesson Select Generic Formulary in the same package
size as ordered by the Rite Aid store. In addition, for any Product
Identification Number within a GCN ordered by a Rite Aid store for
which there is not a corresponding product in the Rite Aid Generic
Formulary, McKesson will automatically substitute such item with the
corresponding Product Identification Number from the McKesson Select
Generic Formulary in the same package size as ordered by the Rite Aid
store. In the event that McKesson is out of stock on the corresponding
McKesson Select Generic Formulary item, or the McKesson Select Generic
Formulary does not have a corresponding Product Identification Number
in that GCN, then McKesson will automatically substitute such item with
the corresponding Product Identification Number from the McKesson
Multi-Source Generic Formulary in the same package size as ordered by
the Rite Aid store. In the event that McKesson is out of stock on the
corresponding McKesson Multi-Source Generic Formulary item, or the
McKesson Multi-Source Generic Formulary does not have a corresponding
Product Identification Number in that GCN, then McKesson will provide
an appropriate generically equivalent Generic Rx Product in the same
package size as ordered by the Rite Aid store at [
]
(b) In order to override the foregoing autosubstitution
program, a Rite Aid pharmacy shall be required to call the McKesson
Customer Care Service Center and specifically request the override. At
the time of the override request to the McKesson Customer Care Service
Center, McKesson will record the Rite Aid store number and the name of
the pharmacist making such request. McKesson shall report to Rite Aid
all such requests electronically on a weekly basis. Such report shall
be prepared based on the formats requested by Rite Aid, shall include
the Generic Rx Product requested and identify the pharmacist and Rite
Aid store requesting the override and shall be delivered in accordance
with Rite Aid's management hierarchy. No Order shall be considered for
override unless the Rite Aid store first specifically requests the
override.
10.2 CHANGES TO RITE AID GENERIC FORMULARY. Rite Aid will give written
notice to McKesson of changes to the Rite Aid Generic Formulary from time to
time, including the proposed effective date of
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such changes. When any Generic Rx Product becomes an Accepted GSP it will
automatically replace the corresponding product on the Rite Aid Generic
Formulary for purposes of this Agreement. McKesson will stock any changed item
within the later of (i) [ ] after such written notice, or (ii) the
proposed date of such change.
10.3 [
]
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[
]
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[
]
10.4 [
]
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[
]
]
11. [ ]
11.1 [
]
11.2 [
]
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[
]
11.3 [
]
11.4 [
]
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[
]
--------------------------------------------------------------------------------
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[
]
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[
]
[
]
11.5 [
]
11.6 [
]
12. MCKESSON SERVICES
12.1 SERVICE LEVEL AGREEMENT. Beginning on the Transition Start Date,
the services provided by McKesson under this Agreement will be subject to the
service levels specified in Exhibit J for the transition period. After
completion of the transition period, the services provided by McKesson under
this Agreement will be subject to the service levels specified in the Service
Level Agreement. The remedies set forth in the Service Level Agreement shall be
Rite Aid's exclusive recovery of monetary damages for McKesson's failure to meet
the service levels set forth in the Service Level Agreement. During the Term, on
a weekly basis and at the end of each complete Calendar Month, Calendar Quarter
and the end of each Contract Year, McKesson shall provide Rite Aid with a report
setting forth the results of the Composite Performance Measurement for such
week, Calendar Month, Calendar Quarter or Contract Year, including
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all individual components necessary for Rite Aid to calculate the Composite
Performance Measurement. In the event that the Composite Performance Measurement
during any such period falls below the levels set forth in the Service Level
Agreement, McKesson shall pay the penalties set forth in the Service Level
Agreement at the time of any such report.
12.2 CUSTOMER SUPPORT.
(a) Headquarters. At no cost to Rite Aid, to assist with
transition and operations under this Agreement, McKesson will install a
National Account Director and an Administrator on-site at Rite Aid
headquarters. Both such persons will be experienced and fully trained,
and supplied with personal computers by McKesson. The National Account
Director will work closely with Rite Aid personnel (including home
office personnel) to coordinate inventory procurement activities,
support customer reporting systems, assist in daily/weekly/month-end
financial reconciliation activities, interface with Rite Aid and
McKesson field operations to resolve service issues, schedule and
facilitate unique events (e.g., one time annual returns clean up). The
National Account Director shall have the ability to access information
regarding the Deal Information List, inventory levels for specific
Products, purchase order status, return receipts and other similar
information for purposes of determining the prices and Composite
Performance Measures under this Agreement and to provide such
information to Rite Aid upon Rite Aid's request. In addition to the
McKesson personnel at Rite-Aid headquarters, Rite Aid will have the
right to install a full-time employee at McKesson Headquarters and/or
the McKesson Customer Care Service Center in Carrollton, Texas. Each
party recognizes that personnel placed on the other party's site shall
be subject to the confidentiality restrictions set forth in Section 13
and any other confidentiality or information access limitations that
the hosting party may request.
(b) Field Operations. The McKesson Customer Care Service
Center shall provide Rite Aid support for day to day service
requirements of individual stores, including without limitation,
product information, process return and credit requests and delivery
issues. McKesson shall provide dedicated Rite Aid Customer Service
Representatives to insure consistent knowledge and understanding of
their service needs and a dedicated national toll free telephone line
for use only by Rite Aid stores for all hours that the McKesson
Customer Care Service Center is open, but not less than 8:00 a.m. to
11:59 p.m., eastern time, Monday through Friday; McKesson will provide
service for emergency orders from 8:00 p.m. through 11:59 p.m., pacific
time.
(c) Vendor Disputes/Catastrophic Losses. McKesson will use
diligent efforts to assist Rite Aid to resolve all vendor disputes and
to work around problems caused by catastrophic loss.
(d) Customer Care Service Center. McKesson will provide Rite
Aid, at no cost to Rite Aid, all services, including all reports,
provided to any McKesson retail customers from the McKesson Customer
Care Service Center during the Term.
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(e) Trade Show. McKesson shall participate in Rite Aid's
annual vendor trade show, at a cost not to exceed the published cost
for Rite Aid's primary vendors (such cost shall be [ ] for the first
trade show after the Effective Date).
12.3 CONTRACT MANAGEMENT.
(a) McKesson agrees to service all manufacturers' contracts
negotiated by Rite Aid consistent with the terms of this Agreement,
provided such manufacturers are approved suppliers of McKesson that
have satisfied the corporate indemnification and insurance requirements
set forth in McKesson's Buying Terms Form, a copy of which has been
provided to Rite Aid. For purposes of this Agreement, any manufacturer
with whom McKesson is currently doing business at time of request will
be deemed to have satisfied the foregoing requirements as of the date
of any such request. McKesson shall have [ ] for contracts
covering 100 or more items, [
] for contracts covering fewer than [ ] but more than
[ ] items, [ ] for contracts covering [ ] or
fewer items but more than [ ] items, and [ ] for contracts
covering [ ] or fewer items in which to load new contract prices
after receipt thereof; any purchases of such Contract Products during
or prior to the expiration of the loading period shall be at the prior
contract prices, if any, until the earlier of the loading of the new
contract prices or expiration of the prior contract.
(b) Rite Aid shall be invoiced and liable for unpaid
chargebacks resulting from eligibility issues regarding any contract
manufacturer; provided that McKesson has submitted a chargeback to the
manufacturer within [ ] of Rite Aid's purchase of the Contract
Product [ ] If the chargeback has not been paid within [
] of its submission, McKesson will so notify Rite Aid in
writing. If any submitted chargeback is denied by the manufacturer,
McKesson will notify Rite Aid in writing within [ ] of the
denial.
(c) In the event a manufacturer (i) makes an assignment for
the benefit of creditors, files a petition in bankruptcy, is
adjudicated insolvent or bankrupt, or if a receiver or trustee is
appointed with respect to a substantial part of the manufacturer's
property or a proceeding is commenced against it which will
substantially impair its ability to pay on chargebacks or (ii)
otherwise defaults in the payment of chargebacks to McKesson, Rite Aid
shall be invoiced and become liable for the unpaid chargebacks
allocable to its purchases from such manufacturer so long as such
chargebacks have been submitted and followed-up by McKesson in
conformity with the requirements of this Section 12.3 McKesson agrees
to immediately notify Rite Aid when any such vendor situation results
in the nonpayment of submitted chargebacks.
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12.4 SYSTEM SERVICES AND EQUIPMENT.
(a) The following systems and services will be made available
to Rite Aid by McKesson at no charge to Rite Aid:
(i) Telxon electronic order entry equipment
(including shelf wand) at each current and
new store;
(ii) Item price stickers with Rite Aid custom
pricing, where required, and other features
such as:
(1) Department number
(2) Invoice cost
(3) Month and year ordered
(4) Store name
(5) AWP and/or retail pricing
(Note: Each feature is available for both Rx
Products and OTC Products);
(iii) Bar-coded shelf labels;
(iv) A complete catalog or microfiche (Rite Aid's
choice) of items stocked by McKesson's
Distribution Centers. This catalog or
microfiche will be furnished every [
] and will be updated by a
cumulative monthly supplement showing
additions and deletions in a format similar
to such catalog or microfiche. At Rite Aid's
direction and request, a fiche reader will
be supplied to each Rite Aid store. In
addition, McKesson will provide a Generic Rx
Product catalog every [ ] providing
the brand name, generic name and Product
Identification Number for each Generic Rx
Product, with lists alphabetized by both
generic and brand names.
(v) One (1) InfoLink/EconoLink system (including
all hardware) will be provided to Rite Aid's
headquarters that has the capacity to handle
all Rite Aid representative requests,
including combining all Rite Aid Warehouse
and DSD purchase information and charges.
McKesson, at Rite Aid's request, will assist
Rite Aid in revising all such data to be
compatible with Rite Aid's internal systems
and shall allow Rite Aid to transmit both
Rite Aid and McKesson data back and forth
from Rite Aid systems to the
InfoLink/EconoLink system. Upon termination
of this Agreement, McKesson will provide
Rite Aid with all of Rite Aid's data that is
on the InfoLink/EconoLink system in the
format used by Rite Aid's systems.
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Additional InfoLink/EconoLink systems will
be made available to Rite Aid pharmacies for
a charge of [ ] Rite Aid
agrees that the InfoLink/EconoLink system is
owned by McKesson and that Rite Aid will
return the system upon termination of this
Agreement. The InfoLink/EconoLink System
will be subject to a separate license
agreement between the parties (there shall
be no additional cost to Rite Aid for such
license).
(vi) McKesson will set up a system so that all
faxes and other communications McKesson
receives from manufacturers related to the
Agreement will be provided by McKesson
directly to Rite Aid's central office or
warehouses as directed by Rite Aid and will
use reasonable commercial efforts to
establish a system where such communications
are received by Rite Aid directly from
manufacturers.
(vii) McKesson shall reimburse Rite Aid for all
costs associated with the development,
production and distribution of a training
video concerning McKesson supply terms and
conditions and other related matters, up to
a maximum amount of [ ]
(b) During the Term of the Agreement, McKesson will promptly
reimburse Rite Aid for [ ] of all information technology expenditures,
upon presentation of appropriate supporting documentation by Rite Aid,
incurred in connection with systems relating to procurement of Products
from McKesson, including replenishment and reporting, up to a maximum
reimbursement of [ ]in the aggregate. McKesson will be
responsible for 100% of its own information technology expenditures
for required technology investments.
13. CONFIDENTIAL INFORMATION
13.1 NON-DISCLOSURE. Neither party shall, without the prior written
consent of the other party, provide, disclose, transfer or otherwise make
available any Confidential Information, or any portion or copy thereof, to any
third party. Each party shall give access to Confidential Information solely to
those employees and agents with a need to have access thereto, and who have
agreed to protect the Confidential Information in accordance with this
Agreement. Each party shall take the same security precautions to protect
against disclosure or unauthorized use of the Confidential Information that it
takes with its own confidential information of a similar kind, which in no event
shall be less than a reasonable standard of care to prevent any such disclosure
or unauthorized use. Neither party shall be in breach of this provision if
Confidential Information is disclosed (a) with the other party's prior written
approval or (b) pursuant to any judicial or governmental request, requirement or
order, provided that reasonable steps are taken to give the other party
sufficient prior notice in order to contest such request, requirement or order.
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13.2 NON-USE. In furtherance and not in limitation of Section 13.1,
each party (the "Guest Party") shall cause all individuals who will be located
on the other party's site to execute a written agreement with such other party
(the "Host Party"), in form and substance satisfactory to the Host Party,
pursuant to which such individuals will be bound to (a) maintain in strictest
confidence all Confidential Information of the Host Party, (b) refrain from
using or disclosing any of the Host Party's Confidential Information during
their employment with the Guest Party (other than use, but not disclosure, in
furtherance of their performance of the essential functions of their positions
with the Guest Party and in accordance with the terms of this Agreement) and (c)
refrain from accepting any employment position within the two-year period
following termination of their employment with the Guest Party that would
effectively require use or disclosure of the Host Party's Confidential
Information, or any abstract or summary thereof, to or for the benefit of any
other person.
14. LIMITATION ON LIABILITY
In no event shall Rite Aid or McKesson be liable to the other party or any other
entity for any special, consequential, incidental, or indirect damages, however
caused, on any theory of liability, and whether or not they have been advised of
the possibility of such damages.
15. TERM AND TERMINATION
15.1 INITIAL TERM. The initial term of this Agreement (the "Initial
Term") commences on the Effective Date and expires on the third anniversary of
the Effective Date, unless earlier terminated in accordance with this Article
15.
15.2 RENEWAL TERM. Unless the Initial Term has previously been
terminated or expired in accordance with this Article 15, Rite Aid may renew
this Agreement for an additional three (3) year term ("Renewal Term") at the
conclusion of the Initial Term on the same terms and conditions by giving not
less than 90 days' prior written notice in accordance with the provisions of
Section 17.4 of this Agreement.
15.3 TERMINATION.
(a) In the event of a breach by a party of its material
obligations hereunder, the other party may terminate this Agreement
upon five days' prior written notice of such termination, if such
breach has not been cured within ninety (90) days (or, if the breach
consists of a failure to pay undisputed amounts, within fifteen (15)
days) after prior written notice to the breaching party of the
existence and nature of the breach and of the non-breaching party's
intention to terminate if not cured.
(b) Either party may terminate this Agreement upon 10 days'
prior written notice if:
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(i) the other party files any petition under any
bankruptcy, reorganization, insolvency or moratorium laws, or
any other law or laws for the relief of or in relation to the
relief of debtors;
(ii) there shall be filed against the other party any
involuntary petition under any bankruptcy statute or a
receiver shall be appointed to take possession of all or any
substantial part of the assets of the other party, and such
petition or appointment shall not have been dismissed or
terminated within 60 days after the date thereof;
(iii) the other party makes any general assignment
for the benefit of creditors or admits in writing its
inability to meet its obligations as they mature; or
(iv) the other party institutes any proceedings for
the liquidation or winding-up of its business other than for
the purposes of any reorganization, consolidation or merger.
(c) If Rite Aid shall fail to transfer [
]
(d) In addition to the right to terminate set forth in Section
15.3(a), Rite Aid may terminate this Agreement at any time upon five
days' prior written notice if McKesson's Composite Performance Measure
falls below the level specifically set forth in the Service Level
Agreement giving rise to such right of termination for the periods of
time applicable thereto, and McKesson fails to cure such situation
under the terms of the Service Level Agreement.
(e) [
] Promptly following McKesson's receipt of
such notice, the parties will attempt to negotiate modifications to
this Agreement to appropriately reflect such additional volume. If the
parties are unable to agree upon such modifications within ninety (90)
days following Rite Aid's notice, Rite Aid may give written notice of
termination to McKesson, which termination shall be effective sixty
(60) days after receipt of such notice of termination by McKesson. Rite
Aid agrees that its shall not give McKesson written notice of
termination under this Section 15.3(c) during the first eighteen (18)
months after the Effective Date, plus the number of days, if any that
the Initial Term is extended under Section 8.1 for Rite Aid's
transition delay. [
]
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(f) [
] McKesson has the option
to terminate this Agreement with one hundred twenty (120) days prior
notice to Rite Aid. For purposes of this Section 15.3(f), a store shall
be considered acquired by Rite Aid if it becomes subject to the terms
of this Agreement within sixty (60) days of such transaction.
(g) McKesson may terminate this Agreement under the
circumstances set forth in Section 9.1.
15.4 CONSEQUENCES OF TERMINATION.
(a) Any termination or expiration of this Agreement shall be
without prejudice to, and shall not act as any bar to or waiver of, (i)
the rights of either party to all amounts due to such party at the time
of such termination or expiration, (ii) the obligations of each party
under Article 13 of this Agreement and (iii) such rights as either
party may enjoy at law or in equity.
(b) At Rite Aid's election, unless such termination is based
upon Rite Aid's failure to pay undisputed amounts, McKesson shall
continue to provide Rite Aid with Products under the terms and
conditions of this Agreement for a period of ninety (90) days after
termination of this Agreement.
16. RECORDS AND AUDIT
16.1 RECORDS. McKesson and Rite Aid shall maintain all records relating
to services performed under this Agreement as required by applicable law (but in
no event less than three (3) years) and will keep clear and accurate records
sufficient to enable the other party to review and audit the services provided
by McKesson under this Agreement, including without limitation, verification of
all rebates and other amounts payable under this Agreement and of McKesson's
conformance with the Performance Criteria.
16.2 AUDITS. Not more than three times in any twelve-month period, and
following 30 days advance written notice to the other party, either party will
have the right to appoint one or more of its employees or representatives of a
national independent auditing firm to review those relevant records of the other
party for the sole purpose of verifying compliance with the terms of this
Agreement. Any such review will be subject to a confidentiality provisions set
forth in Section 15.2, including without limitation, the execution of
appropriate non-disclosure agreements by all independent reviewers prior to
review of such records. Within thirty (30) days of the completion of any such
audit, the reviewing party shall provide the other party with a report of the
results of such audit and any amounts found by such audit that the parties agree
to be in error will be promptly settled (neither party shall unreasonably
withhold such agreement). In the event that the audit reveals a discrepancy
resulting in a loss to Rite Aid in excess of 10 bps, then McKesson will
reimburse Rite Aid's expense for the audit.
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17. MISCELLANEOUS
17.1 FORCE MAJEURE. If service from any McKesson distribution center to
any Rite Aid store or distribution center is interrupted or delayed because of
strike, lockout, labor dispute, fire or other casualty, or any other reason
beyond the reasonable control of McKesson, McKesson will take such action,
without additional cost or expense to Rite Aid, to maintain service as mutually
agreed upon to affected Rite Aid facilities from an alternate McKesson
Distribution Center. McKesson shall identify and utilize such alternate McKesson
Distribution Center within 24 hours after strike or similar event. In no event
shall delays based on Force Majeure exceed three (3) days and McKesson shall be
responsible for all costs incurred by Rite Aid from any delay in excess of three
(3) days, including without limitation, reimbursement of the amount, if any,
that the cost to Rite Aid of acquiring the Products from a third party during
such period exceeds the Purchase Price that would have been paid under the terms
of this Agreement. Any delays that exceed three (3) days shall not relieve
McKesson of its obligations under the Service Level Agreement.
17.2 DEA. Rite Aid will certify that all Rite Aid pharmacies are
properly and completely licensed in compliance with all applicable state and
federal laws, regulations, and rules, and are licensed to order and dispense
Schedule II Narcotic, Schedule II Nonnarcotic, Schedule III Narcotic, Schedule
III Nonnarcotic, Schedule IV and Schedule V Rx Products. Such certification will
be provided in the form of a list of each store and their respective state and
Federal license numbers and expiration dates. On a monthly basis an updated list
will be given to the McKesson representative resident at Rite Aid's
headquarters. Any questions or problems regarding the licensing of any Rite Aid
store will be sent to the attention of Xxx Xxxxxxxx, or contact can be made by
phone at (000) 000-0000.
17.3 REGULATION. Rite Aid and McKesson understand and acknowledge that
all product discounts and rebates earned by or granted under this Agreement may
be subject to certain state and federal laws and regulations regarding reporting
and/or disclosure requirements and may be required to be reflected in the costs
claimed or charges made by Rite Aid's stores under Medicare, Medicaid or any
other health care reimbursement program or provider plan.
17.4 NOTICES. Any notices given under this Agreement shall be in
writing and sent by registered or certified postage prepaid mail, express
delivery, or confirmed telecopier transmission, addressed as follows:
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(a) If to McKesson:
McKesson Corporation
Xxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Senior Vice President, National
Accounts
(b) If to Rite Aid:
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Vice President
with a copy, as to notices of breach, default or termination
only, to:
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Senior Vice President and
General Counsel
Either party may change the address to which notices must be sent by providing
written notice of the change to the other party in accordance with the
provisions of this Section 17.4. Any notice so given shall be deemed to have
been given on the date it was received.
17.5 TAXES. If any federal, state, or local tax currently or in the
future is levied upon McKesson that relates or applies to the Products or any
transactions covered by this Agreement (excluding taxes imposed on McKesson's
net income) and such taxes are not included in WAC, then McKesson shall
separately xxxx Rite Aid for any such tax paid by McKesson; provided, however,
that Rite Aid will have no obligation with respect to fines or penalties
resulting from failure to pay such taxes unless McKesson first notifies Rite Aid
as to such taxes within five (5) Business Days after McKesson is first notified
of them.
17.6 OUTSTANDING AMOUNTS. As of the Effective Date, except for current
payment due amounts for Rite Aid stores in Alaska and Hawaii, both parties
recognize that there are no outstanding amounts due from the other party for
Products provided prior to the Effective Date.
17.7 INDEPENDENT CONTRACTORS. For all purposes, Rite Aid and McKesson
shall remain independent contractors. Accordingly, this Agreement does not
constitute a partnership or other joint
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58
venture between the parties and neither party shall be deemed to be an agent or
representative of the other. For purposes of certainty, neither the Lead
Purchasing Representative nor any other representative of either party is a
representative of, or shall have any power to bind the other party.
17.8 ASSIGNMENT. Neither this Agreement nor any rights, privileges,
duties or obligations under this Agreement may be assigned, sublicensed, sold,
mortgaged, pledged or otherwise transferred or encumbered by either party
without the prior written consent of the other party, which consent may be
withheld at such other party's sole discretion; provided, however, that a merger
or consolidation of a party into or with a third party shall not be deemed to be
an assignment. Any attempt to assign this Agreement without the consent of the
other party hereto shall be void. This Agreement shall be binding on all
permitted assignees and on all successors in interest to the parties hereto.
17.9 INDULGENCES. No failure or delay on the part of any party in
exercising any right hereunder, irrespective of the length of time for which
such failure or delay shall continue, will operate as a waiver of, or impair,
any such right. No single or partial exercise of any right hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right. No waiver of any right hereunder will be effective unless given in a
signed writing.
17.10 SEVERABILITY. If any provision in this Agreement is held to be
invalid or unenforceable under any circumstances, its application in any other
circumstances and the remaining provisions of this Agreement shall not be
affected thereby.
17.11 INTERPRETATION. The Article and Section headings in this
Agreement and in the Exhibits attached hereto are for purposes of reference only
and shall not restrict or affect the meaning of application of any provision
herein or therein contained.
17.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute together one and the same document.
17.13 ANNOUNCEMENT. Neither party may provide a press release or any
other marketing or publicity materials regarding this Agreement without the
prior approval of the other party, which approval shall not be unreasonably
withheld. The parties agree that no such materials will be released until after
the Transition Start Date unless in the reasonable opinion of the independent
legal counsel of either party, such release is required in order to prevent
material liability to such party under applicable securities laws.
17.14 ENTIRE AGREEMENT. This Agreement and the Exhibits attached hereto
constitute the entire agreement and understanding of the parties relating to the
subject matter hereof, and no representation, condition, understanding or
agreement of any kind, oral or written, shall be binding upon the parties unless
expressly set forth herein or therein. This Agreement supersedes all prior
written and oral agreements and all other communications between Rite Aid and
McKesson. Amendments to this Agreement shall be effective only if in writing and
signed by Rite Aid and McKesson.
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IN WITNESS WHEREOF, Rite Aid and McKesson have executed this Agreement as of the
day first written above.
RITE AID CORPORATION McKESSON CORPORATION
By: /s/ XXXX XXXXXX By: /s/ XXXX X. XXXXXXX
-------------------------- --------------------
Name: Xxxx Xxxxxx Name: Xxxx X. Xxxxxxx
Title: V.P. Pharmacy Purchasing Title: President - Customer Operations
Group
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60
EXHIBIT A
61
EXHIBIT B
DSD ORDER AND DELIVERY SCHEDULE
The attached schedule sets forth the current McKesson Distribution Center,
Order Cut-off Time, scheduled Delivery Days, delivery time and C-II turnaround
time for Rite Aid stores. The number of Delivery Days for each store may be
changed by Rite Aid in accordance with Section 3.2(b)(iii) of the Agreement.
The servicing Distribution Center, delivery time, and C-II turnaround time may
be changed by McKesson upon ten business days' prior notice to Rite Aid,
provided that:
(a) The percentages of stores with delivery times in the following
categories shall be no less favorable to Rite Aid (i.e., no later) than the
percentages of stores with delivery times in such categories as currently set
forth on the attached schedule:
(i) 1:00 p.m. or earlier
(ii) 1:01 p.m. to 3:00 p.m.
(iii) 3:01 p.m. to 4:00 p.m.
(b) The percentages of stores with C-II turnaround times of one day shall
be no less than [ ]; the parties agree that within 60 days following the
Effective Date such percentage will be updated to reflect the actual percentage
of stores with C-II turnaround times of one day, but in no event less than
[ ]. Thereafter the percentage of stores with C-II turnaround times of one day
shall be no lower than that determined at the end of such 60 day period.
62
EXHIBIT C-1
RITE AID
WAREHOUSE ORDER & DELIVERY SCHEDULE
63
EXHIBIT C-2
WAREHOUSE PACKAGING AND DELIVERY REQUIREMENTS
1. Introduction
Below is a summary of the packaging, labeling and Receiving requirements for
the Brokerage Business.
1.1 Labeling
Each Pick, whether case, Innerpak and piece will be labeled by McKesson. Each
label will contain certain data documented below.
1.1.1. Case Label
The Case label will contain the following detail information:
[ ] NDC Number (Barcode and Numeric)
[ ] Rite Aid Item Number (Barcode and Numeric)
[ ] Item Description and Size
[ ] Purchase Order Number
[ ] Purchase Order Line Number
[ ] Rite Aid DC Specific Pick Location
[ ] Rite Aid DC Specific Putway Zone
[ ] Number of Pieces
Note: The Barcode versions of NDC Number and Rite Aid Item number will not be
supported immediately, but will be in place with the opening of the Rite Aid
Mid Atlantic facility in September 1998.
1.1.2. Innerpak Label
The Innerpak label will contain the following detail information:
[ ] NDC Number (Barcode and Numeric)
[ ] Rite Aid Item Number (Barcode and Numeric)
[ ] Item Description and Size
[ ] Purchase Order Number
[ ] Purchase Order Line Number
[ ] Rite Aid DC Specific Pick Location
[ ] Rite Aid DC Specific Putway Zone
[ ] Number of Pieces
Note: The Barcode versions of NDC Number and Rite Aid Item number will not be
supported immediately, but will be in place with the opening of the Rite Aid
Mid Atlantic facility in September 1998.
1.1.3 Piece Label
The Piece label will contain the following detail information:
[ ] NDC Number (Barcode and Numeric)
[ ] Rite Aid Item Number (Barcode and Numeric)
[ ] Item Description and Size
[ ] Purchase Order Number
[ ] Purchase Order Line Number
[ ] Rite Aid DC Specific Pick Location
[ ] Rite Aid DC Specific Putway Zone
[ ] Number of Pieces
Identical Piece Pick Items will be bagged together and labeled
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Note: The Barcode versions of NDC Number and Rite Aid Item number will not be
supported immediately, but will be in place with the opening of the Rite Aid Mid
Atlantic facility in June 1998.
1.2 Picking and Packing Rite Aid Orders
[ ] Products will be aggregated by Rite Aid determined DC Zone
Locations.
[ ] Piece and Innerpak items will packed in totes. Totes will have a
packing list included.
[ ] Cases and Totes will be placed in Gaylords (A pallet with four
sides.) by DC Zone Location. Each Xxxxxxx will include packing
List.
[ ] Controls and Refrigerated items will packed separately.
[ ] Smaller Gaylords will be used for improved cube utilization if
necessary.
[ ] Gaylords will be labeled. The label will contain Xxxxxxx number
(to be used when verifying xxx Xxxxxxxx on receipt), and the zones
of the merchandise contained in the Gaylord (in descending order).
1.3 Order Receipt
[ ] On receipt xxx Xxxxxxxx will be unloaded and the Gaylord count
verified by checking the Xxxxxxx numbers unloaded with a delivery
sheet.
[ ] The receipt will be prepared to putaway directly to the pick
location using the Rite Aid pick location on the label.
[ ] Discrepancies will be reported within 96 hours.
1.4 System Maintenance
To operate the proposed process certain files will need to be transferred
between Rite Aid and McKesson identifying item pick locations, and picking zones
by Rite Aid DC, NDC number, with Rite Aid item number. This requirement will
have to be defined fully between IS, and Distribution personnel from McKesson
and Rite Aid, but will be supported by McKesson. This information may be EDIed,
transferred in a file via E-mail or on a computer disk.
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65
EXHIBIT D
66
EXHIBIT E-1
67
EXHIBIT E-2(a)
68
EXHIBIT E-2(b)
69
EXHIBIT E-3
70
EXHIBIT E-4
71
EXHIBIT E-5
72
EXHIBIT E-6
73
EXHIBIT E-7
74
EXHIBIT E-8
75
EXHIBIT G-1
76
EXHIBIT I-1
77
EXHIBIT I-2
78
EXHIBIT J-1
RITE AID MARKET AREA
TRANSITION PLAN
79
EXHIBIT J-2 (PAGE 1 OF 2)
WAREHOUSE TRANSITION PLAN
80
EXHIBIT J-3
TRANSITION PENALTIES
81
EXHIBIT K
RE-PACKAGED PRODUCT PRICING METHODOLOGY FOR DSD
82
EXHIBIT L
MCKESSON/RITE AID
EDI DOCUMENT OF UNDERSTANDING
83
EXHIBIT M-1
84
EXHIBIT M-2
85
EXHIBIT O
86
EXHIBIT P-1
87
EXHIBIT P-2
88
EXHIBIT W
PAYMENTS TO RITE AID/PAYMENTS TO MCKESSON
