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08-3995
RITE AID HDQTRS. CORP., VS. TIMEX CORPORATION, Plaintiff, Defendant. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. (? - 3R S- : ACTION - LAW NOTICE TO DEFEND You have been sued in court. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this complaint and notice are served, by entering a written appearance personally or by attorney and filing in writing with the court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the court without further notice for any money claimed in the complaint or for any other claim or relief requested by the plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER. IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE. Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 Telephone: (717) 249-3166 RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. VS. TIMEX CORPORATION, CIVIL ACTION - LAW Defendant. AVISO USTED HA SIDO DEMANDADO/A EN CORTE. Si usted desea defenderse de las demandas que se presentan mas adelante en las siguientes paginas, debe tomar acci6n dentro de los pr6ximos veinte (20) dias despues de la notificaci6n de esta Demanda y Aviso radicando personalmente o por medio de un abogado una comparecencia escrita y radicando en la Corte por escrito sus defensas de, y objecciones a, las demandas presentadas aqui en contra suya. Se le advierte de que si usted falla de tomar acci6n como se describe anteriormente, el caso puede proceder sin usted y un fallo por cualquier suma de dinero reclamada en la demanda o cualquier otra reclamaci6n o remedio solicitado por el demandante puede ser dictado en contra suya por la Corte sin mas aviso adicional. Usted puede perder dinero o propiedad u otros derechos importantes para usted. USTED DEBE LLEVAR ESTE DOCUMENTO A SU ABOGADO INMEDIATAMENTE. SI USTED NO TIENE UN ABOGADO, LLAME O VAYA A LA SIGUIENTE OFICINA. ESTA OFICINA PUEDE PROVEERLE INFORMACION A CERCA DE COMO CONSEGUIR UN ABOGADO. SI USTED NO PUEDE PAGAR POR LOS SERVICIOS DE UN ABOGADO, ES POSIBLE QUE ESTA OFICINA LE PUEDA PROVEER INFORMACION SOBRE AGENCIAS QUE OFREZCAN SERVICIOS LEGALES SIN CARGO O BAJO COSTO A PERSONAS QUE CUALIFICAN. Cumberland County Bar Association 32 South Bedford Street Carlisle, PA 17013 Telephone: (717) 249-3166 RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. ©f-3515'e. VS. TIMEX CORPORATION, CIVIL ACTION - LAW Defendant. COMPLAINT Plaintiff Rite Aid Hdqtrs. Corp. ("Rite Aid"), by its undersigned attorneys, files this Complaint alleging as follows: PARTIES 1. Rite Aid is a Delaware corporation with its principal place of business at 30 Hunter Lane, Camp Hill, Pennsylvania 17011. 2. On information and belief, defendant Timex Corporation is a Delaware corporation with a principal office at 555 Christian Road, Middlebury, Connecticut 06762. JURISDICTION AND VENUE 3. This court has jurisdiction pursuant to 42 Pa.C.S. §931(a). 4. Venue in this Court is proper because the cause of action arose in Cumberland County and a transaction or occurrence took place out of which the cause of action arose in Cumberland County. RELEVANT FACTS 5. Rite Aid is a national drug store chain with its principal office in Cumberland County, Pennsylvania. 6. At all times relevant to this Complaint, Timex was involved in the manufacture, sale and distribution of watches. 7. In June, 2006, Rite Aid and Timex entered into Incremental Investment Agreements ("Agreements") whereby Timex agreed to fund display fixtures to promote the sale of Timex's watches at Rite Aid stores during Fiscal Years 2007 and 2008. True and correct copies of the Incremental Investment Agreements, valid and enforceable written contracts, are attached to this Complaint as Exhibit A. 8. By signing the Agreements, Timex committed to $995,000.00 in funding. 9. On or about July 28, 2006, Timex informed Rite Aid that it would not participate in the display fixture funding initiative. See email dated July 28, 2006 from Don Turano of Timex to William W. Renz of Rite Aid, attached to this Complaint as Exhibit B. 10. Timex breached the Agreements when it refused to fund the fixtures pursuant to the Agreements. 11. Additionally, Timex was a non-go forward vendor because it stopped shipping to Rite Aid and would not take back the inventory, leaving Rite Aid to deal with it. As a result, Rite Aid ran two clearance events in which it marked down the Timex watches at 50% off the retail price. 12. On or about August 7, 2006, another vendor, International Watch Group ("IWG"), agreed to fund the display fixtures covered under the Agreements and assist in markdown funding for the Timex watches. See agreements dated August 7, 2006 between IWG and Rite Aid attached as Exhibit C. 13. Timex did not contribute markdown funding to Rite Aid. -2- 14. Because of Timex's breach, Rite Aid was forced to markdown the Timex watches at 50% off the retail price resulting in loss of revenue in the amount of $2,114,306.16. COUNT BREACH OF CONTRACT 15. Rite Aid incorporates the averments in paragraphs 1 through 14 above as if fully set forth herein. 16. As noted above, Rite Aid and Timex entered into valid and enforceable written agreements under which Timex agreed to pay certain funding for display fixtures. 17. Rite Aid relied on these Agreements in formulating anticipated revenues and was fully prepared to perform under the Agreements. 18. Timex is in breach of the Incremental Investment Agreements and all related agreements because it failed to perform pursuant to the Agreements thereby compelling Rite Aid to significantly markdown the remaining Timex watches in its inventory. 19. Due to Timex's breach, Rite Aid has suffered $2,114,306.16 in lost revenues. WHEREFORE, Rite Aid requests judgment in an amount in excess of $2,114,306.16, plus interest, costs and all other amounts deemed appropriate by the Court. COUNT II UNJUST ENRICHMENT 20. Rite Aid incorporates the averments in paragraphs 1 through 19 above as if fully set forth herein. 21. In the event Timex contends no contractual relationship exists, Rite Aid is entitled to recover the damages to prevent Timex from being unjustly enriched. 22. Timex owes Rite Aid $2,114,306.16 in lost revenue due to the forced markdown of Timex product, all of which was absorbed by Rite Aid. -3- 23. Rite Aid has a reasonable expectation to receive the loss of revenue incurred because of the markdown. 24. Timex reasonably should have expected to have funded the markdown losses since such funding is custom in the industry. 25. It would be inequitable for Timex to receive the benefit of the $2,114,306.16 that Rite Aid would have received had Timex not breached the Agreements. 26. In the event the contracts are deemed to be unenforceable, Rite Aid has no adequate remedy at law. 27. Rite Aid is entitled to collect the lost revenue from Timex under the doctrine of unjust enrichment. WHEREFORE, Rite Aid requests that judgment be entered against Timex in the amount of $2,114,306.16 plus interest, costs and all other amounts deemed appropriate by the Court. Respectfully submitted, a4'L.4?j ?'? Brian P. Downey, Esquire (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 717.255.1155 717.238.0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com P.O. Box 1181 Harrisburg, PA 17108-1181 Date: July 7, 2008 Attorneys for Plaintiff Rite Aid Hdgtrs.Corp. -4- ?6xkjjo-? A 09/13:09 7172 09:53 FJU 717 973 3722 RIMAIU CAT M Qoo: ?; is f ,a l ? a d? 00-'13-us 7C£ 09:36 F.SX 717 973 3722 tf? RITE-AID CA? Mgff 1 24' a 13 i t P Z 003. i job d? r n 0 ?s 1 e? REDACTED From: Turano, Don [mailto:DTurano@Timex.com] Sent: Friday, July 28, 2006 2:21 PM To: William W Renz Subject: Timex Bill, Thanks for the time today and your patience over the past few weeks. Subsequent to our continued discussions on the Rite Aid display initiative, Timex senior management has concurred that we as a company cannot support the $995K cost. The decision would cause Timex significant financial hardship against projected revenue As discussed over the phone, we will not be participating in the display fixture initiativ with Rite Aid. Regards, e Don Turano ?. as" j-- fs ?i I? p M/N/N 1!41 941411 Iii "I O/ "AN +fs-Afs w ..? os/Nf07 !R1 12242 PAR 7r7 R72 7722 RIM-AIO CAT * M M N A M N M M N A N A A N N N N N N w M N N A M N N N M N N M fig M M N M N N N N M N M N N M M M N N M N N N M N M N N N A A A A M L7 e: w VERIFICATION Ron Chima signs this Verification on behalf of Rite Aid Hdqtrs. Corp., and does hereby verify that the foregoing Complaint was prepared with the assistance and advice of counsel, and in reliance upon counsel's advice; that the document, subject to inadvertent or undiscovered errors, is based upon and therefore limited by the records and information still in existence, presently recollected and thus far discovered in preparation of this document; and that subject to the limitations set forth herein, the statements contained in this document are true and correct to the best of his knowledge, information and belief. The language of the foregoing document is that of counsel. It is understood that the statements herein are made subject to the penalties of 18 Pa. C.S. § 4904 relating to unworn falsification to authorities. RON CHIMA Date: June -?, 2008 Q SL V t Cl\ rs r" .G- aL? ?i RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. 08-3995 CIVIL VS. TIMEX CORPORATION, CIVIL ACTION - LAW Defendant. AFFIDAVIT OF SERVICE COMMONWEALTH OF PENNSYLVANIA SS: COUNTY OF DAUPHIN THE UNDERSIGNED, Natalie Grill Einsig, being duly sworn according to law, does depose and say as follows: 1. I am a competent adult and an attorney duly admitted to the Bar of the Supreme Court of the Commonwealth of Pennsylvania, having Attorney Identification Number 89791. 2. On July 7, 2008, I caused the Complaint to be served upon the defendant by the mailing of a true and correct copy to the defendant by United States certified mail, return receipt requested, postage prepaid, addressed as follows: Timex Corporation, 555 Christian Road, Middlebury, Connecticut 06762 ("Service Address"). I received the return receipt, postmarked July 11, 2008, indicating that the documents were delivered to and accepted at the Service Address on behalf of the defendant, thereby completing service pursuant to Pa. R.C.P. 403. The return receipt card is attached hereto as Exhibit "A". Brian P. Downey, Esquire (PA 59891 Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 717.255.1155 717.238.0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com Date: July 15, 2008 Attorneys for Plaintiff Rite Aid Hdgtrs.Corp. SWORN TO AND SUBSCRIBED BEFORE ME THIS _1sL? DAY OF 11?, 2008. Notarf Pu lic COMMONWEALTH OF PENNSYLVAMN Notarial Sad lambert' Keay Perez, Notary Pubic Cl y Of Herril Ul% Dauphin O=* My Oonrnrle"E Aug. 21.2x91 Member, Pennsylvania Association of Notaries -2- ? ?,e;k P AM Ser vice i Ln i R IT' M1 u'1 M ? ? $ P NCR/S+6 C] $ COW Fee ? O G? ? C3 Q ? - Receipt Fee Poetrnedc ft L C] Co Reetric led Delivery Fee Mftmernem %quhM y ?X Total Postage & Fees (JgpB • C7 M 0 Timex corporation 555 Christian Road ------------- --------------- orPOBearWo. -------------------?t?i??ehtrr ap,'sraro z??a Y's It 0r1*tlals JIM S 1, 2, artd 3. Also camrrvb% U04 N Flaatrfctad Ddvery is desMed. ? ? A?atN 8 MIN your name and address on the reverse x ? sn t vw? cm mtum the m d to you. R-PAvabled by ( MV141 C. Ddo a16d d to the back of ft 1 ' jjj? sec to: D. M drlwry adriaee dttktard Aom f6em 1 T ? 111 B YES, im to deNwry adder below: 13 No .'orpa0.atioA 55? Christian Road Middlebury, Connecticut 067+62 3. SWAM Iypo ficCettiaaa Mw ? Bpm mom ? PA W W G Fallum Receipt *W mWdW mW ? I wmw mqA ? C.O.D. 4. Restricted Degwryt Pft Fee) ? )be 2. Q7Article lrtsr s rr ee ?aoeq 7 ?? U 5 ]i 8 0 d ?i d 5` X 65 5 '7951 Ps Form 3811, February 2004 Dome W Return Race" 102595-024A-1540 ; CERTIFICATE OF SERVICE I hereby certify that on July 15, 2007, I served a copy of the foregoing Affidavit of Service on defendant by United States mail, first class postage prepaid, addressed as follows: Timex Corporation 555 Christian Road Middlebury, CT 06762 Natalie Grill Einsig (PA 89791) Fri ""G CIe Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation RITE AID HEADQUARTERS CORP. Plaintiff V. TIMEX CORPORATION Defendant IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL UNCONTESTED MOTION FOR ADMISSION PRO HAC VICE Pursuant to Pa. R.C.P. 1012.1(b), Timex Corporation, Defendant in the above-referenced matter, by and through its counsel, Steven E. Grubb, Esquire of Goldberg Katzman, P.C., the Sponsor as defined by Rule 1012.1, hereby moves for the admission pro hac vice of Ann H. Rubin, Esq. and James K. Robertson, Jr., Esquire. 1. In support of this Motion, and pursuant to Pa. R.C.P. 1012.1(b), we incorporate by reference the Verified Statements of Ann H. Rubin, Esquire, James K. Robertson, Jr., Esquire and Steven E. Grubb, Esquire, which are attached hereto as Exhibits A through C, respectively. 2. Concurrence of counsel for the Plaintiff in this matter has been sought and granted. 3. No judge has ruled upon any issue in this case as of this date. 160770.1 WHEREFORE, it is respectfully requested that the Court grant Defendant's Motion to Admit Pro Hac Vice Annn H. Rubin, Esquire and James K. Robertson, Jr., Esquire. Date: July 30, 2008 Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 160770.1 Ann H. Rubin, Esq. Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 KITE AID HEADQUARTERS CORP Plaintiff V. TIMEX CORPORATION Defendant IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA : NO. 08-3995 CIVIL VERIFIED STATEMENT OF ANN H RUBIN, ESQUIRE IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE Pursuant to Pa. R.C.P. 1012.1(c), Candidate Ann H. Rubin, Esquire states the following in support of this Motion for Admission Pro Hac Vice: I am a licensed practicing attorney in the following jurisdictions: Connecticut Superior Courts (Admitted 1983; Juris No. 302187); United States District Court for the District of Connecticut (Admitted 1983; Federal Bar No. ct04486); and the U.S. Court of Appeals for the Second Circuit (Admitted 2001). 2. In each of the jurisdictions identified above, I have not been suspended, disbarred, or otherwise disciplined. 3. For each of the jurisdictions described above, I am not the subject of any disciplinary proceeding. 4. I have not previously applied to any court of record in Pennsylvania for admission pro hac vice. I shall comply with and be bound by the applicable statutes, case law and procedural rules of the Commonwealth of Pennsylvania, including the Pennsylvania Rules of Professional Conduct. (W16263471 6. I shall submit to the jurisdiction of the Pennsylvania Courts and the Pennsylvania Disciplinary Board with respect to acts and omissions occurring during the appearance in the matter for which admission pro hac vice is being sought. 7. I have consented to the appointment of Steven E. Grubb, Esquire, of the law firm of Goldberg Katzman, P.C. as the agent upon whom service of process shall be made for all actions, including disciplinary actions, that may arise out of the practice of law in the matter for which admission pro hac vice is sought. 8. I, Ann H. Rubin, verify that the above information is true and correct to the best of my knowledge, information, and belief. I understand that any false statements herein are made subject to penalties of 18 Pa. C.S. §4904, relating to unsworn falsification to authorities. Respectfully submitted, Dacca. Ann H. Rubin, Esquire Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Date: July 25, 2008 {W1626347)LADATA\WD0X\2147\649\W1626347.UOC 2 James K. Robertson, Jr., Esq. Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 F II E AID HEADQUARTERS CORP Plaintiff V. TIMEX CORPORATION Defendant IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL VERIFIED STATEMENT OF JAMES K. ROBERTSON, JR., ESQUIRE IN SUPPORT OF MOTION FOR ADMISSION PRO HAC `NICE Pursuant to Pa. R.C.P. 1012.1(c), Candidate James K. Robertson, Jr., Esquire states the following in support of this Motion for Admission Pro Hac Vice: I am a licensed practicing attorney in the following jurisdictions: Connecticut Superior Court (Bar Card #050530); U.S. Court of Appeals for the Second Circuit (ct05301); U.S. Court of Appeals for the Federal Circuit (9/19/07); U.S. District Court of CT (ct05301); U.S. District Court EDNY (JR8962); U.S. District Court SDNY (JR8962); U.S. District Court for the District of CO (5/17/06). 2. In each of the jurisdictions identified above, I have not been suspended, disbarred, or otherwise disciplined. 3. For each of the jurisdictions described above, I am not the subject of any disciplinary proceeding. 4. I have not previously applied to any court of record in Pennsylvania for admission pro hac vice. 1W16263461 5. I shall comply with and be bound by the applicable statutes, case law and procedural rules of the Commonwealth of Pennsylvania, including the Pennsylvania Rules of Professional Conduct. 6. I shall submit to the jurisdiction of the Pennsylvania Courts and the Pennsylvania Disciplinary Board with respect to acts and omissions occurring during the appearance in the matter for which admission pro hac vice is being sought. 7. I have consented to the appointment of Steven E. Grubb, Esquire, of the law firm of Goldberg Katzman, P.C. as the agent upon whom service of process shall be made for all actions, including disciplinary actions, that may arise out of the practice of law in the matter for which admission pro hac vice is sought. I, James K. Robertson, Jr., verify that the above information is true and correct to the best of my knowledge, information, and belief. I understand that any false statements herein are made subject to penalties of 18 Pa. C.S. §4904, relating to unsworn falsification to authorities Respectfully submitted, C;?mody & Torrance, LLP 0 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Date: July 25, 2008 (W1626346) RECYCLED Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 2344161 RITE AID HEADQUARTERS CORP. IN THE COURT OF COMMON PLEAS Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA V. TIMEX CORPORATION Defendant : NO. 08-3995 CIVIL VERIFIED STATEMENT OF STEVEN E GRUBB, ESQUIRE Pursuant to Pa. R.C.P. 1012.1(d)(2), I, Steven E. Grubb, Esquire, am the sponsor of Ann H. Rubin, Esquire and James K. Robertson, Esquire and submit this Verified Statement: 1. After reasonable investigation, I believe the candidates to be reputable and competent attorneys and am in a position to recommend the candidates' admission. 2. This is the only case in all courts of record in this Commonwealth in which I am acting as Ms. Rubin's and Mr. Robertson's sponsor for admission pro hac vice. 3. Any proceeds from a settlement in the above-captioned action in which Ms. Rubin and Mr. Robertson are granted admission pro hac vice, shall, to the extent applicable, be received, held, distributed and accounted for in accordance with Rule 1.15 of the Pennsylvania Rules of Professional Conduct, including the IOLTA provisions thereof. Res e 1 s e ven E. Grubb, Es ire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Date: July 30, 2008 CERTIFICATE OF SERVICE I HEREBY CERTIFY that I served a true and correct copy of the foregoing document upon the following counsel of record by depositing the same in the United States Mail at Harrisburg, Pennsylvania with first-class postage prepaid on July 30, 2008. Natalie Grill Einsig, Esquire Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 GOLDBERG By w4uVr l r. ULUDD, r;Rulre k14o. /:)6y 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 160770.1 CD _ 17 4 Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation RITE AID HEADQUARTERS CORP. IN THE COURT OF COMMON PLEAS Plaintiff V. TIMEX CORPORATION Defendant CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL ENTRY OF APPEARANCE TO THE OFFICE OF THE CUMBERLAND COUNTY PROTHONOTARY: Kindly enter the appearance of Goldberg Katzman, P.C., on behalf of Defendant Timex Corporation, in the above-captioned action. Respectfully submitted, GOL G TZ Date: July 30, 2008 By: ven E. Gru squire (I.D. # 75897) 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 Telephone: (717) 234-4161 CERTIFICATE OF SERVICE I hereby certify that I am this date serving a copy of the foregoing document upon the following via First Class Mail, which service satisfies the requirements of the Pennsylvania Rules of Civil Procedure: Natalie Grill Einsig, Esquire Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 GOLDBERG KATZMAN, P.C. By: Steven E. Grubb, squire Date: July 30, 2008 160774.1 r_;j ? ?? ,^?` 0-7_ '' t+7.1`I ? ,,,? '--: `" f`'r? L:; g ?- f?.? :? ".? C'., ?ry ?`-.?f - N Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys jor Defendant Timex Corporation Ann H. Rubin, Esq. Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Attorneys for Defendant Timex Corporation admitted pro hac vice RITE AID HEADQUARTERS CORP. : IN THE COURT OF COMMON PLEAS Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA V. TIMEX CORPORATION Defendant : NO. 08-3995 CIVIL NOTICE TO PLEAD TO: Rite Aid Headquarters Corp. c/o Natalie Grill Einsig, Esq. Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 You are hereby notified to file a written response to the within New Matter and Counterclaim within twenty (20) days of service hereof or a judgment may be entered against you. GOLDVfitU I AN, P.C. Date: August 15, 2008 By: Ste, n E. Grubb, Esquire (I.D. # 75897) 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 Telephone: (717) 234-4161 Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation Ann H. Rubin, Esq. Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Attorneys for Defendant Timex Corporation, admitted pro hac vice RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, Plaintiff PENNSYLVANIA VS. NO. 08-3995 CIVIL, TIMEX CORPORATION, CIVIL ACTION - LAW Defendant August 14, 2008 DEFENDANT TIMEX CORPORATION'S ANSWER TO COMPLAINT NEW MATTER AND COUNTERCLAIM Defendant, Timex Corporation C Timex') answers the Complaint of Plaintiff Rite Aid Hdqtrs. Corp. ("Rite Aid") as follows: (N0797405) PARTIES 1. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 2. The Defendant admits the allegations contained in Paragraph 2. JURISDICTION AND VENUE 3. The Defendant states that the allegations contained in Paragraph 3 are legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 4. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. RELEVANT FACTS 5. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 6. The Defendant admits the allegations contained in Paragraph 6. f N0797405 J 2 T-8. The Defendant states that the allegations contained in Paragraphs 7 and 8 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraphs 7 and 8. Timex and Rite Aid negotiated whether and on what terms Timex would contribute to the cost of purchasing display fixtures for Rite Aid, and the associated terms of Rite Aid's purchase of watches from Timex, which continued from September of 2005 through July 28, 2006. Timex and Rite Aid never entered into an agreement to fiord fixture displays as alleged. 9. The Defendant neither admits nor denies the allegations contained in Paragraph 9, as the document speaks for itself. 10. The Defendant states that the allegations contained in Paragraph 10 are legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 10. 11. The Defendant denies so much of Paragraph 11 that alleges that Timex stopped shipping to Rite Aid. The Defendant admits that it would not take back the inventory. The Defendant states that the allegation that Timex was a "non-go forward vendor" is a legal conclusion that is not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. After reasonable investigation the Defendant is without knowledge {Ma797ao5} 3 or information sufficient to form a belief as to the truth of the remaining allegations contained in Paragraph 11, and, thus, denies the allegations. 12. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 13. The Defendant admits the allegations contained in Paragraph 13. 14. The Defendant denies so much of Paragraph 14 that alleges a breach by Timex. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. COUNTI 15. The Defendant hereby incorporates its answers to Paragraphs 1 through 14 i as its answers to Paragraphs 1 through 14 of this First Count, as if fully set forth. 16. The Defendant states that the allegations contained in Paragraph 16 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 16. 17. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. (N0797405) 4 18. The Defendant states that the allegations contained in Paragraph 18 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 18. 19. The Defendant denies so much of Paragraph 19 that alleges that Timex breached the contract. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations contained in Paragraph 19 and, thus, denies the allegations. WHEREFORE, Defendant respectfully requests that the Court enter judgment in its favor and dismiss the Complaint. COUNT II 20. The Defendant hereby incorporates its answers to Paragraphs 1 through 19 as its answers to Paragraphs 1 through 19 of this Second Count, as if fully set forth. 21. The Defendant states that the allegations contained in Paragraph 21 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 22. The Defendant denies so much of Paragraph 22 that alleges Timex owes Rite Aid $2,114,306.16 in lost revenue due to forced markdown of Timex product. After reasonable investigation the Defendant is without knowledge or information sufficient to {NO7974Q5) 5 form a belief as to the truth of the remaining allegations contained in Paragraph 22, and, thus, denies the allegations. 23. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 24. The Defendant denies the allegations contained in Paragraph 24. 25. The Defendant states that the allegations contained in Paragraph 25 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 25. 26. The Defendant states that the allegations contained in Paragraph 26 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 27. The Defendant states that the allegations contained in Paragraph 27 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 27. WIMREFORE, Defendant respectfully requests that the Court enter judgment in its favor and dismiss the Complaint. (N0747405) 6 NEW MATTER 1. By virtue of its conduct as set forth in the Counterclaim, Rite Aid's claims are barred by the doctrine of estoppel. 2. To the extent that the Court finds that there was a contract between Timex and Rite Aid with respect to Timex funding of displays for Rite Aid, which is denied, any such contract is not enforceable because it lacks consideration. 3. To the extent that the Court finds that there was a contract between Timex and Rite Aid with respect to Timex funding displays for Rite Aid, which is denied, Rite Aid has, by its conduct, waived its right to claim any benefit(s) pursuant to such contract. 4. By virtue of its conduct as alleged in the Counterclaim, Rite Aid's claims against Timex are barred by Rite Aid's unclean hands. COUNTERCLAIM 1. Timex brings this counterclaim for breach of contract and violation of Connecticut's Unfair Trade Practices Act, pursuant to Connecticut common law and Conn. Gen. Stat. §§ 42-11 Ob(a), et M. (N0797405) 7 COUNT ONE: BREACH OF CONTRACT 2. Rite Aid and Timex entered into a series of agreements whereby Rite Aid agreed to purchase merchandise from Timex and to promptly pay Timex the prevailing prices for that merchandise. 3. These agreements were expressly governed by Terms and Condition of Sale ("Terms and Conditions'). See Terms and Conditions of Sale, attached as Ex. A. The Terms and Conditions of Sale included the following provisions: Applicable price: All prices and packages are subject to change without notice. Customer agrees to pay the list price in effect on the date of delivery; provided that, if the list price is increased after an order is placed but before delivery, Customer shall be given an opportunity to adjust or cancel. No representative of the company has authority to change any prices or terms established in any Company circular, letter, order form, price list, index or catalog. Terms of Payment: Customer shall remit the purchase price net 30 days from invoice date... Governing Law: This contract shall be construed under and governed by the laws of State of Connecticut. 4. Pursuant to the Terms and Conditions, Rite Aid regularly purchased merchandise from Timex. Timex's business practice was to send an invoice with the merchandise, which provided Rite Aid with the date payment was due. Per the Terms and Conditions, payment was due thirty days from the date of the invoice. {N0797405) 8 5. For many months, Timex and Rite Aid enjoyed a contractual relationship whereby Rite Aid ordered merchandise, Timex delivered the merchandise with the corresponding invoice, and Rite Aid remitted payment within thirty days. 6. Throughout the spring and summer of 2006, Rite Aid continued to order merchandise from Timex. Consistent with the usual practice of Timex and Rite Aid and the Terms and Conditions, Timex delivered the merchandise along with invoices providing for payment within thirty days. 7. In the spring and summer of 2006, Rite Aid and Timex entered into negotiations regarding the possibility that Timex would contribute financial support for Rite Aid's new fixture displays. 8. On July 28, 2006, Timex informed Rite Aid that it could not support the cost of the Rite Aid display initiative and would not enter into a contract in that regard. 9. Thereafter, Rite Aid continued to order merchandise from Timex pursuant to the Terms and Conditions; and Timex delivered the merchandise as requested. 10. Throughout August, 2006, Rite Aid accepted the merchandise it had ordered. 11. In violation of the Terms and Conditions, Rite Aid failed to remit payment within thirty days for the merchandise it had ordered and that had been delivered in August, 2006. 12. Despite repeated requests from Timex, Rite Aid has not remitted payment. {N0797405) 9 13. To date, Timex has not yet received payment for all the merchandise Rite Aid ordered and accepted. 14. The merchandise for which Rite Aid has not remitted payment was ordered within thirty days of the date Timex informed Rite Aid that it would not fund its fixture displays. Thus, upon information and belief, Rite Aid purchased the merchandise with the intention of accepting it and not remitting payment to penalize Timex for not entering into an agreement to contribute to the cost of the fixture display. 15. Rite Aid owes Timex a total of $413,230.55 for merchandise it received in August 2006, and for which payment was due in September 2006. 16. On March 1, 2006, Timex issued a chargeback to Rite Aid. On August 5, 2006, August 15, 2006, and August 26, 2006, Timex sent Rite Aid merchandise Rite Aid had ordered, along with invoices providing the due date for payment. Rite Aid failed to remit the payment indicated in the chargeback and invoices. These unpaid charges amount to $141,400.35. See Statement dated December 20, 2007, Account Number 10418-01, attached as Ex. B. 17. Additionally, on August 5, 2006, August 14, 2006, August 21, 2006, August 25, 2006, and August 31, 2006, Timex sent Rite Aid merchandise Rite Aid had ordered, along with invoices providing the due date for payment. Rite Aid failed to remit the payment indicated in the invoices. These unpaid charges amount to $314,050.00. See Statement dated December 20, 2007, Account Number 10417-01, attached as Ex. C. (N07974051 10 18. The total amount Rite Aid owes Timex for merchandise it has accepted is $455,450.35. 19. To date, Timex owes a credit to Rite Aid in the amount of $42,219.80. See Statement dated December 20, 2007 under Account Number 08192-01, attached as Ex. D. 20. Thus, Rite Aid owes Timex a balance of $413,230.55 for merchandise it accepted and agreed to pay for, but for which it never remitted payment. 21. Rite Aid has breached its agreements with Timex by failing to pay Timex for the merchandise that it purchased. 22. Moreover, Rite Aid's breach was in bad faith, as it ordered and accepted merchandise for which, upon information and belief, it had no intention of remitting payment. 23. As a result of Rite Aid's breach, Timex has suffered a loss and is entitled to the recovery of damages. COUNT TWO: UNFAIR AND DECEPTIVE TRADE PRACTICES 1.-23. Paragraphs 1 through 23 of the First Count are hereby incorporated by reference as if fully set forth herein. 24. Rite Aid is a "person" within the meaning of Connecticut General Statutes § 42-11 Oa(3). JN0797405) 11 25. The acts of Rite Aid constitute unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade and commerce in violation of Connecticut's Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-11Ob(a), et §tq. 26. As a result of the unfair or deceptive acts or practices of Rite Aid, Timex has suffered an ascertainable loss and is entitled to the recovery of consequential and punitive damages and an award of attorneys' fees, pursuant to § 42-11 Og of the Connecticut General Statutes. COUNT THREE: SETOFF 27. Timex is entitled to a setoff against any damages which may be assessed in favor of Rite Aid and/or damages arising from Rite Aid's acts or omissions as set forth in Timex's New Matter and Counterclaim. (N0797405) 12 PRAYER FOR RELIEF WHEREFORE, Timex prays that this Court enter judgment in its favor for an amount in excess of $50,000.00, the arbitration limit in Cumberland County, together with all costs of Court and any other relief this Court deems just and proper. Respect ly S miffed, even E. Grub , squire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation Ann H. Rubin, Esquire Carmody & Torrance, LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 Attorneys for Defendant Timex Corporation, admitted pro hac vice 'TERMS AND CONDITIONS OF.. SALE Acceptance All orders are vAooted to acceptance' by the Invoicing company on the reverse hereof ('the Company' or'Company? at He.offices in Middlebury Cwew& put, Acceptance of any order is tale W to availability of product and Why of ate Odmpany to detivar. Wnimum Older No order for lees than $5.00 in the aggregate will be accepted: Any order for a particular article in a quantity less. than the minimum quantity of that article. for which a un8 package is quoted In the current prim list will be. deemed fn order for kui minimum.quardity, and shall result in an obligation of Customer to pay the full price dhere1w If delivery in such quantity is made by the Company. Applicable price Ail prices and.packings are subject to change without notice. Customer agrees to pay the list price in efled an the date of delivery, provided that, h the-list price Is increased char an order is placed but before chitvary. Customer shay be given an opportunity toadjust or Certool.' No reprmera®tive of the company has aultority to change any prices or tams estadidtad in any Company cmlar, fetter, order fount price list, indett or catalog, Taxes All applicable sales, oWse.and similar taxes shah be added to the purchase price. Delivery SNprnsnt shah be F.Q.B. Company tacillties, In standard packages or multiples thendor: All transportation charges, including dismiraple. Nsurertca. and extra handling or shipping charges, shah be pad directly by Customer or added. to the purchase price; provided, however. that the Carpainy will pay basic ground transportation charges on all orders written on a Company order form covering goods which have a shipping. weight of 5 lbs. or more. Loan of or damage to goods after daivary shag beat Customers risk. As used In these Tema and Ctrhdhtions of Sale, 'delivery' maens possession of ft goods by Customer or the carrier, whichever occurs sooner, and *car ar'means rorrrTion carrier, contract comer, and operators of conveyances leased to the Company. The Company reserves Cre right.to male delivery in Watallments and off delivery dates we approximate; .-Tema of Payment . Customer shah remit the purchase price flat 90days from invoice data. PaAla shipments will be bled as made. NO CASH DISCOUNT OR ANTICIPATION. DISCOUNT ALLOWED. The Company reserves the tight to require payrnera In advance or upon deYvary-deparding on Customers raaflwotdniness. Warranties The Company warrants to Customer that goods are free from delecffs in'materieia and workmanship. THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN IN LIEU OF ALL OTHER WARRANTIES, INCLUDING ANY WARRANTY OF MERCHANTABILTY AND. FITNESS FOR ANY PURPOSE WHETHER. WRITTEN, ORAL OR IMPLIED IN FACT OR IN LAW. 0afnf of Customer No claim by Customer, whether under the above wan from or otherwise shall be effective unless notification a sent to the company within tai (10) days of dei Wry of Iths goods against which the claim Is made. via postage prepaid cirditd U.S. Mail, and orgy I Otstomer does not meah sale goods. Customers exduaive and sole remedies for dNaoWe items shah-be replacement thereof by the Company (it they have not been used) with comparable stock or the Isaua ce of credit against account, in each case at the Company's option :The Company she not be responsible for any failure to perform due to unforeseen circumstances or causes beyond its reasonable control. IN NO EVENT SHALL THE COMPANY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES. 'Patonts The following states be entire habhhy of the Company for patent Wdngement by any product or pan thereof furnished hereunder. The Company will defend any action brought against Customer or a subsequent purchaser, so far as based on the deice that such product or psi Infringes eqy Unirod States patent, provided the Company is promptly notified in"wdting, and given authority, irdorrntion and assistance (at fie Company's gxpenss) to defend Same; the Company will pay all damaggsAomts awarded in such aua against Customer or subsaquerd purchaser in case such product or port is found to be Wringing. I the use of ash product or pat is enjoined, the Company shah at its own expense either procure for Customer of Subsequent purchaser title right to dtorttinme using sucltproduct or part, or replace some with non-Inhingirhg product or part, or modify same so it becomes non-Wriging, or "refund the purchase price therefor. Accommodation Orders No action or assistance by a. spresenative of the Company in connection with resale of any article shall constitute a representation or guarantee. as to the creditworthiness of the subsequent purchaser. Notice and Modification Placement of an order by Customer or acceptance of any shipment of goods listed in. a Company current price list constitutes agreement by Customer to these Tarts and Conditions of Sale as the only terns and conditions applying to fie purchase and sae of the fdantefieed goons. No adldgtin to, deletion from; or modification of any of these provisions shah be binding upon the Company unless made In writing and signed by a duty authorized Company representative or in accordance with At published Company policy applicable to such order and in effect at the tine the Company accepts such order. THE COMPANY HEREBY OBJECTS TO ANY BUYER TERMS AND CONDITIONS CONTAINED IN ANY PURCHASE ORDER OR OTHER DOCUMENT SUBMITTED BY BUYER. Gorroming.Law This contract shah be construed under and gm%med by the laws of State of Connecticut. V. TIMEX CORPORATION P.O. BOX 310 MIDDLEBURY, CT 06762-0310 DELIVER TO : 0 RITE AIDE HEADQUARTERS CORP P.O. BOX 8432 HARRISBURG, PA 17105 i J J 1 I J 1 I 1 I J i J t J I J I. J 1 J. 1 I J i J M F.U. t$UA WOW L P.O. BOX 8432 T CHARLOTTE, NC 28260 T 0 HARRISBURG, PA 17105 T 0 20-DEC-07 .1 10418-01 F I L F I L F I L TYPE 1N?DAl E = _f1VV.NE MEi tR - _ ;=-_:;REF REN?:£ - + ::' ;. l EEI __ ` . `: =-J MOULIT p?4lc,> Invoice 05-AUG-06 70075758 3611889'POD 1-4-07 04-SEP-06 29,860.00 Invoice 15-AUG-06 70085553 3624664'POD 1-4-07 14-SEP-06 73,470.00 Invoice 26-AUG-06 70090294 3633172'POD 1-4-07 25-SEP-06 32,860.00 Chargeback 01-MAR-06 352548 *ADV.BALl128969 frm. 01-MAR-06 5,210.35 t -RRENT _hy4&T' D J E :: Qfi1 L MD t 1 T:° 0.00 141,400.35 141,400.35 r I L F I L i i i L I Li s N I I LI .m z ' a m r m I L a :o r P i L r i L z 12120107 10:45 AM ,- toots -4- RECYCLED & ?..,. n r.u. DuA ou3uy L T CHARLOTTE, NC 28260 -I ' TT HARRISBURG, PA 17105 i 0 J 1 J 1 i J f I-- J a I J 1. J I J. 1 J J z F f L tagemeiit te;'.> - '. = _PagLI 20-DEC-07 1 10417-01 PE `_ IN?Da 1?1?I7?IUIfABEfG. -- ?Ft?NGE- :_ - -_ Invoice 05-AUG-06 70075765 3607758*POD 1-4-07 04-SEP-06 34,470.00 Invoice 14-AUG-06 70083637 3623189*POD 1-4-07 13-SEP-06 60,970.00 Invoice 21-AUG-06 70088941 3629699*POD 1-4-07 20-SEP-06 113,480.00 Invoice 25-AUG-06 70090050 3631139*POD 1-4-07 24-SEP-06 39,960.00 Invoice 31-AUG-06 70094044 3635519*POD 1-4-07 30-SEP-06 65,170.00 C FtRENT. ". PA$T.'>DUE . ?? TO ' MOUNT:- -_ 0.0 0 314,050.00 314,050.00 12/20/07 10:45 AM I L F I L ?I i L r; I L( 0 t L? i m r. ? I L' m 0 r L - r L toozs _-r ---- --- ---- I - - - - -- - - - -- - - - =---I I----i I ----1 I- -' F- -11 --- i I----1 I - F TIAEOF#PORA?TIQN '- :. ??`3,a STATEMENT Z' -0 J B RITE AID HEADQUARTERS CORP. TIMEX CORPORATION L P.O. BOX 8432 L E M P.O. BOX 60509 St iteler?3 Dale.`; ,.Raga? `- T CHARLOTTE, NC 28260 20-DEC-07 1 -I HARRISBURG, PA 17105 o .r.o:r7r:ii- r J 1 J -'I J , J J. J I J. 08192-01 -- :: ? ...._._ _? .. _ _'-:? ::;: ??•. ,:.r::: _E[aitypEl;?IHBER .. r "_ - REFERE[J?? ' _? .:.=[??JE ia?4 E< - Credit Memo 13-JUL-06 6505293 D272533299 TA619404711 13-JUL-06 -8,811.29 Credit Memo 13-JUL-06 6505302 R230795958 TA619404657 13-JUL-06 -16.00 Credit Memo 07-AUG-06 6506437 D273624790' TA62190680 07-AUG--06 -6,512.54 Credit Memo 25-AUG-06 6507202 D279931790 TA623704374 25-AUG-06 -3,168.97 Credit Memo 14-SEP-06 6507849 D284275790 TA625708864 14-SEP-06 -4,511.94 Credit Memo 10-OCT-06 6508749 D281015958' TA62830586 10-OCT-06 -19,199.06 I l- r f F L i F I L L i r I L' ,o I ? V L1 a i .m m r N L' b I a G I , J ? I L CURRENT Ri_ IIJL_ 7E'?'?"AlIC3:41_T_ =r_ I 0.00 --42,219.80 -42,219.80 J I L 12/20107 10:41 AM z LWZS t- i I VERIFICATION I, James Fried, sign this Verification on behalf of Timex Corporation, and do hereby acknowledge that the foregoing Answer, New Matter and Counterclaim were prepared with the assistance and advice of counsel; that the document, subject to inadvertent or undiscovered errors, is based upon and therefore limited by the records and information still in existence, presently recollected and thus far discovered in preparation of this document; and that subject to the limitations set forth herein, the facts stated in this document are true and correct to the best of my knowledge, information, and belief. I understand that any false statements herein are made subject to penalties of 18 Pa. C.S. §4904, relating to unsworn falsification to authorities. Date: ! /l d By: -- J Fried (N0797448) CERTIFICATE OF SERVICE This is to certify that a copy of the foregoing has been mailed, postage prepaid, on the above date, to: Natalie Grill Einsig, Esquire Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 August 15, 2008 N G'? _77 r . fil Ora C m t.i 1 "? AUG o i zooe? RITE AID HEADQUARTERS CORP. IN THE COURT OF COMMON PLEAS Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA V. NO. 08-3995 CIVIL TIMEX CORPORATION 'Defendant ORDER Upon consideration of the Defendant's Motion for Admission Pro Hac Vice, it is hereby ordered this 1S 6ay of s? 2008 that said Motion is granted and Attorneys Ann H. Rubin, Esquire and James K. Robinson, Jr., Esquire are admitted pro hac vice in the above- captioned matter A I o t ? ?- p ? ? kiwi 03 1? G r e J I oLTIQ. 160770.1 O11- RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. 08-3995 CIVIL vs. TIMEX CORPORATION, CIVIL ACTION - LAW Defendant. PRELIMINARY OBJECTIONS OF PLAINTIFF RITE AID HDQTRS. CORP. TO DEFENDANT'S COUNTERCLAIM Pursuant to Pa. R.C.P. 1028, plaintiff Rite Aid Hdqtrs. Corp. ("Rite Aid") by its undersigned attorneys, asserts the following preliminary objections to defendant Timex Corporation's ("Timex") Counterclaim: Preliminary Objection to Count Two (Unfair and Deceptive Trade Practices) Pursuant to Pa. R.C.P. 1028(a)(4) 1. Pa. R.C.P. 1028(a)(4) authorizes a preliminary objection if a complaint is legally insufficient. 2. Timex's Counterclaim asserts a claim for violation of Connecticut's Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110b(a), et seq. ("CUTPA"). Counterclaim ¶¶ 1, 24-26. A copy of Timex's Answer to Complaint, New Matter and Counterclaim ("Counterclaim") is attached hereto as Exhibit A. 3. Specifically, Timex alleges that throughout August 2006, Rite Aid ordered product from Timex "with the intention of accepting it and not remitting payment to penalize Timex for not entering into an agreement to contribute to the cost of the fixture display" for the product and that these actions constituted "unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade and commerce" in violation of CUTPA. Counterclaim ¶¶ 14-17, 22, 25. 4. While Rite Aid denies that Connecticut law applies to this action, even if it does apply, Timex's claim based on CUTPA fails as a matter of law and is legally insufficient. 5. The alleged wrongdoing asserted by Timex is nothing more than a simple breach of contract which does not warrant an action under CUTPA. Salvatore v. George, No. CV010163065S, 2001 WL 34039492 (Conn. Super. Ct. 2001). A copy of this opinion is attached as Exhibit B. 6. "Substantial aggravating circumstances" that take the matter beyond a simple breach of contract claim must be shown to recover under CUTPA. Id. at *3- 7. Specifically, "where a count simply incorporates by reference the breach of contract claim and does not set forth how or in what respect the [opposing party's] activities are either immoral, unethical, unscrupulous, or offensive to public policy," a CUPTA claim will fail as legally insufficient. Id. 8. Here, Timex's counterclaim arises out of Rite Aid's alleged contractual obligations in ordering Timex's product, and does not allege "substantial aggravating circumstances" beyond a mere breach of contract. 9. Additionally, in determining whether a practice violates CUTPA, the Connecticut courts have adopted the following criteria set out in the "cigarette rule" by the federal trade commission for determining when a practice is unfair: -2- (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise - in. other words, it is within at least the penumbra of some common law, statutory, or other established concept of fairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons]. Ramirez v. Health Net of the Northeast, Inc., 938 A.2d 576, 589 (Conn. 2008). 10. As discussed above, Timex surmises that Rite Aid ordered product for which it did not intend to pay, but beyond this breach of contract allegation, does not allege any aggravating circumstances that may bring the case within the "cigarette rule" and for this reason, Timex's claim fails. WHEREFORE, plaintiff Rite Aid Hdqtrs. Corp. respectfully requests that the Court sustain its demurrer and dismiss Count II of Defendant's Counterclaim as legally insufficient. Respectfully submitted, Brian P. Downey, Esquire (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 717.255.1155 717.238.0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com Date: September 4, 2008 Attorneys for Plaintiff Rite Aid Hdqtrs. Corp. -3- Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation Ann H. Rubin, Esq. N. E! ^S I G Carmody &Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Attorneys for Defendant Timex Corporation admitted pro hac vice RITE AID HEADQUARTERS CORP. : IN THE COURT OF COMMON PLEAS Plaintiff V. TIMEX CORPORATION Defendant TO: Rite Aid Headquarters Corp. c/o Natalie Grill Einsig, Esq. Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 : CUMBERLAND COUNTY, PENNSYLVANIA : NO. 08-3995 CIVIL NOTICE TO PLEAD You are hereby notified to file a written response to the within New Matter and Counterclaim within twenty (20) days of service hereof or a judgment may be entered against you. GOLD 7??- StevWE. P.C. Date: August 15, 2008 By: Grubb, Esquire (I.D. # 75897) 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 Telephone: (717) 234-4161 AUG 1 8 2008 Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant 2-unei Corporation Ann H. Rubin, Esq. Carmody & Torrance, LLP 50 Leavenworth Street Waterbury, CT 06702 (203) 573-1200 Attorneys for Defendant Y-unex Corporation, admitted pro hac vice RITE AID HDQTRS. CORP., Plaintiff VS. TIMEX CORPORATION, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL CIVIL ACTION - LAW August 14, 2008 DEFENDANT TIMEX CORPORATION'S ANSWER TO COMPLAINT, NEW MATTER AND COUNTERCLAIM Defendant, Timex Corporation ("Timex'] answers the Complaint of Plaintiff' Rite Aid Hdqtrs. Corp. ("Rite Aid') as follows: fM797405) PARTIES 1. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 2. The Defendant admits the allegations contained in Paragraph 2. JURISDICTION AND VENUE 3. The Defendant states that the allegations contained in Paragraph 3 are legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. I 4. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. RELEVANT FACTS 5. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 6. The Defendant admits the allegations contained in Paragraph 6. (N0797405) 2 7.-8. The Defendant states that the allegations contained in Paragraphs 7 and 8 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraphs 7 and 8. Timex and Rite Aid negotiated whether and on what terms Timex would contribute to the cost of purchasing display fixtures for Rite Aid, and the associated terms of Rite Aid's purchase of watches from Timex, which continued from September of 2005 through July 28, 2006. Timex and Rite Aid never entered into an agreement to fund fixture displays as alleged. 9. The Defendant neither admits nor denies the allegations contained in Paragraph 9, as the document speaks for itself. 10. The Defendant states that the allegations contained in Paragraph 10 are legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 10. 11. The Defendant denies so much of Paragraph 11 that alleges that Timex stopped shipping to Rite Aid. The Defendant admits that it would not take back the inventory. The Defendant states that the allegation that Timex was a "non-go forward vendor" is a legal conclusion that is not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, . denies the allegations. After reasonable investigation the Defendant is without knowledge (N0797405) 3 or information sufficient to form a belief as to the truth of the remaining allegations contained in Paragraph 11, and, thus, denies the allegations. 12. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 13. The Defendant admits the allegations contained in Paragraph 13. 14. The Defendant denies so much of Paragraph 14 that alleges a breach by Timex. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. COUNTI 15. The Defendant hereby incorporates its answers to Paragraphs 1 through 14 as its answers to Paragraphs 1 through 14 of this First Count, as if fully set forth. 16. The Defendant states that the allegations contained in Paragraph 16 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 16. 17. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. {NO7974D5} 4 18. The Defendant states that the allegations contained in Paragraph 18 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 18. 19. The Defendant denies so much of Paragraph 19 that alleges that Timex breached the contract. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of the remaining allegations contained in Paragraph 19 and, thus, denies the allegations. WHEREFORE, Defendant respectfully requests that the Court enter judgment in its favor and dismiss the Complaint. COUNT II 20. The Defendant hereby incorporates its answers to Paragraphs 1 through 19 as its answers to Paragraphs 1 through 19 of this Second Count, as if fully set forth. 21. The Defendant states that the allegations contained in Paragraph 21 contain I legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 22. The Defendant denies so much of Paragraph 22 that alleges Timex owes Rite Aid $2,114,306.16 in lost revenue due to forced markdown of Timex product. After reasonable investigation the Defendant is without knowledge or information sufficient to (N0797405) 5 form a belief as to the truth of the remaining allegations contained in Paragraph 22, and, thus, denies the allegations. 23. After reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 24. The Defendant denies the allegations contained in Paragraph 24. 25. The Defendant states that the allegations contained in Paragraph 25 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the. allegations contained in Paragraph 25. 26. The Defendant states that the allegations contained in Paragraph 26 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, after reasonable investigation the Defendant is without knowledge or information sufficient to form a belief as to the truth of these allegations, and, thus, denies the allegations. 27. The Defendant states that the allegations contained in Paragraph 27 contain legal conclusions that are not subject to denial or admission, but to the extent a response is necessary, the Defendant denies the allegations contained in Paragraph 27. WHEREFORE, Defendant respectfully requests that the Court enter judgment in its favor and dismiss the Complaint. NEW MATTER 1. By virtue of its conduct as set forth in the Counterclaim, Rite Aid's claims are barred by the doctrine of estoppel. 2. To the extent that the Court finds that there was a contract between Timex and Rite Aid with respect to Timex fimding of displays for Rite Aid, which is denied, any such contract is not enforceable because it lacks consideration. 3. To the extent that the Court finds that there was a contract between Timex and Rite Aid with respect to Timex funding displays for Rite Aid, which is denied, Rite Aid has, by its conduct, waived its right to claim any benefit(s) pursuant to such contract. 4. By virtue of its conduct as alleged in the Counterclaim, Rite Aid's claims against Timex are barred by Rite Aid's unclean hands. COUNTERCLAIM 1. Timex brings this counterclaim for breach of contract and violation of Connecticut's Unfair Trade Practices Act, pursuant to Connecticut common law and Conn. Gen. Stat. §§ 42-11Ob(a), et M. (N0797405) 7 COUNT ONE: BREACH OF CONTRACT 2. Rite Aid and Timex entered into a series of agreements whereby Rite Aid agreed to purchase merchandise from Timex and to promptly pay Timex the prevailing prices for that merchandise. These agreements were expressly governed by Terms and Condition of Sale ("Terms and Conditions"). See Terms and Conditions of Sale, attached as Ex. A. The Terms and Conditions of Sale included the following provisions: Applicable price: All prices and packages are subject to change without notice. Customer agrees to pay the list price in effect on the date of delivery; provided that, if the list price is increased after an order is placed but before delivery, Customer shall be given an opportunity to adjust or cancel. No representative of the company has authority to change any prices or terms established in any Company circular, letter, order form, price list, index or catalog. Terms of Payment: Customer shall remit the purchase price net 30 days from invoice date... Governing Law: This contract shall be construed under and governed by the laws of State of Connecticut. 4. Pursuant to the Terms and Conditions, Rite Aid regularly purchased merchandise from Timex. Timex's business practice was to send an invoice with the merchandise, which provided Rite Aid with the date payment was due. Per the Terms and Conditions, payment was due thirty days from the date of the invoice. (N0797405) S. For many months, Timex and Rite Aid enjoyed a contractual relationship whereby Rite Aid ordered merchandise, Timex delivered the merchandise with the corresponding invoice, and Rite Aid remitted payment within thirty days. 6. Throughout the spring and summer of 2006, Rite Aid continued to order merchandise from Timex. Consistent with the usual practice of Timex and Rite Aid and the Terms and Conditions, Timex delivered the merchandise along with invoices providing for payment within thirty days. 7. In the spring and summer of 2006, Rite Aid and Timex entered into negotiations regarding the possibility that Timex would contribute financial support for Rite Aid's new fixture displays. 8. On July 28, 2006, Timex informed Rite Aid that it could not support the cost of the Rite Aid display initiative and would not enter into a contract in that regard.. 9. Thereafter, Rite Aid continued to order merchandise from Timex pursuant to the Terms and Conditions; and Timex delivered the merchandise as requested. 10. Throughout August, 2006, Rite Aid accepted the merchandise it had ordered. 11. In violation of the Terns and Conditions, Rite Aid failed to remit payment within thirty days for the merchandise it had ordered and that had been delivered in August, 2006. 12. Despite repeated requests from Timex, Rite Aid has not remitted payment. (N07974M) 9 13. To date, Timex has not yet received payment for all the merchandise Rite Aid ordered and accepted. 14. The merchandise for which Rite Aid has not remitted payment was ordered within thirty days of the date Timex informed Rite Aid that it would not fund its fixture displays. Thus, upon information and belief, Rite Aid purchased the merchandise with the intention of accepting it and not remitting payment to penalize Timex for not entering into an agreement to contribute to the cost of the fixture display. 15. Rite Aid owes Timex a total of $413,230.55 for merchandise it received in August 2006, and for which payment was due in September 2006. 16. On March 1, 2006, Timex issued a chargeback to Rite Aid. On August 5, 2006, August 15, 2006, and August 26, 2006, Timex sent Rite Aid merchandise Rite Aid had ordered, along with invoices providing the due date for payment. Rite Aid failed to remit the payment indicated in the chargeback and invoices. These unpaid charges amount to $141,400.35. See Statement dated December 20, 2007, Account Number 10418-01, attached as Ex. B. IT Additionally, on August 5, 2006, August 14, 2006, August 21, 2006, August 25, 2006, and August 31, 2006, Timex sent Rite Aid merchandise Rite Aid had ordered, along with invoices providing the due date for payment. Rite Aid failed to remit the payment indicated in the invoices. These unpaid charges amount to $314,050.00. See Statement dated December 20, 2007, Account Number 10417-01, attached as Ex. C. (N07974051 10 18. The total amount Rite Aid owes Timex for merchandise it has accepted is $455,450.35. 19. To date, Timex owes a credit to Rite Aid in the amount of $42,219.80. See Statement dated December 20, 2007 under Account Number 08192-01, attached as Ex. D. 20. Thus, Rite Aid owes Timex a balance of $413,230.55 for merchandise it accepted and agreed to pay for, but for which it never remitted payment. 21. Rite Aid has breached its agreements with Timex by failing to pay Timex for the merchandise that it purchased. 22. Moreover, Rite Aid's breach was in bad faith, as it ordered and accepted merchandise for which, upon information and belief, it had no intention of remitting payment. 23. As a result of Rite Aid's breach, Timex has suffered a loss and is entitled to the recovery of damages. COUNT TWO: UNFAIR AND DECEPTIVE TRADE PRACTICES 1.-23. Paragraphs 1 through 23 of the First Count are hereby incorporated by reference as if fully set forth herein. 24. Rite Aid is a "person" within the meaning of Connecticut General Statutes § 42-110a(3). (M797405) 11 25. The acts of Rite Aid constitute unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade and commerce in violation of Connecticut's Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-11 Ob(a), et §N. 26. As a result of the unfair or deceptive acts or practices of Rite Aid, Timex has suffered an ascertainable loss and is entitled to the recovery of consequential and punitive damages and an award of attorneys' fees, pursuant to § 42-110g of the Connecticut General Statutes. COUNT THREE: SETOFF 27. Timex is entitled to a setoff against any damages which may be assessed in favor of Rite Aid and/or damages arising from Rite Aid's acts or omissions as set forth in Timex's New Matter and Counterclaim. {NO797405} 12 PRAYER FOR RELIEF WHEREFORE, Timex prays that this Court enter judgment in its favor for an amount in excess of $50,000.00, the arbitration limit in Cumberland County, together with all costs of Court and any other relief this Court deems just and proper. R4evenE. S mitted, (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation Ann H. Rubin, Esquire Carmody & Torrance, LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 Attorneys for Defendant Timex Corporation, admitted pro hac vice txlli3lry A IMMS AND MI)TIONS 2F SALE A ? 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As twad b fheee rams and CoytMm a 3*.'dslvwy' meson pwfenbrt Gift gtroda by Cupomm w ft aardw, latiderw ttoours saawr, and ?pwrMr'mewe tiamrto carrloo car* ordw, and operatM d m"eyoreea isasW to fM Company. The Cotmpeityreserves ft dghtlo msk! delivery in batsw ads oral di deMry dda am apprwsrtwa; Terms of Prom* . Owbrrw Nwi rwdl Ats purtrres Ptlos rte/ 30deys boa bwoics dale Paeid drpnoatac wAi W bBad as mode. MO CASH DOCOUNT OR ANTTCIPAT04 . DISCOUNT ALLOWED. lho OwwAV twwvas ft, rood to rpgWm papaw In ackove or upon ddvwydag cl an Cusiomses orad hourerrmw „ Wourardiss Ths CwWW warratrs I* MMonWOW goods we boo bom dams i Materida art! ww Wmwirp. THE FOREOONG WARRANTIES ARE OWLUSIVE AND ARE GIVEN IN LIEU OF ALL OTHER WARRANTIES, ING.U M ANY WARRNM OF MRIiCHANTABLTY AND FTRIESS FOR ANY PURPOSE. . WHETHER WRITTEN, ORAL OR AINM W. FACT OR H LAW. dodo a Custo"M - No claim by Cwbnw, whether under ft dhow wanortiw or otlerwis! ttftdl bo Macaw Wssaxotowan is sad to lip aorapow wollrrt %n'jTo)dqs a dtrivsry cf - Bw goods vo" RAAdf Ate Balm k made via podapa pr opok ciriisd U.S. ills, and wry A puMww dvaa met form geld goads, Ctatoswt s swkrdv. aW bas so.tddts for ddaoivs horns"be raploamwa fttwaol by Aw Camay Cr rut' hers nd bun used) WAt oompar" abet of fha ktwatoe a troll a0dnst axaure in ooh ass KAe Cs+rOawy a gpAatx .Ttw Conprry alai not ba rsapawbN for NOW ldkee b Pa"M &M b tarwaawrdrtunarwx w or owAm beyond As mamrvebk control M NO E%WT SMALL THE COMPANY BEIIABI E. FOR ANY WECWL, iOoMT& OR CON3EWaffML OAM FOES. Pa1Mq The kWwbtp sate ft, rlnAte %bYry of ft Corr4my for pled iNrirgMtem by erry faodtsa or pan fend kwbbW hentiatder. no Company wN olww a ty wdm brm+pltl agaitri Custmew or a autlssquent puehndr, m far as bored an @w dabs ifel such pro" or pad kwrateas arty Utrlad Sbrw Plod. provided the CwrWM b psarply nollbd invAlltg, tad given wAwray. bttwwmtbn and assiaww (a Aw t agena!) b dolatd done as cow" va W ¦ tfarregsabwk waded In such auk agskwt Owtw ar oraubaoq mt pwWwor In om stab prodrat or Wit fm w* to be bibbo p, i Ae tea d Suds product a pan is wji % .4, At! 6ompatgr dW d iw own ssponas OMW pr=n for C Mater w subugwd ptadtaaw tie.dg* to oortidw t+ol^Y nudrpoodtna w paR w ' rapleoa wow wilft ^on-frt4kxVinp proa+or ar PK Or randy rawer ao a beoxxrws non-krdnpirp. w rslxsal ri! psdew Pros A+axslw. . . Aomwo odason Orders W mew. or assitgave by a ntpdsar"live of be cowpony In owiectim with reade d any arools small cons" a rept"antation or guwran, as to the aredkwaednlss of the vuWlqued purchaver. Nation and Nbdimcatan Ploesnwnt at an order by culwa w or Woo"" of MY trristwnt of pads kled In a i',orlpany currant pace so v 11411ee a~"# W Oratartr to less! Tom W4 Qo xilb" of SW no iw dry terms aria aortdlbro' applying a Ae ptnahass and sale a tie fderdAlld goods. No oddflcn to, do Mm hum, or modl o0w of arty of gees Wavldae MW be bbxdfy upon live Ccav&W arched mods b wdfktg and dgnsd by i• day Kowlsed Corrpwty npuwou. a N =onwr" I ft a p *kN d Corti q po" wwobe to sucb wow and in am ache erne ew cwnpany waapts auch order. THE COMPANY HERESY OBJECTS TO ANY 81/YER TSnM AND CONDITIONS CONTAINED IN ANY PURCHASE ORDM OR OTHER DOCUMb4T SUW"M BY BUYER, ' Govarming Law This rnr*w dW to owns ed wider and woonved by ft taws of Slag of C )nn$CbCw. ... , .. .. . T1 r TIMEX CORPORATION P.O. BOX 310 -MIDDLEBURY, CT 06762-0310 DELIVER TO RITE AIDE HEADQUARTERS CORP P.O. BOX 8432 HARRISBURG, PA 17105 EXHIBIT B . -77 TWEX ORPORATI6N.. accslo STATEMENT MIDQLE6U jYl CT 0 62 03 S3 f e RITE AIDE HEADQUARTERS R TIMEX CORPORATION I -' CORP e `- I J 1 J ' 7 I J I J f J 1 J I• J J• I J I M P.O. BOX 60509 .. Statia> pnt.vate .; page: L P.O. BOX 8432 T CHARLOTTE, NC 28280 20-DEC-07 1 T O HARRISBURG, PA 17105 T N ` € 0 10418-01 r: 1?PE r ??tiVV NU Invoice 05-AUG-06 70075758 3611889'POD 1-4-07 04-SEP-06 29,860.00 invoice 15-AUG-06 70065553 3624664`POD 1-4-07 14-SEP-06 73,470.00 Invoice 26-AUG-06 70090294 3633172'POD 1-4-07 25-SEP-06 32,860.00 Chargeback 01-MAR-06 352548 *ADV.BAL.#128969 irm. 01-MAR-O6 5,210.35 x' URRENF j?A 0.00 141,400.35 141,400.35 I ?i r? I' LI F I L F. I I Ll i s r; I• I L? s s ri LI • ' a r Ali L` a :e ?I L r I J L i 12120/07 10:45 AM ?_ ?oozs 1?`r.. , EXHIBIT C I J I J I J 1 I J 1 I J 1 J I TIME C h-baRk., q STATEMENT F i- B RITE AID HEADQUARTERS CORP E TIMEX CORPORATION L L P.O. BOX 8432 M P.O. BOX 60509 L ' CHARLOTTE, NC 28260 0 T '. 7 HARRISBURG, PA 17105 0 20-DEC-07 1 10417--01 I L Invoice 05-AUG-06 70075765 3607758'POD 14-07 04-SEP-06 34,470.00 Invoice 14-AUG-06 70083637 3623189'POD 1-4-07 13-SEP-06 60,970.00 Invoice 21-AUG-06 70088941 3629699'POD 1--4-07 20-SEP-06 113,480.00 Invoice 25-AUG-06 70090050 3631139'POD 1-4-07 24-SEP-06 39,960.00 Invoice 31-AUG-06 70094044 3635519'POD 1-4-07 30-SEP-06 65,170.00 :.CURRENT; Jiot 4u ' NA .• 0.00 314,050.00 314,050.00 1 I. J I J I. J I J. l J I J z 12120107 10:45 AM f- I I L r I L.. L 0 rs I L 8 I 9 Ll e r, m I b L a r" I ` L r I Li -1 toots T+r- tyK?BIT D I J I J f I J i TI?I??ORPQF?AcT10N , F&1d= STATEMENT E. 7 I RITE AID HEADQUARTERS CORP. E TIMEX CORPORATION L P.O. BOX 8432 M P.O. BOX 60509 L T CHARLOTTE, NC 28260 T HARRISBURG, PA 17105 T 0 20-DEC-07 1 I'c 08192-01 I .:L:. Credit Memo 13-JUL-06 6505293 D272533299 TA619404711 13-JUL-06 -8,811.29 Credit Memo 13-JUL-06 6505302 8230795958 TA619404657 13-JUL-06 -16.00 Credit Memo 07-AUG-06 6506437 D273624790' TA62190680 07-AUG-06 -6,512.54 Credit Memo 25-AUG-06 6507202 D279931790 TA623704374 25-AUG-06 -3,168.97 Credit Memo 14-SEP-06 6507849 D284275790 TA625708864 14-SEP-06 -,4,511.94 Credit Memo 10-OCT-06 6506749 0281015956' TA62830586 10-OCT-06 -19,199.06 - CU RRI=NT , . 0.00 -42,219.80 --42,219.80 f - J. I J J I J• I J i F I I L i r I L I LI r I $ L 8 I N r v r N L l r w I 1 T L i r ! I J L' 12!20/07 10:41 AM z r Wozs VERIFICATION 1, James Fried, sign this Verification on behalf of Timex Corporation, and do hereby acknowledge that the foregoing Answer, New Matter and Counterclaim were prepared with the assistance and advice of counsel; that the document, subject to inadvertent or undiscovered errors, is based upon and therefore limited by the records and information still in existence, presently recollected and thus far discovered in preparation of this document; and that subject to the limitations set forth herein, the facts stated in this document are true and correct to the best of my knowledge, information, and belief. I understand that any false statements herein are made subject to penalties of 18 Pa. G.S. §4904, relating to unworn falsification to authorities. Date: 11 b By: •% 43HLed=-?- (NO7974481 CERTIFICATE OF SERVICE This is to certify that a copy of the foregoing has been mailed, postage prepaid, on the above date, to: Natalie Grill Einsig, Esquire Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 t Grubb, Esquire August 15, 2008 Page 2 of 4 i dawr Not Reported in A.2d Not Reported in A.2d, 2001 WI, 34039492 (Conn.Super.) Salvatore v. George Conn.Super.,2001. Only the Westlaw citation is currently available. UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING. Superior Court of Connecticut. Robert J. SALVATORE et al., v. Duane M. GEORGE. No. CV010163065S. Aug. 14, 2001. CHASE T. ROGERS, J. *1 The issue before the court is whether the defend- ants' motion to strike should be granted because the plaintiffs have failed to state a claim under the Con- necticut Unfair Trade Practice Act ("CUTPA") upon which relief may be granted. FACTUAL BACKGROUND On March 13, 2001, the plaintiffs, Robert Salvatore and Sorrina Salvatore, filed a five-count complaint against the defendant, Duane George. The plaintiffs allege claims for breach of contract (count one), breach of implied warranty (counts two and three), negligence (count four) and violation of the Con- necticut Unfair Trade Practices Act (CUTPA), Gen- eral Statutes § 42-110a et seq. (count five). The plaintiffs allege in their complaint that on July 21, 1998, the plaintiffs and the defendant signed an agreement for the construction and sale of a resid- ential house. The defendant warranted that the con- struction of the house would be done in a workman- like manner. Following a water leakage problem in the basement, the defendant refused to dig the ex- terior soil around the foundation and correct the problem from the outside. On several occasions, the defendant allegedly represented to the plaintiffs that Page 1 his attempted and proposed solutions would per- manently remedy the problem. In reliance on the defendant's representations, the plaintiffs did not hire another contractor to remedy the problem and went without the use of their basement for over a year. The defendant knew or should have known that his attempted proposed solutions would not remedy the actual problem. Furthermore, between February 1999, and June 2000, the defendant built a house for himself and a separate house for his son. On March 22, 2001, the defendant filed a motion to strike counts two, three and five of the plaintiffs' complaint. The court heard argument at short calen- dar on May 22, 2001, where both parties agreed that counts two and three should be stricken. The defendant's motion to strike count five is now be- fore the court. DISCUSSION "The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any com- plaints ... to state a claim upon which relief can be granted ... A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings ... [W]hat is necessarily implied [in an allegation] need not be expressly alleged."(Citations omitted; internal quotation marks omitted.) D'Amico v. John- son, 53 Conn.App. 855, 859, 733 A.2d 869 (1999)."In deciding upon a motion to strike ... a tri- al court must take the facts to be those alleged in the complaint ... and cannot be aided by the as- sumption of any facts not therein al- leged."(Citations omitted; internal quotation marks omitted.) Liljedahl Brothers, Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990). The court must "construe the complaint in the manner most favorable to sustaining its legal sufficiency."Sher- wood v. Danbury Hospital, 252 Conn. 193, 212-13, 746 A.2d 730 (2000). © 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works. httns://web2.westlaw.com/printlprintstream.aspx?sv=Split&rs=WLW8.08&prft=HTMLE&fn= top... 9/4/2008 Page 3 of 4 Not Reported in A.2d Not Reported in A.2d, 2001 WL 34039492 (Conn.Super.) *2 The defendant argues that count five should be stricken because the alleged wrongdoing involves a simple breach of contract claim and a negligence claim. The defendant argues that the alleged wrong- doing is nothing more than a single instance or private wrong which does not warrant an action un- der CUTPA. The defendant further argues that the plaintiffs have failed to allege that installing defect- ive drainage systems is part of the defendant's gen- eral business practice as required by CUTPA. In response, the plaintiffs argue that they have pleaded sufficient facts to establish a CUTPA claim. Specifically, the plaintiffs argue that CUTPA is applicable to a single transaction that occurs in the conduct of any trade or commerce. The plaintiffs further argue that they are not required to allege that the wrongful act is part of the defend- ant's general business practice. Currently, there is a split of authority within the Su- perior Court on the issue of whether a single act may constitute a CUTPA violation. The split of au- thority arises out of the language in General Stat- utes §§ 42-110b(a) and 42-110g(a). Section § 42-110b(a), phrased in the plural, provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or prac- tices in the conduct of any trade or com- merce."(Emphasis added.) Conversely, § 42-110g(a), phrased in the singular, provides, in relevant part, that "[a]ny person who suffers any as- certainable loss of money or property .., as a result of the use of employment of a method, act or prac- tice prohibited by 42-110b, may bring an action in the judicial district..." (Emphasis added.) "In interpreting the language of a statute, we are guided by the premise that we must consider the statute as written and read it as a whole ... [N]o part of a legislative enactment is to be treated as insigni- ficant or unnecessary, and there is a presumption of purpose behind every sentence, clause or phrase ... and no word in a statute is to be treated as superflu- ous. Insofar as it is possible, the entire enactment is to be harmonized, each part made operat- Page 2 ive."(Citations omitted; internal quotation marks omitted.) Groton v. Yankee Gas Services Co., 224 Conn. 675, 689, 620 A.2d 771 (1993). After considering §§ 42-110b(a) and 42-110g(a) as written and as a whole, this court adopts the line of cases that hold that a CUTPA claim may not be based on a single unfair or deceptive act. See, e.g., Connecticut Natural Gas Corp. v. Yankee Gas, Su- perior Court, judicial district of Hartford-New Bri- tain at New Britain, Docket No. 482269 (October 30, 1998, Graham, J.) ("in order to give purpose to the legislature's use of the plural terms in Section 42-110b(a), more than one such unfair act by a de- fendant is required to be proven by plaintiff"); Medeiros v. Federal Paper Board, Superior Court, judicial district of New London at New London, Docket No. 536477 (July 2, 1996, Hurley, J.)(17 Conn. L. Rptr. 310) ("the Legislature's use of the plural ... in General Statutes § 42-110b, instead of the singular, has significance as to what may con- stitute a CUTPA violation"). *3 Additionally, "It is well settled that in determin- ing whether a practice violates CUTPA [the court has] adopted the criteria set out in the `cigarette rule' by the federal trade commission for determin- ing when a practice is unfair: (1)[W]hether the practice, without necessarily having been previ- ously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or un- scrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businessper- sons] ... All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three."Hartford Electric Supply Co, v. Al- len-Bradley Co., Inc., 250 Conn. 334, 367-68, 736 A.2d 824 (1999). "A simple breach of contract, even if intentional, © 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works. 1----•ii.ueh2.westlaw.com/print/printstream.aspx?sv=Split&rs=WLW8.08&prft=HTMLE&fn= top... 9/4/2008 Page 4 of 4 Not Reported in A.2d Not Reported in A.2d, 2001 WL 34039492 (Conn.Super.) does not amount to a violation of [CUTPA]; a [plaintiff] must show substantial aggravating cir- cumstances attending the breach to recover under the Act ... Moreover, a simple contract breach is not sufficient to establish a violation of CUTPA ... where a count simply incorporates by reference the breach of contract claim and does not set forth how or in what respect the defendant's activities are either immoral, unethical, unscrupulous, or offens- ive to public policy ... However, [w]here the plaintiff alleges sufficient aggravating circum- stances, beyond a mere breach of contract that may bring the case within the cigarette rule, the CUTPA claim may withstand a motion [to strike]." (Citations omitted; internal quotation marks omit- ted.) Pete's Plumbing v. Meade, Superior Court, ju- dicial district of Danbury, Docket No. 340790 (April 12, 2001, Adams, J.)."[A] misrepresentation can constitute an aggravating circumstance that would allow a simple breach of contract claim to be treated as a CUTPA violation; it would in effect be a deceptive act ..." (Citations omitted; internal quo- tation marks omitted.) Designs on Stone, Inc. v. Brennan Construction Co., Superior Court, judicial district of Ansonia Milford at Milford, Docket No. 059997 (April 9, 1998, Corradino, J.)(21 Conn. L. Rptr. 659, 660). It should be noted, however, that "[n]ot every misrepresentation constitutes a CUTPA violation."Calandro v. Allstate Ins. Co., 63 Conn.App. 602, 617 (2001). After construing the complaint in the light most fa- vorable to the plaintiffs, the court finds that the de- fendant's motion to strike should be granted. The plaintiffs' argument that the CUTPA claim is leg- ally sufficient because it includes multiple allega- tions of misrepresentation, is unavailing. The de- fendant's alleged misrepresentations, including the remedying of the problem, arise out of the defend- ant's obligations under the contract. The contract was a single transaction. Accordingly, the motion to strike count five is granted because the plaintiffs have failed to allege multiple transactions and have also failed to allege substantial aggravating circum- stances that take this matter beyond a simple negli- gence and breach of contract claim. Page 3 Conn. Super.,200 1. Salvatore v. George Not Reported in A.2d, 2001 WL 34039492 (Conn.Super.) END OF DOCUMENT © 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works. westlaw.com/print/printstream.aspx?sv=Split&rs=WLW8.08&prft=HTMLE&fn=_top... 9/4/2008 CERTIFICATE OF SERVICE I hereby certify that on September 4, 2008, I served a copy of the foregoing Preliminary Objections of Plaintiff Rite Aid Hdqtrs. Corp. on counsel of record via United States mail, first class postage prepaid, addressed as follows: Steven E. Grubb, Esquire Goldberg Katzman, P.C. 320 Market Street P.O. Box 1268 Harrisburg, PA 17108-1268 Natalie Grill Einsig (PA 89791) r?.a C!s -?-_ _ .1 ?? +.-i1 r:..! "? "T7 C`a? f?:,.''r .-?aM1S.«.??^ Steven E. Grubb, Esquire (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Corporation RITE AID HEADQUARTERS CORP. IN THE COURT OF COMMON PLEAS Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA V. NO. 08-3995 CIVIL TIMEX CORPORATION Defendant SUPPLEMENT TO UNCONTESTED MOTION FOR ADMISSION PRO HAC VICE 1. On or about July 31, 2008, Defendant Timex Corporation filed an Uncontested Motion for Admission Pro Hac Vice. 2. On August 15, 2008, the Court rendered the Order attached hereto as Exhibit A which granted the Motion but made it subject to payment of the required fees to IOLTA. 3. Attached hereto as Exhibit B is the letter indicating that the candidates to be granted pro hac vice admission, Ann H. Rubin, Esquire and James K. Robertson, Jr., Esquire have paid the required fee to the IOLTA Board. 4. Judge Oler has ruled upon the initial Motion for Admission Pro Hac Vice. 162649.1 WHEREFORE, since the condition placed by the Court has been satisfied, it is respectfully requested that the Court sign the attached Order admitting Ann H. Rubin, Esquire and James K. Robertson, Jr., Esquire pro hac vice in the above-captioned matter. Date: September 9, 2008 162649.1 Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 AUG 1 9 2008 E-A - A ,( AUG 012008 ,91 1 RITE AID HEADQUARTERS CORP. Plaintiff V. TIMEX CORPORATION Defendant IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA : NO. 08-3995 CIVIL ORDER Upon consideration of the Defendant's Motion for Admission Pro Hac Vice, it is hereby ordered this day of 2008 that said Motion is granted and Attorneys Ann H. Rubin, Esquire and James K, J r., Esquire are admitted pro hac vice in the above- captioned matter S la gC C LO u1G P rrne.h? of .\e re U1res 4 ?ees ?d ?OLT?. S J 160770.1 SUPREME COURT OF PENNSYLVANIA PENNSYLVANIA INTEREST ON LAWYERS TRUST ACCOUNT BOARD P. O. BOX 1025 a 115 STATE STREET Ji.4RRISBURG, PENNSYLVANIA 17108-1025 7171238-2001 0 888-PA-IOLTA (724-6582) • 7171238-2003 FAX paiolia@pacourts.us www.paiolta.org Chair DI4UREEN R KELLY. Esquire September 8, 2008 Two Gateway Center 601 Stanwix Street. 8th Floor Pittsburgh, PA 15222-5412 yi,,-cj,,,tr Sent by fax: (203) 575-2600 WILLI 5,M P. CARLUCCI. Esquire Williamsport, PA Ann H. Rubin, Esquire CARMODY & TORRANCE, LLP B dm,=h,6 50 Leavenworth St. BI )BERT X. GILROY. Esquire PO Box 1110 Carlisle. PA Waterbury, CT 06721 LEi 7IS F. GOULD, JR., Esquire Philadelphia, PA Dear Attorney Rubin: WiLI IAM T. HANGLEY, Esquire Philadelphia. PA This letter serves as the fee payment certification referenced in 204 P.3 Code §81.503 and acknowledges receipt of the $100 fee paid t y Check, number PENIN.F.KESSLERLISBER,Esquire 196809, on this date related to your pursuit for admission pro hac vice in the Pittsburgh, PA case identified as Rite Aid Headquarters Coro. v. Tirr.ex corporation, case no. l. . MARK MENDEL, Esquire 08-3995, filed in the Court of Common Pleas of Cumberland County. Philadelphia, PA You should refer to Pa Rule of Civil Procedure 1012.1, lo:al court rules, and 1. ICHAEL H. REED, Esquire other regulations of 204 Pa Code §81.501 et. seq. concerning additional Philadelphia, PA requirements related to seeking pro hac vice admission. Al rDREW F. SUSKO, Esquire Sincerely, Philadelphia, PA Alfred 4.) Az?'' E LEtN Executive Director ALFRED J. AZAZE A cc: Steven E. Grubb, Esq. (717) 234•46808 G:\CL\DOC\PHW\CK LTR\2008\Sep\September 8.wpd Administering Pennsylvania's Interest On Lawyers Trust Account (10L'17A) A ogram CERTIFICATE OF SERVICE I HEREBY CERTIFY that I served a hue and correct copy of the foregoing document upon the following counsel of record by depositing the same in the United States Mail at Harrisburg, Pennsylvania with first-class postage prepaid on July 30, 2008. Natalie Grill Einsig, Esquire Pepper Hamilton, LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 GOLDBER TZM , P.C. By S ven E. Grubb, Esqui a (No. 75897) 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 162649.1 r?+ O RITE AID HEADQUARTERS CORP. IN THE COURT OF COMMON PLEAS Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA V. TIMEX CORPORATION Defendant NO. 08-3995 CIVIL ORDER Upon consideration of the Defendant's Motion for Admission Pro Hac Vice, it is hereby ordered this l I "day of 2008 that said Motion is granted and Attorneys Ann H. Rubin, Esquire and James K. Robinson, Jr., Esquire are admitted pro hac vice in the above- captioned matter. 162649.1 C\l N N U 00 b C r . I 00 Q A a RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. 08-3995 CIVIL VS. TIMEX CORPORATION, CIVIL ACTION - LAW Defendant. PRAECIPE FOR LISTING CASE FOR ARGUMENT TO THE PROTHONOTARY: Please list the above-referenced matter for the December 3, 2008 argument court. 1. Matter to be argued: Preliminary Objections of Plaintiff Rite Aid Hdqtrs. Corp. to Defendant's Counterclaim 2. Counsel: A. Counsel for plaintiff who will argue the case: Brian P. Downey, Esquire, or Natalie Grill Einsig, Esquire, Pepper Hamilton LLP, Suite 200, 100 Market Street, P.O. Box 1181, Harrisburg, PA 17108-1181 B. Counsel for defendant Timex Corporation: Steven E. Grubb, Esquire, Goldberg Katzman, P.C., 320 Market Street, P.O. Box 1268, Harrisburg, PA 17108-1268 Date: October 14, 2008 Brian P. Downey, Esquire (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP Suite 200, 100 Market Street P.O. Box 1181 Harrisburg, PA 17108-1181 717.255.1155 717.238.0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com Attorneys for Plaintiff Rite Aid Hdgtrs. Corp. i A CERTIFICATE OF SERVICE I hereby certify that on October 14, 2008, I served a copy of the foregoing Praecipe for Listing Case for Argument on counsel of record via United States mail, first class postage prepaid, addressed as follows: Steven E. Grubb, Esquire Goldberg Katzman, P.C. 320 Market Street P.O. Box 1268 Harrisburg, PA 17108-1268 I _ Natalie Grill Einsig (PA 89791) n ?__ ,? ^-1 t73 ? °7 '..? ? -- -r-' tl.w J ?;' - „, ? `i r? ? '?+» . RITE AID HEADQUARTERS CORPORATION, PLAINTIFF V. TIMEX CORPORATION, DEFENDANT IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA : 08-3995 CIVIL TERM IN RE: PRELIMINARY OBJECTIONS OF PLAINTIFF TO DEFENDANT'S COUNTERCLAIM BEFORE BAYLEY, J. AND EBERT, J. ORDER OF COURT AND NOW, this 5th day of December, 2008, the preliminary objections of plaintiff to defendant's counterclaim, ARE DISMISSED. Natalie Grill Einsig, Esquire Pepper Hamilton LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 For Plaintiff Thomas Brenner, Esquire 320 E. Market Street Strawberry Square Harrisburg, PA 17108 For Defendant :sal C6F1;=S m? LL 1 Ia f s?o8 LU ._.. ,? its D 1 Q., Q CM3 c Brian P. Downey (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 Post Office Box 1181 Harrisburg, PA 17108-1181 (717) 255-1155 (717) 238-0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com TO: DEFENDANT TIMEX CORPORATION You are hereby notified to file a written response to the enclosed New Matter within twenty (20) days from service hereof or a judgment may be entered against you. Pepper Hamilton LLP Q ?? - 13y: Natalie Grill Einsig (PA 89791) Attorneys for Plaintiff Rite Aid HDQTRS. CORP. RITE AID HDQTRS. CORP., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff, NO. 08-3995 CIVIL VS. TIMEX CORPORATION, : CIVIL ACTION - LAW Defendant. ANSWER WITH NEW MATTER OF PLAINTIFF RITE AID HDQTRS. CORP. TO DEFENDANT'S NEW MATTER AND COUNTERCLAIM Plaintiff Rite Aid HDQTRS. CORP. ("Rite Aid") by its undersigned attorneys, answers defendant Timex Corporation's ("Timex") New Matter and Counterclaim as follows: NEW MATTER Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 2. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 3. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 4. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. WHEREFORE, Plaintiff Rite Aid HDQTRS. CORP. request that judgment be entered in its favor and against Timex as requested in the Complaint. COUNTERCLAIM 1. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. COUNT ONE: BREACH OF CONTRACT 2. Denies as stated. Rite Aid admits that it purchased merchandise from Timex for sale in Rite Aid stores, but denies that it agreed to "promptly pay Timex the prevailing prices for that merchandise." To the contrary, Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable, and therefore, did not become bound to pay Timex the "prevailing prices" for such merchandise. 3. Denies. Rite Aid denies that it agreed to the Terms & Condition of Sale attached as Exhibit A to Timex's counterclaim. By way of further response, Rite Aid and Timex entered into a Vendor Supply Chain Guide agreement which set forth purchase order terms and conditions governing the purchase and sale of Timex watches, including a choice of law provision providing that Pennsylvania law would govern any dispute between the parties. See -2- Vendor Supply Chain Guide p. 8. A true and correct copy of the Vendor Supply Chain Guide is attached hereto as Exhibit A. 4. Denies. Rite Aid denies that it purchased merchandise from Timex pursuant to Timex's Terms and Conditions. Rite Aid did not agree to Timex's Terms and Conditions. By way of further answer, Rite Aid is without knowledge sufficient to form a belief as to Timex's business practices, and accordingly, the remaining allegations of this paragraph are denied. 5. Admits. 6. Denies. Rite Aid denies that Timex delivered merchandise "consistent with the usual practice of Timex and Rite Aid and the Terms and Conditions" in that Rite Aid does not know what Timex means by "the usual practice." By way of further answer, Rite Aid did not agree to Timex's Terms and Conditions. 7. Admits. 8. Denies as stated. Rite Aid denies that Timex informed Rite Aid that it would "not enter into a contract" for funding for the fixture displays. To the contrary, contracts had already been entered into between Rite Aid and Timex. In June, 2006, Rite Aid and Timex entered into Incremental Investment Agreements ("Agreements") whereby Timex agreed to fund display fixtures to promote the sale of Timex's watches at Rite Aid stores during Fiscal Years 2007 and 2008. True and correct copies of the Incremental Investment Agreements, valid and enforceable written contracts, are attached to Rite Aid's complaint as Exhibit A. On July 28, 2006, Timex informed Rite Aid that it would not participate in the display fixture funding initiative and therefore, breached the Agreements when it refused to fund the fixtures pursuant to -3- the Agreements. See email dated July 28, 2006 from Don Turano of Timex to William W. Renz of Rite Aid, attached to Rite Aid's complaint as Exhibit B. 9. Admits in part, denies in part. Rite Aid admits that Timex delivered merchandise to Rite Aid. Rite Aid denies that it continued to order merchandise from Timex pursuant to Timex's Terms and Conditions. Rite Aid did not agree to Timex's Terms and Conditions. 10. Denies. Rite Aid denies that it accepted the merchandise. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable. By way of further answer, to the extent this paragraph states a conclusion of law, no response is required and it is accordingly denied. 11. Denies. Rite Aid denies that it violated Timex's Terms and Conditions. Rite Aid did not agree to Timex's Terms and Conditions. 12. Admits in part, denies in part. Rite Aid admits that it has not remitted payment for some of the merchandise delivered by Timex to Rite Aid for sale in Rite Aid's stores. Rite Aid denies that it owes Timex for the amount not remitted. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable, and therefore, does not owe Timex for such merchandise. 13. Denies. Rite Aid denies that it accepted all merchandise. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable. By way of further answer, to the extent this paragraph states a conclusion of law, no response is required and it is accordingly denied. 14. Denies. Rite Aid denies that it purchased merchandise with the intention of accepting it and not remitting payment to penalize Timex for not entering into an agreement to -4- contribute to the cost of the fixture display. On or about August 7, 2006, another vendor, International Watch Group ("IWG"), agreed to fund the display fixtures covered under the Agreements and assist in markdown funding for the Timex watches. See agreements dated August 7, 2006 between IWG and Rite Aid attached to Rite Aid's complaint as Exhibit C. By way of further answer, to the extent this paragraph states a conclusion of law, no response is required and it is accordingly denied. 15. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. To the extent an answer is required, Rite Aid denies that that it owes Timex $413,230.55. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable (collectively, "unsaleables"). The amount of these unsaleables was then deducted from the amount due to Timex. Similarly, Timex agreed to an advertising allowance to fund advertising of its product, which was also deducted from the amounts owed by Rite Aid. By way of further answer, any amount allegedly owed by Rite Aid is further offset by the loss of revenue Rite Aid suffered as a result of Timex's breach of the Incremental Investment Agreements. 16. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. To the extent an answer is required, Rite Aid denies that that unpaid charges amount to $141,400.35. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable (collectively, "unsaleables"). The amount of these unsaleables was then deducted from the amount due to Timex. Similarly, Timex agreed to an advertising allowance to fund advertising of its product, which was also deducted from the amounts owed by Rite Aid. By way of further -5- answer, any amount allegedly owed by Rite Aid is further offset by the loss of revenue Rite Aid suffered as a result of Timex's breach of the Incremental Investment Agreements. 17. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. To the extent an answer is required, Rite Aid denies that unpaid charges amount to $314,050.00. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable (collectively, "unsaleables"). The amount of these unsaleables was then deducted from the amount due to Timex. Similarly, Timex agreed to an advertising allowance to fund advertising of its product, which was also deducted from the amounts owed by Rite Aid. By way of further answer, any amount allegedly owed by Rite Aid is further offset by the loss of revenue Rite Aid suffered as a result of Timex's breach of the Incremental Investment Agreements. 18. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. To the extent an answer is required, Rite Aid denies that it accepted merchandise amounting to a total of $455,450.35. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable (collectively, "unsaleables"). The amount of these unsaleables was then deducted from the amount due to Timex. Similarly, Timex agreed to an advertising allowance to fund advertising of its product, which was also deducted from the amounts owed by Rite Aid. By way of further answer, any amount allegedly owed by Rite Aid is further offset by the loss of revenue Rite Aid suffered as a result of Timex's breach of the Incremental Investment Agreements. 19. Admits. -6- 20. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. To the extent an answer is required, Rite Aid denies that it accepted merchandise amounting to a balance of $413,230.55. Rite Aid did not accept all merchandise, specifically merchandise deemed damaged, defective, outdated, discontinued or otherwise unsaleable (collectively, "unsaleables"). The amount of these unsaleables was then deducted from the amount due to Timex. Similarly, Timex agreed to an advertising allowance to fund advertising of its product, which was also deducted from the amounts owed by Rite Aid. By way of further answer, any amount allegedly owed by Rite Aid is further offset by the loss of revenue Rite Aid suffered as a result of Timex's breach of the Incremental Investment Agreements. 21. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 22. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 23. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. COUNT TWO: UNFAIR AND DECEPTIVE TRADE PRACTICES 1-23. Paragraphs 1 through 23 of the First Count are hereby incorporated by reference as if fully set forth herein. 24. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. 25. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. -7- 26. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. COUNT THREE: SETOFF 27. Denies. This paragraph states a conclusion of law to which no response is required and it is accordingly denied. WHEREFORE, Rite Aid HDQTRS. CORP. requests that judgment be entered in its favor and against Timex Corporation, and such other and further relief as this Honorable Court deems appropriate. NEW MATTER 1. Timex's claim fails to state a claim upon which relief may be granted. 2. Rite Aid did not breach any duty, contractual or otherwise, allegedly owed to Timex. 3. Timex's cause of action against Rite Aid is barred by the equitable doctrines of estoppel, laches, and waiver. 4. Rite Aid is entitled to an equitable right of setoff. 5. Rite Aid does not waive any of the affirmative defenses enumerated in Pa. R.C.P. 1030 or any other affirmative defense and hereby gives notice that the defendant relies upon such other defenses as may become available or appear during the course of discovery proceedings in this case. Rite Aid reserves the right to amend this answer to assert such defenses. WHEREFORE, Rite Aid HDQTRS. CORP. requests that judgment be entered in its favor and against Timex Corporation, and such other and further relief as this Honorable Court deems appropriate. -8- Respectfully submitted, LL CL S-L? Brian P. Downey, Esquire (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 717.255.1155 717.238.0575 Fax downeyb @pepperlaw. com einsign@pepperlaw. com Date: December 24, 2008 Attorneys for Plaintiff Rite Aid Hdqtrs. Corp. -9- VERIFICATION Ron Chima signs this Verification on behalf of Rite Aid HDQTRS. CORP., and does hereby verify that the foregoing answer with new matter to counterclaim was prepared with the assistance and advice of counsel, and in reliance upon counsel's advice; that the document, subject to inadvertent or undiscovered errors, is based upon and therefore limited by the records and information still in existence, presently recollected and thus far discovered in preparation of this document; and that subject to the limitations set forth herein, the statements contained in this document are true and correct to the best of his knowledge, information and belief. The language of the foregoing document is that of counsel. It is understood that the statements herein are made subject to the penalties of 18 Pa. C.S. § 4904 relating to unsworn falsification to authorities. RON HIMA Date: December 51 2008 CERTIFICATE OF SERVICE I hereby certify that on December 24, 2008, I served a copy of the foregoing Answer with New Matter of Plaintiff Rite Aid HDQTRS. CORP. to Defendant's New Matter and Counterclaim on counsel of record via United States mail, first class postage prepaid, addressed as follows: Steven E. Grubb, Esquire Goldberg Katzman, P.C. 320 Market Street P.O. Box 1268 Harrisburg, PA 17108-1268 Ann H. Rubin, Esquire Carmody & Torrance, LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 Natalie Grill Einsig (PA 89791) 04 A io RITE IL 1--i A AID] Vendor Supply Chain Guide Revised: March 1, 2005 Vendor Supply Chain Guide Content Page I. INTRODUCTION Letter from Executive Management .................... ............2 ................................ How to use this Guide ......................................................................................3 II. MERCHANDISE INFORMATION & TECHNOLOGY Item Information ......................... UPC ............................................. ....... 4-5 ............................................... New Items & Merchandise Samples ......................................................5 Notification of Changes .............................................. ....................5 Date Codes / Shelf Life ............................. ............................ 5-7 ............. PO Terms & Conditions .......................................................................... 7-10 Replenishment Guidelines ..................................................... EDI- Electronic Data Interchange ........................................................ 12-13 EDI Document of Understanding ......................................................... 14-17 Source Tagging Program ........................................................... . 17-18 Unsaleable Merchandise Policy ............................................................ 19-20 Recalls ..................................................................................................... 20-24 III. SHIPMENT & ROUTING GUIDE Distribution.......... ..................... Appointment Scheduling ......................................... 25-26 ....................... Marking & Labeling of Cartons ...........................................................26 Pallets / Packing Slips .................. .27 ....................................................... Transportation .............................................................................................28 Bill of Lading Requirements .......................................................... 28-29 Prepaid Shipments: LTL & TL ...................................................... 29-30 General Routing Instructions ......................................................... 30-31 Distribution Center Listing ..................................................................32 Routing Guide ................. ....... 33-35 ................................... IV. ACCOUNTS PAYABLE Vendor Information .................... ....................... 36 New Vendor Setup ...................................................... .......... Changes to Existing Vendor Files ........................................................37 Invoicing ........................................ ................ 38 Requirements ............................................... Payment Policies ................... 38-39 Vendor Inquiries and Correspondence ........................................... 39-40 V. VENDOR MANAGEMENT PROGRAM Key Performance Indicators (KPI's) ........................................................ 41 Performance & Compliance Metrics .............................................. 41-42 Performance & Compliance Metric Definitions ............................ 42-43 Vendor Inquiries and Correspondence .................................................43 VI. EXPENSE OFFSETS .........................................................................................44 VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL ............... 45-63 VIII. IMPORT MANUAL .................................................................................. 64-77 IX. LETTER OF ACKNOWLEDGEMENT ................................ 3/14/2005 Vendor Supply Chain Guide Jim Mastrian Rite Aid Senior Executive Vice President 30 Hunter Lane Marketing and Logistics Camp Hill, PA 17011 Dear Vendor: Rite Aid's goal is to develop a business partnership that will be long and prosperous for both our companies. The requirements set forth in the Vendor Supply Chain Guide will allow us both to benefit from increased sales by striving to reduce processing time and increase the "turn" on your merchandise. Rite Aid is committed to improving supply chain efficiencies associated with the receipt, processing, storage, shipping and invoicing of your merchandise. The Vendor Supply Chain Guide provides key information on how to conduct business with Rite Aid, specifically: Merchandise Information and Technology - provides requirements for accurate item information, purchase orders, unsaleable merchandise and EDI. Shipment and Routing - outlines the requirements for distribution and transportation of merchandise. Accounts Pale - provides requirements for accurate vendor information and invoice processing. • Key Performance Indicators (KPI's) - details the KPI's that we have selected to monitor the compliance/performance of warehouse vendors. • Expense Offsets - identifies non-compliance areas and penalties. • Import Information - outlines requirements for our import vendors. Enclosed you will find detailed information for each of these areas, as well as other requirements. Should you have any questions, please contact the individual specified in this guide or your respective category manager. We also encourage all of you to visit Supplier central on the Rite Aid website at http://www.riteaid.com/company info/Supplier central/. Your cooperation in honoring the procedures set forth will contribute to a working relationship that will be successful for both our companies! Sincerely, Jim Mastrian 2 3/14/2005 Vendor Supply Chain Guide 1. INTRODUCTIONS How to Use this Guide This guide is intended as a general overview of key vendor performance indicators, merchandise information and technology, distribution, transportation, and accounts payable. Each section will explain Rite Aid's requirements accordingly. Special notes • This guide contains information for Warehouse vendors - it does not cover Direct Store Delivery vendors or Pharmacy vendors. • An import section has been included for our import vendors; however, a thorough review of the Rite Aid International Policies & Procedures manual is also recommended. • The Rite Aid website httl2://www.riteaid.c:)m/co mvanv info/Supplier central/ provides additional vendor information; including, but not limited to the following: • Leadership (Category Management Team) • New & Current Vendor/ New Item Submissions • EDI startup and specification information • Shipping & Routing Information • Forms Library • Vendor Compliance Scorecard • Directions to Rite Aid Headquarters • Rite Aid reserves the right to alter, amend, or change any of the policies contained within the Vendor Supply Chain Guide at any time. It is the responsibility of the vendor to maintain updated record of all Rite Aid policies & procedures. Nothing herein shall be deemed to constitute a limitation or waiver of any obligations or responsibilities that a Vendor may have or of any rights or remedies that Rite Aid may have, under law or in equity, all of which are hereby expressly reserved. • Vendor Compliance Requirements were effective as of March 1, 2002. 3 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY The Merchandise Information and Technology section outlines the requirements for accurate item information, purchase order processing, Rite Aid's expanding automation effort and the unsaleable merchandise policy. Item Information (UPC) Accurate item information is critical for Rite Aid to service our customers and effectively manage inventory. Rite Aid requires vendors to join the Uniform Code Council (UCC) in order for their products to be UPC source marked and in compliance with set standards. The council may be contacted at: (800) 543- 8137. Not only is accurate item information necessary, but notification of changes is even more critical. Some of the frequently identified problem areas include: • No UPC on merchandise that has a UPC assigned to it. • UPC is incorrect on merchandise or carton. • Vendor uses same UPC when product has changed. • Vendor has changed the UPC number without notifying Rite Aid. • Pack size or carton quantity is changed without notification. • Bar code of poor quality and will not scan. • Single unit UPC on master carton case. To prevent such issues, the following information provides the requirements for new item setup, notification of changes, and date code/shelf life. NEW ITEM INFORMATION & MERCHANDISE SAMPLES When setting up new items, Rite Aid requires at least 6 (six) samples of new items for advertising and planogram purposes. These samples are to be provided free of charge to Rite Aid. In addition to the samples, the following information is required: • General information about the product, i.e., item description, product identification numbers, appropriate UPC numbers, selling units per layer and pallet, is the item Checkpoint EAS source- tagged, case pack information, appropriate "optional" displays available (side panels etc.), terms of sale, i.e., opening order pricing/terms/guarantee sale. • An ongoing review process is underway to continually evaluate whether a given product or line should be shipped on a collect versus prepaid basis. To help facilitate this process, prices for product should be provided on both a collect and prepaid basis. New Vendors should be prepared to present all initial products with both price formats. • Key features/benefits of product being presented. • Marketing/advertising plans, nationally and account specific. 4 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY • IRI/Nielsen market data where available and applicable. • Competitive retail accounts information; which other retail accounts carry the product and what is the competitive retail pricing for the product/products being submitted? Are the products source- tagged for other retail accounts? • Specific comparison information to products that the new item/items might replace and/or compete with. • Contact person, telephone number, to include toll free number if available, Fax number, and mailing address. • Under separate cover submit product samples. These product samples will not be returned to you. Do not send one-of-a-kind prototypes. • All products viewed as high-theft are required to be source-tagged. A Source-tagging Start Up Form must be completed and sent to Checkpoint Systems along with one (1) sample of the product for evaluation. Obtain this form by contacting the Rite Aid In-House Source-Tagging Coordinator, Marian Deppen at 717-975-5719. Please see the Source Tagging Program section on page 17 for additional details. NOTIFICATION OF CHANGES Business demands will require changes, and proper lead-time for communicating these changes will reduce potential service and inventory issues. The chart below lists such changes and the communication requirements Rite Aid expects of its vendors CHANGE GUIDELINES Pricing - Vendors must provide 60 day notice for permanent price changes and deals which must be accompanied by a competitive price shop Case Pack - 60 day notice Product Change - Request UPC change Substitutions - Advance notification Line Discontinuation - 120 day notice DATE CODES / SHELF LIFE The Rite Aid Distribution Centers will receive/accept delivery of date-coded merchandise from vendors within the following guidelines: 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY DATED PRODUCT PROCESSING GUIDELINES Revised: 10-29-03 The following is a schedule of product categories and the average shelf life for most products within the category and is intended to be a guide. The following date-coded items must be... ? received with at least Three Months of dating pulled from center inventory (45) days prior to the expiration date Category Average Shelf Life 100% Juice 6 months to 12 months Candy with Nuts 6 months to 9 months Cereal Bars 6 months to 9 months Cookies 6 months to 12 months Crackers 6 months to 9 months The following date-coded items must be... ? received with at least Six Months of dating pulled from center inventory (45) days prior to the expiration date Cate o Average Shelf Life Candy (peg & gondola bags) - Chocolate Non-Chocolate 9 months to 12 months 12 months Candy front check out-chocolate 9 months to 12 months Convenience Food boxed oods : 9 months to 2 ears Snacks (chips/party mix/nuts 9 months to 15 months Cereal 9 months to 18 months Cigars 6 months to 12 months Gum 9 months to 18 months Bab Food & Formula 9 months to 12 months Juice Drinks 12 months Peanut Butter 12 months Coffee 12 months Microwave Popcorn 12 months Convenience Meals 12 months Nutritional Bars 12 months The following date-coded items must be... received with at least Nine Months of dating ? pulled from center inventory (45) days prior to the expiration date Category Average Shelf Life Candy front check out-hard candy/mints) 1 year to 2 ears Sou 1 year to 2 ears Adult Nutrition 1 year Nutritional Supplements 1 year to 2 ears Pet Food (dry/bagged/treats) 1 year Cigarettes, Little Cigars & Smoking Tobacco 1 year to 2 ears Water 1 year to 2 ears 6 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY The following date-coded items must be... received with at least One-Year of dating pulled from center inventory (45) days prior to the expiration date Category Average Shelf Life Film & One time use cameras 18 months to 2 years Convenience Food canned goods) 18 months to 7 ears Spices 12 months to 4 ears Raisins / Prunes 2 ears The following date-coded items must be... received with at least Two Years of dating ? pulled from center inventory (60) days prior to the expiration date Category Average Shelf Life Pet Food canned 2 ears Vitamins, Cough & Cold, Analgesics, First Aid, Diabetes, Eye/Ear Care, Toothpaste & Mouthwash, Diagnostics, Condoms 2 years to 3 years Medicated Soaps & Shampoos, Feminine Hygiene, Suntan Lotions 2 years to 5 years Batteries 4 ears to 7 ears Product that does not meet the above guidelines will not be accepted by the Distribution Centers. P.O. TERMS & CONDITIONS Rite Aid's "Terms and Conditions" are listed as follows. Said terms and conditions will govern in the event of any conflict between Purchase Order and any other document. The term "Purchaser" refers to Rite Aid and its subsidiaries, affiliates and assigns. The term "Vendor" refers to the party to whom this order is addressed. 2. By acceptance of this order, Vendor agrees to sell and deliver, and Purchaser agrees to purchase and accept from Vendor, the goods described in this Purchase Order, in conformance with and subject to all of the terms, conditions, definitions, and instructions contained herein. Force Majeure: Vendor shall not be liable for any delay or failure to deliver any or all the goods if that delay or failure is caused by labor disputes, strikes, war, riots, insurrection, civil commotion, fire, flood, accident, storm or any act of nature. The Purchaser shall not be liable for failure to take delivery of the goods attributable to any of the causes specified in this paragraph if they render it commercially impractical for the Purchaser to receive the goods. When either Vendor or the Purchaser claims an excuse for nonperformance under this paragraph, they must give reasonable notice to the other party. 7 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY 4. In the event any dispute arises between the Vendor and Rite Aid, either party may request in writing an opportunity to meet and confer regarding the dispute. If such a request is made, it is mandatory that the parties meet and confer within 45 days of the date of the written request. This meet and confer will take place at Rite Aid, 30 Hunter Lane, Camp Hill, PA 17011, unless Rite Aid, in its sole discretion, chooses a different location. If the meet and confer is unsuccessful the parties agree that the dispute will be resolved through mandatory, binding, nonappealable Alternate Dispute Resolution. Rite Aid, in its sole discretion, shall choose the type of Alternate Dispute Resolution that will govern the dispute. Pennsylvania law shall govern without giving effect to its choice of law rules. 5. Vendor warrants, represents, and guarantees to Purchaser that all goods, and the production, billing, advertising, shipping, sale and use thereof, comply with all federal, state and local laws and regulations applicable thereto, and do not infringe upon or violate any patent, trademark, copyright or any other rights. 6. Vendor must indicate a rejection of this order and all terms and conditions via fax or email to the replenishment buyer within five (5) days of the date of the purchase order, otherwise the order is deemed accepted. Vendor agrees to defend, protect, indemnify and save harmless the Purchaser, its assigns, subsidiaries, affiliates and customers from all losses, claims costs, suits, damages, fines, penalties, expenses, and counsel fees incurred or suffered by reason of any breach of this Agreement and any injury to or death of any person or loss of or damage to any property arising from the sale, offering for sale or use of the product, or arising from services provided by the Vendor in connection therewith. These indemnification provisions shall survive the termination of the Agreement. 8. Vendor warrants, represents and guarantees to Purchaser that the goods covered by this order are fit and safe for consumer use and that they comply (and will perform in accordance) with all Vendor's warranties, express and implied, and acceptance of the order shall constitute an agreement upon Vendor's behalf to indemnify, defend and hold the Purchaser harmless from all claims, liability, loss, damage and expense (including reasonable attorneys' fees and costs) incurred or sustained by Purchaser by reason of any breach of such warranties. These indemnification provisions shall survive the termination of the Agreement. 9. Vendor agrees to abide by and ship goods in accordance with the current Vendor Management Program Guide. This does not apply to Corporate and Store Supply purchases. (see Vendor Supply Chain Guide at http://www.riteaid.com/company_.info/supplier central) 10. In case of any threat of action or claim against Purchaser by any person or entity due to use, sale, offering for sale or shipment of any goods Purchaser shall, at its election, and in addition to its rights herein and any other remedies, be entitled to receive from Vendor full payment in cash of the invoice price paid by Purchaser plus all expenses incurred upon tendering to Vendor any remaining goods so complained against, unless, within ten (10) days from demand for such payment Vendor shall offer surety or other assurances satisfactory to Purchaser for the performance of its obligations. 8 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY 11. In the event that any goods covered by this order are subject to the Federal Food, Drug and Cosmetic Act, Wool Products Labeling Act, Fur Products Labeling Act, Flammable Fabrics Act, Consumer Products Safety Commission CA Prop. 65, and/or other various rules and regulations of an appropriate federal or state agency, Vendor's invoice shall bear the separate guarantees provided under the Acts or state that such invoice provides a continuing guarantee in favor of Purchaser and its customers that the goods and products comply with such applicable federal or state statutes. 12. In the event of sale by sample, Vendor represents and warrants to Purchaser that the goods delivered shall in all respects conform with the samples provided. Purchaser has the right to either cancel or return any or all portions of the goods delivered due to failure to conform. It is expressly understood that an order given by Purchase to Vendor is made on the basis of the sample and goods delivered being of the same quality and other attributes. 13. Goods rejected due to inferior quality or workmanship will be returned to Vendor for cash or credit at Purchaser's option, with full reimbursement for transportation charges, labor, repacking, loading, etc. and such goods are not to be replaced, except upon written instructions from Purchaser. 14. Purchaser may deduct for damage or shortage in shipment. 15. Partial orders will not be accepted unless authorized by the Purchaser. This does not apply to Corporate and Store Supply purchases. 16. Freezable goods are shipped at Vendor's risk. 17. Purchaser will return, without Vendor approval, all mis-shipped goods at Vendor's expense. 18. Vendor warrants to Purchaser that the prices charged herein do not exceed those charged to any other purchaser similarly situated, excluding the Government, under the same circumstances, quantity and quality considered. 19. If no price or terms are mentioned in this order, goods will be billed at the same price and terms used in prior shipments made to Purchaser by Vendor or a lower price, if a lower price is offered. Furthermore, in the event Vendor issues a price reduction prior to shipment, the reduced price shall apply to the order. 20. Should Vendor offer any deal of any nature on goods ordered herein prior to the last day of the calendar month following shipment of this order, Purchaser shall receive credit on such goods ordered in accordance with such deal. 21. Purchaser is not responsible for transportation charges on back orders if the original order is qualified as a prepaid shipment. 22. Purchaser's count will be accepted as final and conclusive on all shipments not accompanied by a packing list. 9 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY 23. Cash discount terms must be clearly stated. The cash discount period extends from the invoice date through discount due date. Invoices must be received in a timely manner. The cash discount period reflected on invoices returned for correction will extend from the receipt of corrected invoice. The invoice due date will be calculated based on receipt of goods and based upon the most favorable of the invoice or purchase order terms. Vendor terms will be standard across entities. Checks will not be sent via overnight services. 24. Purchaser reserves the right, at its option, to take an anticipation discount for payment made in advance of the due date or dates indicated on the front of this order. 25. Purchaser, at its option, can off-set any of Vendor's indebtedness to Purchaser against any indebtedness owed to Vendor. 26. In the event of insolvency or bankruptcy of Vendor, Purchaser shall consider such insolvency or bankruptcy as a breach of this Agreement and may, at its option, terminate said Agreement without prejudice to its right to damages. Furthermore, Vendor cannot assign any or all of its obligations or rights under this Agreement without Purchaser's prior written approval. 27. Purchaser's waiver of any single breach of this Agreement by Vendor shall not constitute a waiver of any similar or other breach. 28. There shall not be charged to Purchaser any tax or increase therein imposed by any foreign or domestic authority on the price, commodity, sale, or any feature of this transaction, except such as may be included in or reflected in the price stated herein. Vendor shall be responsible for all such charges, if any. 29. Vendor shall report immediately any incorrect price and/or discount and/or noticeable discrepancies in quantities and sizes. For the purpose of this Agreement, "immediately" shall mean five (5) days from Vendor's becoming aware or receiving notice of any problem. 30. In the event Vendor accepts this order on a form bearing terms, conditions, definitions and/or instructions in conflict with those contained herein, all such conflicts shall be resolved in favor of such terms, conditions, definitions and instructions as herein contained. 31. Vendor agrees to procure and maintain at Vendor's sole cost and expense Comprehensive Public Liability Insurance, including products and contractual liability, with limits of liability of not less than $5.0 million combined single limit per occurrence with an insurance company satisfactory to Rite Aid. Said policy of insurance shall name Rite Aid as a named insured. Such policy or duly executed certificate of insurance shall be delivered to Rite Aid within 15 days from date of Defense and Indemnity Agreement and renewals thereof shall be delivered at least 30 days prior to the expirations of the policy term. Q. In situations where Rite Aid's policy conflicts with a vendor's policy, Rite Aid's policy should prevail, unless separately negotiated and agreed in writing by senior Rite Aid officers. Any unilateral vendor policy, without the expressed written acceptance of a senior Rite Aid official, should not be honored. Rite Aid should ensure that its policies govern its transactions and that a vendor does not impose its unfavorable terms on Rite Aid. 10 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY Replenishment Guidelines 1. All vendor inquiries pertaining to vendor compliance should be directed to vendormgmK3riteaid.com. 2. Product ordered under one PO is not to be received against a different PO. If the product is kept, a new purchase order should be created. 3. Vendors should notify the Replenishment Buyer at least 48-hrs prior to the order due date to request any order modifications. Replenishment buyers have full discretion regarding order modifications. 4. All guidelines outlined in the Vendor Supply Chain Guide should be enforced including proper notice of case pack quantity changes, product substitutions and item discontinuations. 5. Free Goods purchase orders are to be compliant to all Performance and KPI metrics. 6. Rite Aid will leave an item/ order open to receive as a courtesy but authorization to accept a back order does not waive the compliance implications for the vendor. 7. Any purchase orders that are cancelled by the Replenishment Buyer, regardless of the status, should be communicated to the vendor. 8. The vendor is responsible for maintaining accurate lead times by DC/CSC location. If the vendor is unsure of the current lead times or wishes to revise the lead times, they should contact their Replenishment Buyer. 11 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY EDI - Electronic Data Interchange / Electronic Commerce Rite Aid is committed to responding quickly to our customers needs. EDI is a critical part of this strategy. We expect that you will meet our request and become an EDI Vendor. Therefore, we are supplying you with some general information about Rite Aid and our use of EDI. INDUSTRY GUIDELINES All Rite Aid requirements are within the accepted VICS (Voluntary Inter-Industry Communication Standards) guidelines. ANSI X.12 is the published industry guidelines regarding electronic transmission and is maintained by the Accredited Standards Committee (ASC X.12) of the American Standards Institute (ANSI). The X.12 standard convention provides various business transactions for use in a variety of businesses and industries. CURRENT TRANSACTIONS (Supply Chain Related) Rite Aid can receive the following Supply Chain related EDI documents: ¦ 214 Transportation Carrier Shipment Status Message*** ¦ 810 Invoice ¦ 832 Price/Sales Catalog ¦ 855 PO Acknowledgement ¦ 856 Advanced Ship Notice (ASN) / Manifest (Please refer to page 26 UCC-128 Label) ¦ 997 Functional Acknowledgment Rite Aid can send the following EDI documents: ¦ 820 Payment/Remittance ¦ 830 Planning Schedule (DC) - Forecast ¦ 850 Outbound Purchase Order ¦ 852 Product Activity Data ¦ 997 Functional Acknowledgment * * * In order to improve upon accuracy of the Shipment Status #214, Rite Aid requests that the LTL carriers utilized by Rite Aid be provided the EDI Shipment Information Transaction #204. This transaction provides the detailed Bill of Lading Information pertinent to the shipment. 12 3/ 14/ 2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY EDI / Electronic Commerce DEPARTMENT CONTACT INFORMATION • Mailing Address: • Physical Address: Rite Aid Rite Aid EDI / B2B Department EDI / B2B Department P.O. Box 3165 30 Hunter Lane Harrisburg, PA 17105 Camp Hill, PA 17011 GENERAL INFORMATION • General EDI Help Line: (717) 731-3815 • General EDI Email: edina riteaid.com • EDI Fax-On-Demand: (888) 796-3686 • EDI/B2BWebsite:hlM://exchinge.eb2b.net/riteaid SUPPORT CONTACTS • Carmine Pasquini - Director Tel: (717) 975-5759 Fax: (717) 975-8623 Use General EDI Email • Bryant Manning - EDI Analyst Tel: (717) 975-8637 Fax: (717) 975-8623 Use General EDI Email • Ron Oldt - EDI Analyst Tel: (717) 975-5824 Fax: (717) 975-8623 Use General EDI Email • Aaron Porter - EDI Analyst Tel: (717) 214-8847 Fax: (717) 975-8623 Use General EDI Email • Faith Misel - EDI Support Coordinator Tel: (717) 214-8546 Fax: (717) 975-8623 Use General EDI Email 13 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY EDI Document of Understanding The EDI Document applies to all current and future transactions, including ANSI ASC X 12 004010 as well as other future transactions and version upgrades. All Network Identifiers and Qualifiers for Rite Aid and Vendors have been previously exchanged in the Vendor Profile. Rite Aid Map. Refers to the Mapping Documents. Testing Period. The receiving party will review the EDI Document(s) during the testing period. For inbound EDI Documents, Rite Aid's EDI Department should receive sufficient test data from Vendors to ensure compliance with Rite Aid's requirements. Further, Rite Aid will confirm that the EDI Document may replace paper documents currently provided by Vendor. For outbound EDI Documents; Vendor will receive sufficient data from Rite Aid to ensure compliance with business requirements. Vendor agrees to receive the ED] Document(s) instead of paper documents. Testing is to be completed within 30 days of initial non-EDI purchase order. Version Upgrades. For EDI Documents that Rite Aid transmits, Rite Aid will notify Vendor of any ANSI version upgrades prior to any changes. Rite Aid expects the same notification from Vendor for EDI Documents that Rite Aid receives. System Operations. Each party, at its own expense, shall provide and maintain the equipment, software, services and testing necessary to effectively and reliably transmit and receive the EDI Document(s). Verification. Upon proper receipt of any EDI Document, the receiving party shall promptly transmit a functional acknowledgement in return. A functional acknowledgement shall constitute conclusive evidence an EDI Document has been properly received. Functional Acknowledgements. For EDI Documents that Rite Aid transmits to Vendor, Rite Aid expects to receive a functional acknowledgement (ASC X12 997) within twenty-four hours of Rite Aid's transmission. For EDI Documents that Rite Aid receives from Vendor, Rite Aid will transmit a functional acknowledgement to Vendor within twenty-four hours of receipt. Acknowledgement Monitoring. Rite Aid will monitor the performance of Vendor to ensure compliance with the above. Should any issues arise, Rite Aid expects prompt resolution from Vendor. Garbled Transmissions. If any transmittal EDI Document is received in an unintelligible or garbled form, the receiving party shall promptly notify the originating party. Carbon Copy. For EDI Documents that Rite Aid transmits, Vendor may authorize their Value-Added- Network to provide duplicate documents to other organizations such as brokers. Transmission Times. Rite Aid will access GXS Network mailbox hourly. Rite Aid Documentation. Vendor acknowledges the receipt of Rite Aid EDI/B2B Implementation Guidelines and Preferred Carrier DUNS/DEA List. For a copy of these documents, please visit our website or call our Fax-On-Demand Service at 1-888- 796-3686. Please refer to the section on problem management in the Implementation Guide for contacts regarding production problems. Data Content. Vendor is responsible for transmitting accurate data in compliance with transaction mapping specifications. 14 3/ 14/ 2005 Vendor Supply Chain Guide RITE AID EDI/6213 TRADING PARTNER PROFILE (General Profile) Company Information Company Name: Mailing Address: City: State: Zip: Business Contact Name: Title: Email: Phone: ( ) - Ext: Fax: ( Technical Contact Name: Title: Email: Phone: ( ) - Ext: Fax: ( EDI Information ISA Qualifier: ISA Sender/Receiver ID: GS Sender/Receiver ID: Value Added Network: Time Zone: Eastern Inbound Transmission Times: Outbound Transmission Times: Vendor item number preference: No preference Currently EDI capable: Please return this Trading Partner Profile even if you are NOT EDI capable. RETURN PROFILE TO FAX (717) 975-8623 OR EMAIL TO EDI@RITEAID.COM 15 3/14/2005 Vendor Supply Chain Guide EDI/B2B Trading Partner Solutions In order to facilitate EDI with Rite Aid, we have formed alliances with the leading E-Commerce software and service companies to offer solutions that enable you to trade electronically with Rite Aid. We encourage you to contact these references or Rite Aid to learn more about the EDI/B2B solutions. Rite Aid does not require a sole source solution but offers varied alternatives to enable trading electronically to be cost effective. Please contact the following companies directly at the numbers referenced below for solution offerings to enable trading electronically with Rite Aid. Rite Aid E-Business Trade Services Solutions Product Contact Number Rite Aid EDI/B2B Trade Services htt www.ritedid.conr visit Supplier Central Customer Service 800 356-8560 This solution allows vendors to trade documents electronically through the Internet. The site is designed in a user-friendly manner with a variety of options and features. The site can be accessed at the convenience of the vendor and has a Customer Service line available to answer any questions regarding how the web site functions. EDI Service CenterslSoftware and Web EDI SolutionslTax EDI/File Transfers Company Number Product Web Site Fax Web edi Software File transfer eB2B (Enable Corp.) (877) 853-3222 ? ? www.eb2b.c:om Sterling Commerce (800) 677-3027 ? ? ? www.sterlingconuuerce.com Global eXchange Services (800) 560-4347 ? ? ? www'Ug'XS.com EZCom Software, Inc. (201) 883-1930 ? ? www.ycomsottare.com ICC/Internet Commerce Corp. (800) 625-3880 ? ? ? ? www.icc.net ADX (888) 843-3226 ? ? www.adx.com Dicentral (281) 480-1121 ? ? ? www.dicmtral.coin Owens Direct (800) 532-9181 ? ? ? www.owetis(tirect.coni Fountainhead Communications (212) 213-1001 ? www.fciwebnet.com SPS Commerce (800) 998-4334 ? ? ? rvww.sjsc:ommerce.com QRS (510) 215-5000 ? ? www.grs.coni Clark International (201) 438-8388 ? wwwAarkedi.com InfoAccess (216) 328-0100 ? www.infoacress.net Intercoastal Data Corporation (800) 292-8657 ? ? www.intercoastaldata.corn ChanneLinx, Inc. (800) 701-8053 ? ? wwwmebdi.cum Edict Systems/Grocery EC (937) 429-4288 ? ? www.groceiyecc Message Express (Ship Status 214) (800) 637-7248 ? www.ms?.coin Mercator (800) 334-2120 ? ?vww.mercatoncocn Fintech (800) 572-0854 ? www.fintech,oet True Commerce (724)940-5520 ? ? wxvw.truecomnncrce.cum Edisoft (416) 299-0030 ? ti%ww.eklisoft.cum EDI Service Bureau, Inc. (858) 486-7409 ? ? www.edi-service.com These companies provide a variety of solutions and services to meet the individual needs of the vendor and their business programs. 16 3/ 14/ 2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY Security Procedures. Each party shall properly use those security procedures, which are reasonably sufficient to ensure that all Documents are authorized and to protect its business records and data from improper address. Changes to Data. Rite Aid will not correct invalid data received from Vendor using EDI management software. Rite Aid will notify Vendor of receipt of invalid data and will expect Vendor to correct and re- transmit data in a timely manner. Personnel at Rite Aid's Value-Added-Network will not alter any data received from or sent to Vendor, with the exception that the VAN will translate data into other formats as agreed to by Vendor and Rite Aid. Duplicate Data. Rite Aid will use unique interchange, group and transaction control numbers on outbound transmissions to Vendor and expects Vendor to provide unique numbers on transmissions to Rite Aid. Unique numbers are necessary to ensure detection of duplicate data. Rite Aid will monitor Vendor data for duplicates and will notify Vendor immediately upon detection. Rite Aid expects The Company to detect duplicate transmissions from Rite Aid and to notify immediately. Public Interconnects. If your company uses a VAN other than GXS, then Rite Aid will establish a `public network interconnection' between our VAN and yours. Rite Aid expects your company to ensure that your VAN uses appropriate controls and monitoring measures in order to achieve timely exchange of inbound and outbound transactions Rite Aid agrees to do the same. We expect your company to resolve any problems or issues related to interconnects in a prompt manner. Data Sharing Policy. Confidentiality: All communications shall be governed by anti-trust regulations, as well as all other applicable federal and state laws. Both parties commit here to absolute confidentiality in the use of information shared. In the event the vendor gains access to any information and/or communication other than that specifically contemplated under this agreement, the vendor shall immediately notify Rite Aid and cooperate to rectify the unauthorized access. In the event the vendor does not immediately notify Rite Aid and/or fails to cooperate, Rite Aid shall, at its own discretion, immediately terminate this agreement and, if necessary, bring suit in federal or state court to preclude further dissemination of unauthorized communications. Source Tagging Program PROGRAM OVERVIEW Rite Aid has installed article surveillance (EAS) devices in all stores. We have selected radio frequency (RF) with Checkpoint Systems to implement this strategy. All products viewed by Rite Aid as `high theft' should be EAS source-tagged by the Vendor. 17 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY PROGRAM BENEFITS • Protected product flows directly to sales floor • No external tags to deface product • Product is tagged in consistent location • EAS deactivation occurs with bar code price scan • Reduced stock outs = Increased sales SOURCE TAGGING GUIDELINES • All products viewed as high-theft should be source-tagged • Tags must be concealed in the primary package • Tags used for Rite Aid must be Checkpoint manufactured tags (For a list of your products that need to be source tagged, contact our Source Tagging Coordinator, Marian Deppen, at (717) 975-5719.) STEPS TO TAGGING Step 1: Contact the Rite Aid's EAS Coordinator or your Rite Aid Category Manager to discuss which items have been identified as opportunities for source tagging on new product launches and a timeline for shipping source tagged product. Step 2: The next step is to contact Checkpoint, our EAS vendor. They will provide all necessary information and support to begin an effective source-tagging program with Rite Aid. Call (800) 257-5540 ext. 2322 to receive a Vendor's Guide. Checkpoint Systems will have a representative answer any questions, and assist your company with this program. Step 3: After contact, Checkpoint may need samples of products for evaluation. Checkpoint engineers will analyze each item and provide a written evaluation on their recommendations for each product submitted. Step 4: Finally, contact Rite Aid's EAS Coordinator to discuss the implementation schedule and any outstanding issues regarding source tagging. Together, we will select program start dates for your merchandise, beginning a stronger, more rewarding partnership. CONTACT INFORMATION Rite Aid Source Tagging Coordinator 30-A Hunter Lane Camp Hill, PA 17011 Tel: (717)975-5719 Fax: (717) 975-5925 Checkpoint Systems Inc. Source Tagging Evaluation Center 101 Wolf Drive Thororfare, NJ 08086 Tel: (800) 257-5540 ext. 2322 Fax: (856) 384-1480 18 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY Unsaleable Merchandise Policy (Front End product only) A third-party processor currently handles Rite Aid's unsaleable merchandise. During this process, your selected method of disposition (see Disposition Operations) will be applied to all returned items. The product reclamation center process is recognized to be the shared responsibility of manufacturers and distributors. Assigned cost components recognize the need for universally credible, equitable, non- discriminating treatment of all manufacturers and retailers. Items processed through the reclamation centers are allocated between all parties involved in the movement of goods according to a "generally accepted presumption for unsaleable responsibility" (GAPUR) standard. Responsibility is determined by the categories set forth below unless direct evidence suggests an alternative assumption of responsibility. Manufacturer's Responsibility • Unlabeled or mislabeled product • Improperly sealed product • Over/short weight or partially filled product • Broken glass • Crushed, dented or collapsed product • Swollen cans • Manufacturer withdrawal • Moldy package • Rusty cans • Leaking containers • Soiled, stained, sticky, etc. • Expired product as determined by expiration dates, if applicable DISPOSITION OPTIONS • Donate - to add useful life to the product being reclaimed. • Destroy - must have MSDS sheet or ingredient list. Applicable to non-hazardous items only. • Hold for Review - for those manufacturers who wish to review their product before reviewing the claim. The review items will be held for 21 days. During that time, the manufacturer, or its designated agent, may make an appointment to review the product. After the items are reviewed, the manufacturer's disposition policy is applied. Items not reviewed after 21 days will be handled at Rite Aid's discretion. • Return to Vendor - Product will be packaged and returned to the vendor. Shipping paperwork is prepared and included in the return shipments to the manufacturer. An Open RA is required for this option. 19 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY HANDLING & ADDED CHARGES • See Rite Aid's RETURNS AGREEMENT form. MINIMUM / MAXIMUM RATES • Minimum: 100% of list price • Maximum: 130% of list price • Pre-damage direct product costs (DPC): Handling and storage costs which occur before damage is identified, as an item moves through retail distribution. They include costs incurred at the warehouse, during transportation to the store, and at the store itself. Store costs for retail shelf space, checkout, and bagging are excluded from this analysis. • Post-damage handling costs: Costs which occur after the item has been identified in the store and before it arrives at the reclamation center. • Reclamation Center Processing Costs: Handling and storage costs which occur as an item is processed through a reclamation center. This analysis contains separate calculations for the major variables which affect prepackage costs, including reclamation center gross efficiencies, type of product and processing chute. REIMBURSEMENT Vendors will be set up for a "deduction from invoice" and have the deduction taken from their next vendor check. Recalls All recalls information is due at the time the planogram change is made and accepted by the category manager. All freight charges for returned product will be billed to the vendor. The following information is required to process recalls: • Product Disposition: product handling method chosen by vendor • Address and Contact Phone number to Return Merchandise: vendor specific shipping destination information • Return Authorization Number: issued by the vendor • Description: brief product identification See Rite Aid's Recall Disposition Form for further details. 20 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY RITE AID RETURNS AGREEMENT Please note: A Sevarate Returns Agreement must be filled out for each vendor number Company Name: Contact Name: Vendor Number: Invoice Address: E-Mail Address: Phone # Fax # Shipping Address: Category Manager: Associate Category Manager: _ TERMS OF AGREEMENT: A. Unsaleable Merchandise 1. All vendors will be charged the following processing fees for damaged, defective, outdated, and discontinued goods. These fees are based on the findings from the Joint Industry Task Force Study (JIR): DPC (Direct Product Cost) $0.085 Post Damage $0.111 Ops through Scan: .101 $0.297 2. All vendors must determine a method of disposition for their unsaleable products. Based on the CODE/DESCRIPTIONS listed below, the vendor representative will check (X) the method his/her company has authorized Rite Aid to use. The additional charge, shown in () at the end of the description, will be added to the charges above. CODE DESCRIPTION (iIR COST) COPT Scan and disposition is left up to the discretion of Rite Aid ($0.020)* DONA Scan and donate ($0.030) ROPT Scan, Hold, Vendor Review/Center Option ($0.127) RDON Scan, Hold, Vendor Review, Donate ($0.137) RTAK Scan, Hold, Vendor Review, Take ($0.174) RSHP Scan, Hold, Vendor Review, Ship ($0.186) Note: All Vendor Review merchandise will be held for 21 days after invoice date for review. At that time if not reviewed, or if no decision has been provided by the manufacturer the product will be disposed of at the discretion of Rite Aid. SHBK Scan and ship back to vendor ($0.180) OPEN RA* REQUIRED WITH THIS OPTION RA# 21 3/ 14/ 2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY 3. All products will be billed at Rite Aid's list cost + JIR billing factors (DPC, Post Damage Handling, Rec Charges, Disposition Charges) unless otherwise agreed to in writing by Rite Aid. Vendor billing is not to exceed 130% of Rite Aid's list cost. 4. All changes to policies must be in writing to Rite Aid. Approved policy changes will take effect within 30 days following their approval. 5. All vendors will agree to forward a copy of their current national policy regarding reclamation to be reviewed by Rite Aid. This will be sent to: Rite Aid 30 Hunter Lane Camp Hill, PA 17011 Attention: Manager, Front End Returns B. Recall Merchandise **Please note: The dispositions on page 1 DO NOT apply to recalls. A separate agreement MUST be filled out for all recalls at the time the recall is being activated. This allows a vendor to have a separate disposition on recalls than they have on damaged and outdated returns. The signatures below by the appropriate Category Manager of Rite Aid and the vendor representative of said company denote their understanding and acceptance of the above agreement. Signature (Vendor Representative) Company Date Signature (Authorized by Rite Aid) Date Rite Aid Hdgtrs. Corp 22 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY Recall Disposition Form 1 of 2 Control Number -_---_ Recall Projected Date Number(s) Actual Date Category Manager Vendor # Vendor Name ?..i Sales Contact Title Phone # Email R a F R son e or eturn Item Status Promotional Planogram Items Misship Is item DWO'd? Y N 0 Planogram Discontinued Overstock Is item Bill Blocked? Y N F„a Seasonal Planogram Items Other Is PO Cancelled Y N ly v Approximate Pieces Approximate S --- This is only an estimate. Is warehouse merchandise returned? 6% Handling plus Shipping charge Full & Split Case Full Only Split Case Salvage All Warehouses 10 29 35 50 60 80 81 82 88 Disposition Costs Must "X" one. Disposition left up to Rite Aid $0.16/unit Bill to Name Donate - Organization? $0.16/unit Address H Destroy Supply MSDS or In rediant List $0.25/unit City, State, Zip U U Ship back to vendor $0.30/unit Bill to Contact Other Bill to Phone # 0 UST Return Center All RA # East RA # West O Ship to Name Address H City, State, Zip t Phone/Contact Buyer and Vendor agree as follows: I. Vendor is responsible for all return shipping costs. 2. Items returned are not required to be substantially in their original condition; 3. Vendor shall accept items returns with all faults includin but not limited to, the presence of an rice or other stickers ; Category Manager Special Instructions With your signature, you are agreeing to the terms set forth herein. Vendor Contact Printed Name Signature Date Category Manager Printed Name Signature Date Director Printed Name Si nature Date 23 3/14/2005 Vendor Supply Chain Guide II. MERCHANDISE INFORMATION & TECHNOLOGY Recall Disposition Form Page 2 of 2 Stockcode UPC Description Cost "X" one or both DC Store Vendor Contact Printed Name Signature Date If this is an inventory reduction, please list EAST or WEST, individual DC's or "6V indicating all DC's. 24 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE As business partners driving mutually beneficial supply chain efficiencies, this section contains detailed instructions for the routing, consolidation, marking, and documentation of merchandise shipments to Rite Aid Distribution Centers. Rite Aid is committed to working with our vendors to improve product packaging and handling as well as increasing automation efforts. (see http://exchange.eb2b.net/riteaid/logistics.htmi for details). It is expected that all vendors will comply with the requirements set forth. Non-compliance will result in expense offsets as outlined in Section VI of this document. All inquiries related to vendor/carrier expense offsets must be submitted in writing addressed to: Rite Aid Transportation Department 30 Hunter Lane Camp Hill, PA 17011 Distribution APPOINTMENT SCHEDULING Appointments are required for all Distribution Centers and must be made by the carrier at least 24 hours prior to delivery and by 11:00 am at the respective Distribution Center; except for our Preferred LTL Carriers. All appointments are driver-assisted live unloads. A list of Distribution Centers (addresses and phone numbers) can be found further in this section. Appointments must be confirmed by a Rite Aid Distribution Center. • For Shipments via our Preferred LTL Carriers (see list) no appointment is required. • Shipments consisting of multiple trailers require a separate appointment for each trailer. • Shipments consisting of 200 cartons or less can deliver one trailer per day through our fast freight doors without an appointment. • Appointment compliance by a vendors' carrier will be monitored. Consistent non-compliance will result in a dismissal of that carrier from all Rite Aid Distribution Centers. • Please be aware of the holidays listed below when scheduling appointments at the Distribution Centers. 1. New Year's Day 2. Memorial Day 3. Independence Day 4. Labor Day 5. Thanksgiving Day 6. Christmas Day Note: These are corporate holidays and will vary in their application at the Distribution Centers. The vendor is responsible for contacting the facility if there are any questions, issues or concerns regarding the on time arrival/appointment of any purchase orders. 25 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE • Appointment Information Required: I. P.O. Number 2. Number of cartons per shipment 3. Cube per shipment 4. Condition of load: number of pallets, slip sheeted, floor loaded 5. Weight per shipment 6. Carrier Name 7. Carrier Bill Number 8. Carrier phone number & contact information 9. Description of goods 10. Hazardous Material Class (if required) 11. Vendor name & origin MARKING / LABELING OF CARTONS Please note: At this time Rite Aid does not require the UCC/EAN-128 Shipping Container Label to be used in conjunction with the ASN. All carton labels must indicate the following information: I . Purchase Order Number 2. Case Pack Carton Quantity 3. Merchandise Description: carton contents (by style, color, size) 4. Address of Distribution Center (see DC address list) 5. Rite Aid Item Number 6. Selling Unit UPC Number 7. Proper Hazardous Material Label (if required) 8. Vendor Name & Origin Label Format (sample) From: To: Supplier Rite Aid CSC Name/Address 601 Chelsea Road Perryman, MD 21130 PO #: 1013279 Description : Bunny, Solid Chocolate Type: Easter Casepack Qty : 48 Rite Aid Item: # 0904116 UPC:. 0 6907376543.1_ 26 Placement of Carton Labels 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE PALLETS • All Rite Aid Distribution Centers use pallets which are 40 inches by 48 inches, except for DC# 50 (Poca, WV) & DC# 60 (Rome, NY) which use pallets that are 40 inches by 40 inches. • Pallet height is accepted at a maximum of 50 inches (including pallet height) for conventional products. Height exceptions may be granted for paper, diapers, and feminine hygiene products. Pallet weight accepted is an average of 2,500 pounds. Weight exceptions may be granted within 2,500-3,000 pounds on a case-by-case evaluation. Advanced approval is required for any exceptions in transportation/warehousing pallet height and weight. • Place cartons so they do not overhang the edges of the pallet. • Secure cartons to pallets with stretch wrap. • If multiple P.O.'s on a shipment, sort cartons by P.O., making sure that each pallet contains cartons only for one P.O. (If your carton count is insufficient to build a complete pallet you may combine multiple items on one pallet by placing cardboard/heavy paper dividers between P.O.'s so that the cartons are clearly segregated.) • Pallet Exchange will be acceptable at the time of delivery only. Rite Aid does not allow pallet banks. • Chep Pallets will be accepted at all Rite Aid locations. PACKING SLIPS You must prepare packing slips following the steps below: • A packing slip must be shipped with each partial shipment of the same purchase order. The packing slip must reflect the product delivered with each partial shipment. Master Packing Lists will be considered unusable. Include the following information on each packing slip: 1. Rite Aid purchase order number. 2. Distribution Center number and name. 3. Number of cartons: total PO carton count. 4. Item descriptions and quantities: contents of each carton. 5. Total units: total PO unit quantity. 6. Selling Unit UPC Number 7. Rite Aid Item Number 8. Expiration Date (if required) 9. Hazardous Material Notification (class/type) 10. Number of items per unit H. . Vendor Name & Origin Vendors should work with their carriers to determine the most effective way of shipping the packing list to ensure it arrives with the product. A few recommendations to consider are: a) Attach packing slip to freight bill b) Include the packing slip as apiece count on the BOL with a notation "1-envelope with packing slip." c) Ship the packing slip in a separate carton If you ship full trailer loads, the lead carton(s) should be the last carton(s) placed on the truck for easy access at our dock. 27 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE PACKAGING • Use safety lids to avoid leakage of liquid products. • Minimize use of inner pack plastic, cellophane and divider cardboard unless necessary to protect product. Use stronger outer packaging of cardboard to minimize damage. • Don't pack boxes to the top of cartons. Use divider cardboard as buffer to prevent cut product while opening. • Must comply with Hazardous Material Registrations (if required) • Carton Number " of " cartons LOAD CONDITIONS • Minimize mixed skids or mixed layers of items. • LTL shipments should be palletized if at all possible. • Floor loads will not be accepted on truckload shipments. • Do not place the same item on multiple pallets within the load. • Do not mix different PO's on the same pallet. • Sort by PO Number first, then by Item Number. • A single PO Number should not cover more than one truckload. Transportation Transportation is a vital component in effectively managing the supply chain. Ultimately, the goal is to manage product flow to achieve the highest fill rates while operating at the lowest possible cost. Rite Aid's Transportation Dept. will continually direct its effort toward instituting freight collect and/or backhaul programs. The vendor should allow for normal transit time from their location to the Rite Aid Distribution Center. PREPARATION OF BILLS OF LADING All bills of lading must have the following information: 1. P.O. number 2. Pieces (cartons and pallets) and weight 3. Complete commodity description 4. Address of actual origin/shipping location (including zip code) 5. Freight terms agreement: (collect or prepaid) 6. Ship Date 7. Carrier Name PREFERRED LTL CARRIERS For a list of Rite Aid's Preferred Carriers for Prepaid Vendor Shipments, please see the Rite Aid web page at http:/iexchange.eb2b.net/riteaid/logistics.html 28 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE Use LTL carriers from Preferred carrier list to insure priority delivery appointments and unloading by trained receiving personnel. For all truckload and/or collect shipments contact the Rite Aid Transportation Department for routing instructions. Delivery appointments at Rite Aid Distribution Centers are required. The vendor or vendor's carrier must obtain a delivery appointment from the Rite Aid Distribution Center Receiving Department. If a carrier fails to arrive as appointed and has not notified the Distribution Center Receiving Supervisor in advance, a cancellation fee will be assessed. Rite Aid Distribution Centers require the driver to unload shipments. Any assessment of detention, storage, sort & segregation, unloading, or notification charges associated with prepaid shipments will be forwarded to the vendor or deducted from the vendor accounts payable balance. Drop Trailers Drop trailer arrangements will be analyzed on a case by case basis and are subject to the approval of the Rite Aid Transportation Department. Upon approval, drop trailers must deliver 24 hours prior to the scheduled PO appointment date/due date. FOB Vendor or Collect Shipments Contact the Corporate Transportation Department at (717) 761-2633 (ext. 8693, 5741, 8247) for routing instructions. Failure to receive Rite Aid specified routing will result in freight charge backs. Rite Aid Backhaul Rite Aid company trucks are often available for customer pickup. Backhaul services and allowance terms can be negotiated with Corporate Transportation at (717) 761-2633 (ext. 8693, 5741, 8247). PREPAID SHIPMENTS Rite Aid's policy is to ship freight collect whenever it is beneficial to do so. Rite Aid performs an ongoing freight evaluation process to insure that all Rite Aid freight movements are occurring at optimal cost and service levels. When it is not beneficial and shipments are made on a prepaid basis, vendors are expected to use one of the approved carriers participating in the Rite Aid Preferred Carrier Program. • LTL (Less than Truckload) On all less-than-truckload shipments, Rite Aid expects you to utilize our preferred carriers. This will reduce the number of carriers that serve our Distribution Centers and will help to expedite the delivery of merchandise to our Distribution Centers and to our stores. Our preferred carriers have pre-set appointments and are able to increase our receiving efficiencies and your/our carrier efficiencies. Preferred carriers also provide shipment status detail via EDI (214). Non-preferred Carriers are required to make a delivery appointment with the Distribution Center at least 24 hours prior to delivery. 29 3/ 14/ 2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE If you choose to select a non-preferred LTL carrier, Rite Aid will not be responsible for any accessorial charges such as detention, storage, sort and segregation, unloading, or notification charges. REMEMBER: Your carriers are required to make appointments and keep them on time! • TL (Truckload) All TL shipments require a delivery appointment at our Distribution Center and are driver assist unloads. On Prepaid TL shipments. Rite Aid will not be responsible for any accessorial charges such as detention, storage sort and segregation unloading. or notification charges GENERAL ROUTING INSTRUCTIONS The Rite Aid Transportation Department serves to provide vendor routing instructions on all collect shipments. This effort results in lower costs and improved delivery efficiencies to Rite Aid Distribution Centers. Vendors should contact the Rite Aid Transportation Department at least three working days prior to ship date for routing instructions. The Rite Aid Transportation Department is the only department that can provide routings for our vendors who ship their freight collect, or where Rite Aid is responsible for freight payment. You will be instructed by the Rite Aid Transportation Department as to shipping instructions for each Rite Aid purchase order. Deviations from these procedures indicate that you have chosen to shin on a prepaid basis and will result in a chareeback for full freight plus administrative charges • Collect LTL 1. Multiple P.O.'s going to the same distribution center must be written on one (1) bill of lading so as to constitute one shipment. 2. Shipping more than one LTL shipment per week to a Distribution Center is not permitted. Consolidate P.O.'s as mentioned in #1. You will be charged back for subsequent LTL shipments taking place during the same workweek. 3. Instructed Rite Aid preferred carrier should service your location direct. If not, please contact the Rite Aid Transportation Department for instructions. 4. Any deviations from previous instructions will result in a chargeback for full freieht. 30 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE . Collect TruckloadNolume Shipment All collect TL shipments must be routed by the Rite Aid Transportation Department. . Small Packages All collect small package shipments must be routed by the Rite Aid Transportation Department. • Any deviations from these instructions will result in a freight chargeback plus administrative fee to your company. • Import Shipments Please refer to the Import section of the Vendor Relationship Guide for import instructions. • Air Freight Rite Aid does not authorize airfreight Any deviations from the normal shipping procedures must be authorized by the Rite Aid Transportation Department • Contact the Rite Aid Transportation Department for routing guide prior to shipping. Also, the Rite Aid Transportation Department should be contacted for routing of ALL COLLECT, PREPAID & CHARGE and PREPAID & ADD shipments. • If you have any questions regarding Rite Aid preferred carriers and inbound routing, you may call the Transportation Department at: (717) 730-8205. • For a list of LTL Preferred Carriers, by Distribution Center, please see http://exchange.eb2b.net/riteaid/logistics.htinl • 'The Perryman Distribution Center (Mid-Atlantic CSC) has its inventory organized into three areas consisting of. RX (Area 1), Central (Area 2), and Regional (Area 3). It is requested that all transportation paperwork and shipment labeling (bill of lading, packing slip, etc) be addressed appropriately to specify that designation. 31 3/14/2005 Vendor Supply Chain Guide III. SHIPMENT & ROUTING GUIDE Summary of Distribution Center Addresses Shi -To Location Addresses DEA Number DUNS :+ 4 Preferred Carriers Perryman Distribution Center *** RR0236073 0145788920010 Yellow 601 Chelsea Road Perryman, MD 21 130 ABF 410 297-6000 Roadway Pontiac Distribution Center 002230PlY 0145788920029 New England Motor Freight 5400 Perry Drive Yellow Waterford, MI 48329 ABF 248 674-8140 Roadway uscaloosa Distribution Center RH0231124 00 Yellow 3931 Rice Mine Road, N.E. Tuscaloosa, Alabama 35406 = ABF 205 345-7419 Roadway Rite Aid of West Virginia, Inc./W. Va. Dist Ctr. PRO 178055 0145788920050 Yello Rock Branch Industrial Park w Poca, WV 25159 ABF 304 755-8124 Roadway Rite Aid Rome Distribution Center, Inc. PR0112829 0145788920060 Yell 5865 Success Drive ow Rome, NY 13440 ABF 315 337-0125 Roadway Ice Cream Division NA 0145788920061 New England Motor Freight 9200 Telstar Ave ABF El Monte, CA 91731 Yellow 626 571-0122 Tony's Rite Aid Carpenter Sho P NA 0145788920023 Roadwa 325 Welltown Rd Yellow Winchester, VA 22603 ABF 540 662-3552 Roadway Rite Aid Distribution Center 003713TPY 0145788920080 ABF 29555 SW Boones Ferry Road Wilsonville, OR 97070 Yellow (503) 685-6065 Roadway Woodland Distribution Center RT0223874 0145788920081 ABF 1755 East Beamer Street Woodland, CA 95776 Yellow 530 661-1800 Tony's Lancaster Distribution Center N/A 0145788920088 Roa 2801 West Avenue H. ABF BF Lancaster, CA 93536-8342 Yellow (661) 951-7500 Tony's Roadway NOTE: FedEx Ground (small package ground) services all locations. 32 3/14/2005 Vendor Supply Chain Guide Y A d V? ?Z rMn .. HIR C31 N f d r tV rp m a° rmV ? N M O_ WZ"?. 4N'f +ay?ip I-- x In CL" li, M -S M C M a Q °'' 'Stse `aaco M m M ? ? ? V e r v L tom . = iJ1 } v ^ 47Q n ? a?N N Vii Y, ? E LL `1 y ..d s '? rn 3i ffgl .... u 7 ry tJ PD ..S ? TTii rrl W ? '? T .^J ? ?1 ? tjj ? S7 µy f?• M N C] ? L ? ry 1a =r 33 3/14/2005 Vendor Supply Chain Guide a o c ci, $_ A c a m° W oe p 5 v MT c w VI x p CC Ij U ? v ?`'? ?. C M CS v tf1 E LA- LU QJ pl u ry v z 6-2 2, r, r j of w', nci .c 9 O v 2 m x Be 1? -2 r? ig 9 •" ` ? ? ? g ? , _ s ? a v (raj 2'.!c to i. 0 G A5 a y 0 r 3 +r ??y c, Q n yro?y, Yj C .Q v n, 0 'A 2 4- CA - ro .C t0 L C E _ c5 ,7x a, 11 ,F 06 x '22 t FU U, W6 4A W 3: y? LL. -t -0 iz, I CJ >, >% 4A L4 -c aj .............................................................................. .... ............... 34 3/14/2005 Vendor Supply Chain Guide a W $ ?' f } W n .2 c .01 ........... ...........«.e.e.e............................................«., ............. at. J " J? Z y _ cc C L d ? W ra , _ y a ^ T. 35 3/14/2005 Vendor Supply Chain Guide IV. ACCOUNTS PAYABLE This section outlines important information for new vendor setup, changes in vendor information, invoice requirements and payment policies. Accurate information will ensure timely invoice processing. VENDOR INFORMATION - NEW VENDORS New vendors cannot be added to the Rite Aid Vendor File until the vendor has been designated as an "Authorized" vendor by a Rite Aid Category Manager. In addition, each vendor must meet all of Rite Aid's vendor insurance and product liability requirements as confirmed by our Risk Management Department. Furthermore, approval from the Rite Aid Accounts Payable and Treasury Departments must be obtained to activate a vendor within the Rite Aid Vendor File. A Category Manager will work with the vendor to complete the New Vendor Application and Information Form; which requires the completion of the following documents/agreements by Rite Aid and/or the new vendor: Warehouse and DSD vendors • Defense and Indemnity Agreement • Mutual Confidentiality Agreement (if applicable) • Rite Aid Returns Agreement • Rite Aid Guaranteed Sales Agreement • Certificate of Insurance • EDI Trading Partner Profile Form (if applicable) • W-9 Form A copy of the most current (within a year of the application date) audited financial statements of the vendor may also be requested during the new vendor approval process. This may be requested from a potential Warehouse or DSD vendor. Each document/agreement required in the application process must be completed and signed, returned to the Category Manager and reviewed by Risk Management, Accounts Payable and the Treasury Department. 36 3/14/2005 Vendor Supply Chain Guide IV. ACCOUNTS PAYABLE If all Rite Aid requirements are met, the vendor will be approved and added to Rite Aid's Vendor File after which the Category Manager will be able to generate Purchase Orders. Vendors must provide a single address for all Rite Aid remittances. In addition to these documents, the Category Manager will provide each new vendor with the following documents: • Rite Insight, InfoAccess.net • Supply Chain Guide • Rite Aid Price Change Form • EDI Process - New Vendor Document • Distribution Centers Chart • Shipment Routing Guide VENDOR INFORMATION - CHANGES TO EXISTING VENDOR FILES Changes to the corporate address, remit to address, name, or legal structure changes such as company mergers, company sold, Chapter 11 or going out of business must be communicated in writing on a company letterhead and signed by a senior officer of your company. The letter must contain the following information: • Your Company Name and DUNS Number • Old Parent Company Name and New Parent Company Name • Old Company Address and New Company Address • Change of Remit Address • Statement of What Is Transpiring Written notification of changes of this nature must be sent to the appropriate Category Manager at: Rite Aid Attn: 30 Hunter Lane Camp Hill, PA 17011 VENDOR INFORMATION - CHANGES TO REMIT TO ADDRESSES The Vendor File will not be updated for remit address changes unless the written notification discussed above is provided to the Category Manager. If there is a change in ownership and the new owner is not currently on our Vendor File as an approved vendor, your company will be treated like a new vendor and will be required to complete the new vendor process and gain approval as set forth in previous paragraphs. 37 3/14/2005 Vendor Supply Chain Guide IV. ACCOUNTS PAYABLE Rite Aid Accounts Payable is dedicated to paying all merchandise invoices within the established payment terms as well as providing the vendors with superior customer service. EDI 810 Invoice transactions are required of all Rite Aid vendors. Non-compliance penalties will be assessed per invoice infraction. Listed below are the procedures that must be followed to make sure your invoices are paid on a timely basis: 1. Receive from Rite Aida valid purchase order, either EDI or a printed purchase order form (phone orders, worksheets and verbal commitments are not valid). 2. Verify the accuracy of all purchase order details including cost price, payment terms, etc. Do not ship merchandise until all discrepancies on the PO have been corrected and proof of correction is provided to you by the category manager in the form of a new PO (cost and payment term differences are not reimbursable). 3. After shipping goods, submit invoices via the EDI 810 document. Do not begin transmitting 810's until the testing process is complete. For more information call the EDI contacts previously listed. 4. Multiple distribution center deliveries cannot be included on a single purchase order. 5. Each invoice for a Rite Aid Distribution Center receipt must correspond to one unique purchase order. 6. Multiple purchase orders may not be combined on a single invoice. 7. Items with extended terms must be invoiced separately. 8. Vendors may not invoice prior to shipment and must invoice only for the product shipped. 9. For DSD vendors, the vendor is required to provide the store with a fully priced and extended paper invoice at time of delivery of merchandise. The invoice will reflect the same invoice number, invoice date, Rite Aid store #, shipping address and invoice total as that submitted via EDI (as discussed above). RITE AID PAYMENT POLICIES Payment Amount Process Rite Aid will pay the lesser of the price listed on the applicable purchase order, the current invoice price or the negotiated Market Level price (DSD vendors only). Payment Due Date Calculation The invoice due date will be calculated based on Invoice Date or Receipt of Goods Date (which ever is later) and based upon the most favorable of the invoice or purchase order terms. Vendor terms will be standard across entities. Checks will not be sent via overnight services. 38 3/14/2005 Vendor Supply Chain Guide IV. ACCOUNTS PAYABLE Cash Discount Calculations Rite Aid will calculate the cash discount on an invoice's gross value of merchandise prior to discounts and allowances. Timing of Deductions Rite Aid may take an additional 30 days dating without loss of discount for any invoice that is not equal to or less than each item price indicated in the purchase order or the Market Level Pricing system (DSD vendors only). Shipping Discrepancies Deductions will be taken for quantity variances by shipment/picking error, shortages, and damaged merchandise. Adjustments for vendor's shortages or damages, observed at the time of receipt at a Rite Aid location, will be documented at that time. Where inspection of product is not feasible or permitted, undisclosed shortages or damages subsequently discovered during the Rite Aid receiving process, will result in an adjustment to the vendor billing. Other Deductions Rite Aid reserves the right to deduct from outstanding vendor payables for allowances, bill backs, returns, post audits, coupons rejected by manufacturer processor and other receivables including assessments and fees. Rite Aid also reserves the right to request payment by check on balances past due. Shipping Requirements All merchandise is required to be shipped in accordance with Rite Aid's Transportation Guidelines (See Section III: Shipment & Routing Instructions). Penalties will be assessed and deductions will be taken for violations of these guidelines. RITE AID POST AUDIT POLICY Rite Aid conducts Post Audits of all aspects of its payable units. Rite Aid reserves the right, as protected under Section 8.2-725 of the UCC, to file claims within 48 months of the event. Rite Aid auditors submit all claims in writing to our vendors and allow the vendors 30 days to review and respond to the claims before any deduction is initiated. All issues must be resolved in 60 days. VENDOR INQUIRIES AND CORRESPONDENCE • Vendor telephone and letter inquiries regarding A/P transactions, balances, and discrepancies should be directed to the Warehouse or DSD Accounts Payable Department. A number of A/P correspondents are available to process vendor inquiries and problems. • Our correspondents work with a continuous backlog of vendor inquiries --- therefore, wherever possible, vendors should state their situation in writing, attach supporting documentation to their written inquiry, and send their package to the Warehouse or DSD Accounts Payable Department, 39 3/ 14/ 2005 Vendor Supply Chain Guide IV. ACCOUNTS PAYABLE whichever is applicable. Allow 2-4 weeks for response. Except for emergency situations, telephone inquiries will be logged and processed by our correspondents based upon their backlog agenda and the time/date of the telephone inquiry. • Initial inquiries sent by facsimile transmissions (FAX) will also be processed based upon our backlog agenda. To be fair to all our vendors, FAX inquiries will not be inserted into our processing schedule ahead of written and/or telephone inquiries. • Rite Aid must be notified in writing of any invoice payment dispute within 30 days of the check date. • Vendor correspondence on open invoices must be initiated within six months of the initial invoice date. RITE AID ACCOUNTS PAYABLE CONTACTS Warehouse Accounts Payable (For Distribution Centers) Mail: Rite Aid PO Box 8432 Harrisburg, PA 17105-8432 Email: Warehouseap@corpinet.ro.riteaid.us Fax: (717) 972-3985 DSD Accounts Payable (For Direct Store Deliveries) Mail: Rite Aid PO Box 8431 Harrisburg, PA 17105-8431 Fax: (717) 975-5901 Expense Accounts Payable Mail: Rite Aid PO Box 8431 Harrisburg, PA 17105-8431 Fax: (717) 975-5919 Phone: Please call (717) 761-2633 and follow the prompts to reach the appropriate party within Accounts Payable. Internet: htti)://exchange.eb2b.net/riteaid 40 3/14/2005 Vendor Supply Chain Guide V. VENDOR MANAGEMENT PROGRAM The Vendor Supply Chain Guide was established to elevate awareness of critical gaps in the supply chain flow for Rite Aid and our Vendors. By simply creating an awareness of these key measurements, we will work together to resolve some of the challenges that prevent maximization of customer satisfaction. As part of Rite Aid's commitment to continued improvement of supply chain performance, we continually review measures highlighting those areas that Rite Aid has determined to be of high priority. It is our objective to share only the most useful indicators of performance, focusing our attention on measurements that will result in the highest achievement standards throughout the supply chain. Rite Aid extends the invitation for every member of the vendor community to schedule a visit to a Rite Aid Distribution Center to observe the receipt processing of their respective shipments, thereby affording an opportunity to observe our performance measurement criteria `in action'. It is our expectation that the Vendor Supply Chain Guide will provide an opportunity to investigate Supply Chain challenges. Through joint process improvements, Rite Aid is committed to working with our vendors, making every effort to continually improve performance. Please be aware every purchase order contains the following statements inferring agreement from the vendor by accepting the order. For Prepaid LTL shipments use: ABF, NEMF, Roadway, Tony's and Yellow. Delivery charges associated with prepaid shipments are withheld from invoice. Contact the Rite Aid Transportation Department for routing on collect shipments. Carrier must call for an appointment if shipment is over 200 cases. The driver is responsible for unloading. Refer to our annual letter that covers insurance req & other terms. All payments unconditionally guaranteed by Rite Aid. Compliance is expected to the Rite Aid Vendor Supply Chain Guide. Rite Aid issues this purchase order under its standard terms and conditions as contained on pages 7 - 10 of its Supply Chain Guide. Rite Aid's expense offset policy is intended to recover the cost incurred by Rite Aid due to vendors that do not meet our standards. Expense offset charges include Admin fees PLUS Additional fees, where applicable. Below you will find a complete listing of non-compliance issues and corresponding expense offset charge(s). Rite Aid has identified two master vendor non-compliance categories titled `Performance' and `Compliance'. Performance Metrics: Performance metrics focus on vendor-related shipping/transportation issues that directly impact DC related activities (e.g. manpower allocation and receipt processing efficiencies). Performance metric compliance violations are recorded per occurrence (i.e. per P.O. receipt). Performance expense offset charges (Administrative Fee + Additional Fee) will be applied to each vendor's AP account as a line-item deduction and are applied as DC Credits to offset the additional expense necessary for processing compliant receipts. 41 3/14/2005 Vendor Supply Chain Guide V. VENDOR MANAGEMENT PROGRAM Compliance Metrics: KPI Compliance metrics focus on overall compliance performance that directly impacts service levels (e.g. fill rates, on-time shipments, and ASN accuracy), Compliance metrics are recorded on a monthly basis. Compliance KPI Expense Offset fees will only be assessed if the vendor fails to meet the minimum vendor compliance performance percentage goals, as determined by Rite Aid, in three consecutive monthly review periods. In your review of each Compliance key performance indicator (KPI), please take time to understand what each number represents. If you have any questions, please submit them to vendormgmt a-)riteaid.com. PEFORMANCE NON-COMPLIANCE DEFINITIONS: These metrics (00001- 00015) are measured per occurrence or per PO receipt. Since these metrics are defined by their description, please see Page 45 for a list of all metrics. EDI NON-COMPLIANCE METRIC DEFINITIONS: These metrics (01013 - 01015) are measured on a monthly basis. The information is updated the first of each month and is available on the web enabled Performance Scorecard which can be reached from the Compliance Scorecard report. Purchase Order Non-compliance: All purchase orders are required to be received via electronic transmission (EDI). If traditional EDI is not an option, Rite Aid's EDI Department offers an internet version. For more information, email edi!a%riteaid.com or go to http://exchange.eb2b.net/riteaid ASN Non-compliance: All shipments received in Rite Aid distribution centers are required to be preceded by an Advanced Ship Notice (ASN) via electronic transmission (EDI). If traditional EDI is not an option, Rite Aid's EDI Department offers an internet version. Invoice Non-compliance: All invoices against Rite Aid corporate purchase orders are required to be entered into accounts payable system via electronic transmission (EDI). If traditional EDI is not an option, Rite Aid's EDI Department offers an internet version. COMPLIANCE KEY PERFORMANCE INDICATORS (KPI's) These metrics (01016 - 01022) are measured on a monthly basis and a vendor must fall below goal 3 consecutive months before any deductions are applied. The information is updated the seventh of each month and is available on the Compliance Scorecard report. • Initial Receipt Unit Fill Rate: The percent of units received to total units ordered based on initial DC receipt (+I day to allow the DC to receive the product). The initial receipt unit fill rate does not pertain to accumulated receipts but the first substantial receipt defined as 5% or more of the total purchase order quantity. • On-time Initial Receipt Fill Rate: The percent of units received to the total units ordered by the expected delivery due date based on initial DC receipt (+1 day to allow the DC to receive the product) The on-time initial receipt unit fill rate does not pertain to accumulated receipts but the first substantial receipt defined as 5% or more of the total purchase order quantity. . 42 3/14/2005 Vendor Supply Chain Guide V. VENDOR MANAGEMENT PROGRAM • On-time PO Arrival: The percent of PO's received by the PO due date. (+1 day to allow the DC to receive the product) A PO is considered On-Time when the total quantity received is equal to or greater than 90% of the total PO quantity. PO Arrival On-Time values: I = YES, 0 = NO. • On-Time Appointment: The percent of appointments met by the scheduled date/time to the total appointments made. Note: "Time" is defined as the specific dock time that was assigned. On-Time Appointment values: YES (On-Time), NO (Late). In the event that a carrier arrives prior to their scheduled appointment time, all efforts will be made to expedite the unloading process. However, early arrivals will be subject to DC capacity constraints. • On-Time - Delivery on the date requested and within 1 hour of the designated dock time. • Late - Delivery on a date after requested and/or later than 1 hour of the designated dock time. • Failure to acknowledge EDI 850 PO w/EDI 997 within 24 hours. EDI 997s must be received within 24 hrs of PO transmittal date and time: YES, NO. (Rite Aid week-ends and recognized holidays are adjusted into expected arrival dates and times.) • ASN not received within 24 hours of vendor ship date/time: Advanced Ship Notices (ASN) must be received via electronic transmission (EDI) within 24 hours of the purchase order ship date and time. (Rite Aid week-ends and recognized holidays are adjusted into expected arrival dates and times.) Vendor Inquiries and Correspondence Please email all inquiries relating to Rite Aid's Vendor Management Program to the Rite Aid Vendor Management Support Team at: vendormgmt®riteaid.com. All inquiries pertaining to vendor violations must be received within 90 days of the date of the violation. All back up documentation is available on the Rite Aid portal (https://as l.riteaid.com) under the Vendor Management Program report option `FEE REVIEW'. Please forward any requests for additional contacts, deletion of old contacts or new email addresses to vendormgmt(a),riteaid.com. 43 3/14/2005 Vendor Supply Chain Guide VI. EXPENSE OFFSETS NON-COMPLIANCE AREA: EXPENSE OFFSET Metric PO ISSUES: Admin Fee plus Additional Fee 00001 Shipped to wrong RA center $150 $350 per shipment 00002 Cancelled PO $150 $350 per shipment PACKING LISTBOL: 00003 P.L.BOL Missing/Unusable $150 $100 per occurrence 00004 P.L./BOL Contains Multiple POs $150 $100 per occurrence ITEM ISSUES: 00005 No UPC $150 $1 per unit 00006 Incorrect UPC $150 $1 per unit 00007 Not Ordered or Cancelled on PO $150 Accent: vendor pays 00008 Damaged N/A Return freight collect 00009 Overage per PO, but Packing List is Correct $150 Accent: vendor pays freight 00010 Overage per Pack ListBOL Quantity NIA Accept: vendor pays freight 00011 Shortage per Pack List/BOL Quantity N/A Deducted from Invoice 00012 Short-Dated N/A 00013 Out-Dated N/A CARTON ISSUES: 00014 Incorrect CSPK Quantity $150 $10 per carton 00015 No ID / Inaccurate ID (Selling Unit UPC, CSPK QTY) $150 $1 per carton EDI: 01013 Purchase Order Non-compliance N/A $25 per purchase order 01014 ASN Non-compliance N/A $25 per purchase order 01015 Invoice Non-compliance N/A $25 per invoice KPI COMPLIANCE EXPENSE OFFSET* 01016 Initial Receipt Unit Fill Rate minimum monthly % goal not achieved $200 + $20 per 1.0% deviation from 97% performance goal 01017 On-Time Initial Receipt Fill Rate minimum monthly % goal not achieved $200 + $20 per 1.0% deviation from 96% performance goal 01018 On-Time PO Arrival minimum monthly % goal not achieved $200 + $20 per 1.0% deviation from 98% performance goal 01019 On-Time Appointment minimum monthly % goal not achieved $200 + $20 per 1.0% deviation from 98% performance goal 01021 Failure to acknowledge PO w/EDI 997 within 24 hrs $200 per occurrence 01022 ASN not received within 24 hrs of vendor ship date/time $200 per occurrence KPI COMPLIANCE EXPENSE OFFSET fees will only be assessed if the vendor fails to meet minimum vendor compliance performance percentage goals in three consecutive monthly review periods. All vendor non-compliance inquiries should be directed to the vendormemVnriteaid.com 44 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL SID Code of Ethics and Business Conduct Putting Values into Action 45 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL RITE AID Dear Associate: Rite Aid's good name and reputation are the result of its associate's dedication and hard work. Together, we are responsible for preserving and enhancing this reputation, a task that is fundamental to our continued well-being. Rite Aid's goal is not just to comply with the spirit and the letter of the laws and regulations that apply to our business, but also to strive to abide by the highest principles of ethics honor, and respect for others. Set forth in the succeeding pages is Rite Aid's Code of Ethics and Business Conduct, which has been approved by its Board of Directors. The purpose of the Code is to reinforce and enhance Rite Aid's commitment to an ethical way of doing business. This not only applies to Rite Aid associates, but also to the companies Rite Aid does business with. The contents of the Code are not new; the policies set forth are part of Rite Aid's long standing tradition of high ethical standards. You are expected to read the policies set forth in the Code and ensure that you understand and comply with them. If you are a Rite Aid associate and have questions about this information, you should speak to your supervisor, upper management, the Senior Vice President of Human Resources, the General Counsel, or any of the other resources identified in the Code. If you are not a Rite Aid associate and have questions about this information, please contact Rite Aid's General Counsel. The Code does not purport to provide answers to all questions that might arise; for that we must ultimately rely on each person's good sense of what is right, including a sense of when it is proper to seek guidance from others on the appropriate course of conduct. We at Rite Aid are committed to providing the most competitive products and finest services for our customers. Adherence to the policies set forth in the Code will help us achieve this goal. Thank you for doing your part to ensure that Rite Aid continues to realize its potential in both the business that we do and the way that we do business. Every Rite Aid associate and shareholder depends on you to do the right thing. Sincerely, Mary Sammons President and Chief Executive Officer 46 3/14/2005 Vendor Supply Chain Guide Contents Putting the Code of Ethics and Business Conduct to Work ............ 49 About the Code of Ethics and Business Conduct ................................... 49 Meeting shared obligations ....................................................................... 49 Responsibility to Associates ............................................................... 50 Respecting one another ............................................................................ 50 Associate privacy ...................................................................................... 50 Equal employment opportunity and nondiscrimination ........................... 50 Sexual and other forms of harassment .................................................... 51 Associate complaint resolution ................................................................. 51 Environmental policies .............................................................................. 51 Safety in the workplace ............................................................................. 51 Weapons and workplace violence ........................................................... 52 Drugs and alcohol ..................................................................................... 52 Responsibility to the Corporation .......................................................53 Conflicts of interest (outside employment and other activities) .............. 53 Dealing with suppliers and others ............................................................ 53 Business courtesies .................................................................................. 54 Receiving gifts ........................................................................................... 54 Giving gifts ........................................................................... ... 54 ................... Guarding Corporate assets ...................................................................... 54 Corporate books and records ................................................................... 54 Document retention ................................................................................... 55 Confidential information and trade secrets .............................................. 55 Trademarks ............................................................................................... 56 Copyright compliance ................. :............................................................. 56 Intellectual property rights of others ......................................................... 56 Computer and communication resources ................................................ 57 Insider trading ............................ ...... . Responding to inquiries from the press and others ................................ 58 Competing with Integrity ......................................................................59 Success in the marketplace ...................................................................... 59 Antitrust laws ............................................................................................. 59 Gathering competitive information ............................................................ 59 Product and service safety .................. 60 ..................................................... Truth in advertising .............................................. ............. 60 ......................... Truth in prescription billing .........................................................60 Interacting with the Government .........................................................62 Prohibition of gifts to government officials and employees ..................... 61 Political contributions and activities .......................................................... 61 Lobbying activities ..................................................................................... 61 Implementation of the Code .................................................................62 Responsibilities .......................................................................................... 62 Seeking guidance ...................................................................................... 62 Reporting violations ................ ...................... 62 ............................................. The Corporation's hotline ....................................... .................... 62 ............... Investigations of violations ......................................... ...... 63 ......................... Discipline for violations .............................................................................. 63 Associate reminder ................................................................................... 63 47 3/14/2005 Vendor Supply Chain Guide Putting the Code of Ethics and Business Conduct to Work About the Code of Ethics Rite Aid is committed to the highest standards of business and Business Conduct conduct in its relationships with associates, customers, suppliers, stakeholders, and shareholders. This means conducting business in accordance with the spirit and letter of applicable laws and regulations. Rite Aid's Code of Ethics and Business Conduct, which applies to all associates, helps each associate in this endeavor by providing a statement of the fundamental principles and key policies and procedures that govern the conduct of the Corporation's business. However, it in no way provides associates with the assurance of continued employment with the Corporation. In addition, all associates, agents, consultants, independent contractors, representatives, and suppliers of Rite Aid are responsible for complying with all applicable laws and regulations. Unless otherwise stated, the policies in this Code apply to all Rite Aid associates and subsidiaries, regardless of the state or region in which they operate. The Code does not cover all Rite Aid policies or laws. Therefore, if a local law conflicts with a policy in this Code, associates must comply with the law. If a local custom or practice conflicts with a policy in this Code, associates must comply with the Code. Meeting shared obligations Each associate is responsible for knowing and understanding the policies and guidelines contained in the following pages. He/she also has an obligation to comply with the letter and spirit of the Code and all other Rite Aid policies, report violations of the Code and other improper conduct, and know when to ask for guidance when ethical questions and dilemmas are encountered. Associate actions should reflect Rite Aid's values, demonstrate ethical leadership, and promote a work environment that upholds the Corporation's reputation for integrity, ethical conduct, and trust. The way that we do business is just as important as the business that we do. 48 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Responsibility to Associates Respecting one another The way that associates treat each other and their work environment affects the way that they do their jobs. All associates want and deserve a work place where they are respected and appreciated. Everyone who works for the Corporation must contribute to the creation and maintenance of such an environment, regardless of their title or position. Associate privacy Rite Aid respects the privacy and dignity of all associates and will acquire and retain only the personal information that is necessary for the Corporation's effective operation or required by law. Access to such information is limited to only those associates who have an appropriate need to know and will comply with all applicable laws regarding the disclosure of personal information. However, associates should have no expectation of privacy with respect to their workstations. There may be times when an associate's workstation must be accessed for the safety of others or when otherwise deemed appropriate by Rite Aid management. Equal employment Rite Aid is an equal opportunity employer and is committed to opportunity and cultivating a diverse work environment where individual nondiscrimination differences are appreciated and respected. It is the Corporation's policy, through responsible management, to recruit, hire, train, and promote associates regardless of their race, color, national origin, religion, sex, sexual orientation, disability, age, or any other basis protected by state or federal law. In addition, Rite Aid does not tolerate discrimination against associates based on any of these bases and, when necessary, makes reasonable accommodations for disabled and pregnant associates who request such accommodations with the advice of their healthcare providers. For further information regarding the Corporation's policy concerning equal employment opportunity and nondiscrimination, please refer to Policies 1.1 and 1.2. 49 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Sexual and other forms of It is Rite Aid's policy that sexual harassment (including harassment harassment based on gender, pregnancy, childbirth, or related medical conditions) as well as harassment based on such factors as race, color, religion, national origin, disability, age, or any other basis protected by state or federal law is unacceptable and will not be tolerated. Harassment of any kind includes verbal, physical, and visual conduct that creates an intimidating, offensive, or hostile work environment or that interferes with work performance. For further information regarding the Corporation's policy concerning harassment in the workplace, please refer to Policy 4.1. Associate complaint If associates believe that they have been subjected to resolution harassment of any kind or any other type of unlawful discrimination, they should promptly report the incident to their supervisor or Human Resources Manager. Complaints of harassment, abuse, or discrimination will be investigated promptly and thoroughly and will be kept confidential to the extent possible. For further information regarding the Corporation's policy concerning the associate complaint resolution process, please refer to Policy 4.9. Environmental policies All associates have an obligation to carry out Rite Aid activities in ways that preserve and promote a clean, safe, and healthy environment. Associates must strictly comply with the letter and spirit of applicable environmental laws and the public policies they represent. The consequences of failing to adhere to environmental laws and policies could be serious. The Corporation, as well as individual associates, may be liable not only for the costs of cleaning up pollution, but also for significant civil and criminal penalties. Associates must make every effort to prevent violations from occurring, to report violations to the Risk Management department or the General Counsel, and to promptly correct any violations that occur despite the Corporation's best efforts. Safety in the workplace The safety and security of associates are of primary importance to the Corporation. Accordingly, associates are responsible for maintaining clean and orderly work facilities that are free from recognized hazards. They must also obey all safety statutes and regulations as well as Corporate safety policies, procedures, rules, and guidelines. 50 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Safety in the workplace Equipment must be operated in a safe manner, with all safety (continued) devices in place. Associates must wear personal protective equipment in areas where it is required. All injuries, no matter how minor, and violations of health and safety policies, laws, or regulations must be reported immediately to the associate's supervisor. In addition, health and safety information must be accurately recorded. For further information regarding the Corporation's policy concerning safety in the workplace, please refer to Policy 2.2 and the Retail Safety Handbook. Weapons and workplace Associates may not carry weapons or explosives on corporate time violence or on the corporation's premises. Similarly, the Corporation will not tolerate any level of violence in the workplace or in any work- related setting. Violations of this policy must be referred to the associate's supervisor immediately. For further information regarding the Corporation's policy concerning weapons and workplace violence, please refer to Policy 2.1. Drugs and alcohol The Corporation intends to maintain a drug-free work environment. Accordingly, associates may not be under the influence of alcohol or illegal drugs and may not sell, use, possess, manufacture, or distribute illegal drugs or controlled substances on Rite Aid property or during Rite Aid time. The use of prescription or over- the-counter drugs while on Rite Aid property or while performing Rite Aid business is prohibited unless supervisory personnel determine that the associate does not pose a threat to his/her own safety or the safety of coworkers. Supervisory personnel must also determine that the associate's job performance is not significantly affected by the use of prescription or over-the-counter drugs. Rite Aid provides assistance to associates who seek help in coping with a drug or alcohol problem through its Employee Assistance Program and through referrals to treatment and rehabilitation programs. The Corporation will not take disciplinary action against an associate simply for seeking assistance under these programs. However, seeking assistance through treatment and rehabilitation programs will not keep an associate from being disciplined, up to and including discharge, for violations of this Code. For further information regarding the Corporation's policy concerning drugs and alcohol, please refer to Policy 4.7. 51 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Responsibility to the Corporation Conflicts of interest (outside To maintain the highest degree of integrity in the conduct of the employment and other Corporation's business and to maintain an associate's activities) independent judgment, he/she must avoid any activity or personal interest that creates or appears to create a conflict between his/her interests and the interests of the Corporation. A conflict of interest arises any time an associate has two (2) or more duties or interests that are mutually incompatible and may conflict with the proper and impartial fulfillment of the associate's duties, responsibilities, or obligations to the Corporation. Conflicts of interest include an associate making an investment that may affect his/her business decisions, owning a significant financial interest in or being employed by an organization that is in competition with the Corporation, or owning a significant financial interest in or being employed by an organization that does or seeks to do business with Rite Aid. Participation in any of these activities cannot be done without the permission of the Corporation. Associates must be sensitive to issues of security, confidentiality, and conflicts of interest if their spouse, an immediate family member, or someone else that they are close to is a competitor or supplier of the Corporation or is employed by one. Associates must get clearance from their manager or the Legal department before doing business on Rite Aid's behalf with any company in which they or a family member may benefit from this action. Whenever associates have doubts about a possible conflict, they should discuss the matter with their supervisor or the Senior Vice President, Human Resources, before taking any action. For further information regarding the Corporation's policy concerning conflicts of interest, please refer to Policy 4.5. Dealing with suppliers and Associates who make or are involved in making business decisions others for the Corporation must do so using consistent and unbiased standards. Associates interacting with any person who has business dealings with Rite Aid (including suppliers, customers, competitors, contractors, and consultants) must conduct such activities in the best interest of the Corporation. Therefore, associates must not accept any gifts, entertainment, or gratuities that could influence or be perceived to influence their business decisions or be in a position to derive any direct or indirect benefit or interest from a party having business dealings with the Corporation. 52 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Business courtesies The type of business that Rite Aid does involves dealing with a wide range of suppliers, many of whom may consider it standard practice to provide gifts and entertainment as a gesture of appreciation. The giving or receiving of gifts or entertainment by any associate acting in his/her capacity as a Rite Aid associate or by members of an associate's immediate family can potentially be problematic because such acts may be construed as attempts to influence the performance of duties. Receiving gifts Associates and/or members of an associate's immediate family may not request or accept gifts in connection with Rite Aid business beyond that of a nominal or token value (less than $25). This includes gifts, payments, consulting fees, loans, or other benefits of value received directly or indirectly from any existing or potential customer, supplier, or competitor. Gifts of a nominal or token value, motivated by commonly accepted business courtesies, may be accepted. However, any gift that could create or appear to create an obligation to the donor or influence the business relationship with the donor may not be accepted. Associates may accept an occasional meal or outing with suppliers or customers if there is a valid business purpose involved. If an associate is asked to attend an overnight event with a vendor, he/she must obtain prior approval from his/her department's Executive/Senior Vice President. Giving gifts Associates may not furnish or offer to fumish any gifts, entertainment, meals, compensation, credits, or anything of value to a person who has business dealings with the Corporation (suppliers, purchasers, and competitors), except when authorized by the department's Vice President. If authorized, the item must be reasonable and proper under generally accepted business practices and ethics. Guarding Corporate assets Associates have a duty to safeguard Rite Aid assets, including the physical premises and equipment, records, customer information, and Corporate names and trademarks. Rite Aid assets should be used for Corporate business only. Without specific authorization, no associate may take, loan, sell, damage, or otherwise dispose of Rite Aid property or use this property for non-Rite Aid purposes. Associates must also take measures to ensure against theft, damage, and the misuse of Corporate property. Corporate books and records Associates must ensure that all Corporate documents are completed accurately, truthfully, promptly and that, when applicable, they are properly authorized. Financial activities must be recorded in compliance with all applicable laws and accounting practices. 53 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Corporate books and records The making of false or misleading entries, records, or documentation (continued) is strictly prohibited. Associates must never create a false or misleading report under the Corporation's name. In addition, all payments and established accounts must not be used for any purpose other than as described by its support documents. Document retention Rite Aid complies with all laws and regulations relating to the preservation of records. Under no circumstances are records to be destroyed selectively or maintained outside Corporate premises or in designated storage facilities. If the existence of a subpoena or impending government investigation is known or reported to an associate, he/she must immediately contact the Legal department. Associates must retain all records that may be responsive to a subpoena or pertain to an investigation. Any questions regarding whether a record pertains to an investigation or may be responsive to a subpoena should be directed to the Legal department before the document is disposed of. Confidential information and Associates may learn facts about the Corporation's business trade secrets operations, plans, or "secrets of success" that are not known to the general public or to competitors. Customer lists, the terms offered or prices charged to customers and suppliers, and marketing or strategic plans are examples of confidential information and/or trade secrets. Similarly, associates may obtain information concerning possible transactions with other companies or receive confidential information concerning other companies, which the Corporation is under an obligation to maintain as confidential. Such information is to be treated as the confidential information of Rite Aid. Associates who possess or have access to confidential information or trade secrets: ? Are not permitted to use the information for their own benefit or the benefit of persons outside the Corporation. ? Must guard against the disclosure of that information to people outside the Corporation. Associates should not discuss such matters with family members, business or social acquaintances, or in places where they may be overheard. • Must ensure that all information is marked "confidential," "proprietary," or with a similar notation. ? Must maintain it under password protection or in a secure place and be under their direct supervision when in use. ? Are not permitted to disclose it to other Rite Aid associates unless they need the information to carry out business responsibilities. 54 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Confidential information and Confidentiality agreements are commonly used when Rite Aid trade secrets (continued) must disclose confidential information to suppliers, consultants, or joint venture participants. Confidentiality agreements notify the person receiving the information that he/she must maintain the secrecy of such information or face the legal consequences. If, in doing business with persons not employed by the Corporation, associates foresee that they may need to disclose confidential information, they must call the Legal department to discuss the possibility of using a confidentiality agreement. The obligation to treat information as confidential does not end when associates leave the Corporation. Associates must return all Rite Aid documents and other materials containing confidential information upon their separation from the Corporation and must not disclose this information to a new employer. Trademarks Rite Aid's name and logo are examples of Corporate trademarks, which must be used properly. In addition to using trademarks appropriately, associates must also advise senior management or the Legal department of the inappropriate use of the Corporation's trademarks. Similarly, the trademarks of third parties must not be used without first obtaining approval from the Legal department. Copyright compliance Books, articles, drawings, computer software, and other materials may be covered under copyright laws, regardless if they contain a copyright notice or not. It is a violation of these laws to make unauthorized copies of or derivative works based upon copyrighted materials. Both associates who engage in this practice and the Corporation may be subject to substantial civil and criminal penalties. In addition, Rite Aid licenses the use of its computer software from outside companies. In most instances, copyright laws protect this computer software. As such, associates may not make, acquire, or use unauthorized copies of computer software. Questions concerning copyright laws should be directed to the Legal department. Intellectual property rights of Associates may not infringe knowingly upon the intellectual others property rights of others. If an associate uses the name, trademark, logo, or printed materials of another company, he/she must ensure that the use of these materials is done properly and with permission. In addition, associates may not disclose or be asked to disclose to Rite Aid the confidential, proprietary, or trade secret information of other companies, including former employers. 55 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Computer and Rite Aid's computer and communication resources, including communication resources computers, voicemail, and e-mail, provide substantial benefits to associates. However, they also present significant security and liability risks. It is important that associates take all of the necessary measures to ensure the security of their computer systems and computer and voicemail passwords. If associates have a reason to believe that their password or the security of a Corporate computer or communication resource has been compromised, they must change their password immediately and report the incident to their manager and the Information Services department. Associates must be aware that while using Rite Aid resources to send e-mail or voicemail or to access Internet services, they are acting as a representative of the Corporation. At times, their use of these resources may reflect poorly on the Corporation, damaging its reputation and exposing associates and the Corporation to legal liability. All e-mail, voicemail, and personal files stored on Rite Aid computers are the property of the Corporation and should be dedicated to business purposes. Therefore, associates should have no expectation of personal privacy in connection with these resources. In addition, the Corporation may review messages sent or received using Rite Aid's computer and communication resources, at its sole discretion. Associates may not use Rite Aid resources in a way that is unlawful, disruptive, or offensive to others. While sending messages, associates should not transmit comments, language, images, or files that they would be embarrassed to have read by persons not intended to receive the message. Associates must remember that their "private" e-mail messages are easily forwarded to a wide audience. In addition, associates may not use these resources in a wasteful manner. Unnecessarily transmitting messages drains computer resources and causes the receiver to put a lot of time and effort into sorting and reading through his/her e-mail. Use of computer and communication resources must be consistent with other Corporate policies, including those related to sexual harassment, privacy, copyrights, trademarks, trade secrets, and the intellectual property of others. For further information regarding the Corporation's policy concerning computer and communication resources, please refer to Policy 5.1. 56 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Insider trading Associates are prohibited from insider trading (buying or selling Rite Aid securities when they are in possession of material, nonpublic information) and tipping (passing such information on to someone who may buy or sell securities). This prohibition applies to Rite Aid securities and the securities of other companies if associates learn material, nonpublic information about them in the course of completing their duties for the Corporation. Information is considered material if: a) there is a substantial likelihood that a reasonable investor would find the information important in determining whether to trade in a security; or b) the information, if made public, would likely affect the market price of a company's securities. Examples of material information include unannounced dividends, earnings, financial results, new or lost contracts or products, sales results, important personnel changes, business plans, possible mergers, acquisitions, divestitures or joint ventures, and important regulatory, judicial, and legislative actions. Information is considered nonpublic unless it has been adequately disclosed to the public, which means that the information must be publicly disclosed and adequate time must have passed for the securities markets to digest the information. Adequate disclosure includes public filings with securities regulatory authorities and the issuance of press releases, which may include meetings with members of the press and the public. A delay of two (2) business days is generally considered a sufficient period for routine information to be absorbed by the market. A longer period of delay may be considered appropriate for more complex transactions. Associates may not disclose inside information to anyone, including coworkers, unless the person receiving the information has a legitimate, business-related need to know. If an associate leaves Rite Aid, he/she must maintain the confidentiality of that information until it has been adequately disclosed to the public. If there is any question as to whether information regarding the Corporation or any other company Rite Aid has dealings with is material or has been adequately disclosed to the public, the Legal department must be contacted. Responding to inquiries from Rite Aid associates who are not official spokespersons of the the press and others Corporation may not speak with the press as a Rite Aid representative unless specifically authorized to do so. Requests for financial or other information about the Corporation from the media, the press, the financial community, or the public should be referred to the Corporate Communications department. Requests for information from regulators or the government should be referred to the Legal department. For further information regarding the Corporation's policy concerning press and other inquiries, please refer to Policy 5.2. 57 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Competing with Integrity Success in the marketplace To achieve a sustainable record of success, Rite Aid must depend on its reputation for quality, service, and integrity. The way associates deal with the Corporation's customers, competitors, and suppliers molds Rite Aid's reputation, builds long-term trust, and determines the Corporation's success. Rite Aid is committed to a policy of vigorous and lawful competition that is based on the merits of products and services. Associates must seek to maintain the trust of their customers, competitors, and suppliers by conducting business in a fair and ethical manner. Antitrust laws The Corporation's activities are subject to antitrust and trade regulation statutes, which govern how associates interact with competitors, customers, and suppliers. It is important for associates to know and understand these laws and regulations and to make sure that they are in full compliance with them. Some of the most serious antitrust offenses involve agreements between competitors to fix prices, to limit product and service availability, and to allocate customers, territories, and markets. Any such agreement, whether formal or informal, may be unlawful and is prohibited by the Corporation. Associates must avoid unnecessarily involving themselves in situations from which unlawful agreements may be inferred. For that reason, contact with competitors should be kept to a minimum. Associates must notify the Legal department before participating in a meeting or event that brings competitors together. All contact with competitors should be conducted as if they were in the public view. Failure to comply with antitrust laws could subject both the Corporation and the associates involved to criminal fines and jail terms. In addition, the Corporation may be subject to large civil penalties and treble damages. Associates must direct questions or concerns regarding antitrust laws and how they are applied to the Legal department. Gathering competitive Associates may gather information about the marketplace, information including information about Rite Aid's competitors and their products and services. However, there are limits to the ways that this information can be acquired and used, especially information concerning the Corporation's competitors. When gathering competitive information, associates must abide by the following guidelines: 58 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Gathering competitive • Associates may gather information about Rite Aid's information (continued) competitors from sources such as published articles, advertisements, brochures, other non-proprietary materials, surveys by consultants, and conversations with clients (as long as those conversations do not suggest that the Corporation is attempting to conspire with its competitors by using the customer as a messenger, by gathering information in breach of a client's nondisclosure agreement with a competitor, or through other wrongful means). • Associates must never misrepresent the Corporation's identity when attempting to collect competitive information. • Associates must never attempt to acquire a competitor's trade secrets or other proprietary information through unlawful means such as theft, spying, disclosures made by a competitor's past or present employee, or the breach of a competitor's nondisclosure agreement by a client or other person. • If there is any indication that information obtained by an associate was not lawfully received by the party in possession, the associate must refuse to accept it. If an associate receives information that is anonymous or is marked confidential, he/she should contact the Legal department immediately. The improper gathering or use of competitive information could subject associates and the Corporation to criminal and civil liability. When in doubt as to whether a source of information is proper, associates must contact the Legal department. Product and service safety It is essential to the Corporation to provide safe products and services that fulfill Rite Aid's responsibilities to the public, maintain a competitive position in the marketplace, and retain the confidence of our customers. Truth in advertising Associates must not make misstatements of fact or give misleading impressions in any advertisement, literature, or other public statements. All statements made in support of the Corporation's products and services must be true. Questions regarding whether an advertisement or other material meets the requirements of the Code should be directed to the General Counsel. Truth in prescription billing Rite Aid is committed to accuracy in billing for its services to government health programs as well as to private third party payers. All associates and other persons engaged by Rite Aid to provide pharmacy services or to prepare and submit claims for pharmacy services are expected to comply with all Federal health care program requirements, including the preparation and submission of accurate billings consistent with the requirements of Federal health care programs and with 59 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Truth in prescription billing Rite Aid's Policies and Procedures regarding those (continued) programs and private payers. Associates who fail to comply with Federal health care program requirements or with Rite Aid's Policies and Procedures face the possibility of disciplinary action up to and including discharge. They, as well as Rite Aid, also face the possibility of civil and criminal fines and other punishment (including imprisonment for individuals) for health care fraud. Anyone convicted of health care fraud also faces the possibility of being placed on the federal exclusion list, which will make them ineligible to participate in any manner in federally funded health care programs. Rite Aid associates are also required to report any suspected violations of federal health care program requirements or of Rite Aid Policies and Procedure regarding those programs or billing to any third party payers. Associates may report suspected violations by calling the toll-free number, 1-888- RITE-CALL (1- 888-748-3255). All such reports will be maintained in confidence to the extent appropriate and no associate will be retaliated against for making the report. 60 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Interacting with the Government Prohibition of gifts to The various branches and levels of government have laws that government officials and restrict the giving of gifts, including meals, entertainment, employees transportation, and lodging, to government officials and employees. Associates must obtain pre-approval from the Legal department before providing any gift, meal, or anything of value to a government official or employee. Political contributions and Laws of certain jurisdictions prohibit the use of Rite Aid funds, activities assets, services, or facilities on behalf of a political party or candidate. Payment of Corporate funds to any political party, candidate, or campaign may be made only if permitted under applicable law and approved in advance by the Legal department. Associates will not be paid by Rite Aid for any time spent running for public office, serving as an elected official, or campaigning for a political candidate. Nor will the Corporation compensate or reimburse any associates for a political contribution that they intend to make or have made. Lobbying activities Laws of certain jurisdictions require registration and reporting by anyone who engages in a lobbying activity. Generally, lobbying includes: a) communicating with any member or employee of the legislative branch of government for the purpose of influencing legislation; b) communicating with certain government officials for the purpose of influencing government action; or c) engaging in research or other activities to support or prepare such communication. So that the Corporation may comply with lobbying laws, associates must notify the Legal department before engaging in any activity on behalf of the Corporation that might be considered lobbying, as described above. 61 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Implementation of the Code Responsibilities While each associate is individually responsible for putting the Code of Ethics and Business Conduct to work, he/she does not need to go it alone. Rite Aid has a number of resources, people, and processes in place to answer questions and guide associates through difficult decisions. The Senior Vice President, Human Resources, reporting directly to the Corporation's Chief Executive Officer has been , designated the responsibility to oversee and monitor compliance with the Code. The Senior Vice President, Human Resources, will also report periodically to the Corporation's Audit Committee regarding the establishment, implementation, and enforcement of the Code and other program elements. Sales agents, consultants, representatives, and suppliers are required to observe the same standards of conduct as Rite Aid associates when conducting business with or for Rite Aid. If suppliers and consultants for Rite Aid have questions, they should contact the Corporation's General Counsel. Seeking guidance This Code cannot provide definitive answers to all questions. Associates are encouraged to seek guidance when uncertain as to the appropriate course of conduct in adhering to the Corporation's high standards. In most instances, questions concerning the Code should be brought to the attention of the associate's supervisor or the Corporation's General Counsel. Copies of the Code are available on the Corporation's Internet and Intranet sites and should be provided to persons or entities retained and authorized to act on behalf of Rite Aid in areas to which the Code is applicable. Reporting violations If associates know of or suspect a violation of applicable laws and regulations, the Code, or the Corporation's related policies, they must immediately report that information to their supervisor, a higher level of management, the individuals or offices identified in the section above, or the Corporation's hotline discussed below. No associate reporting a suspected violation will be subject to retaliation because of a good faith report. The Corporation's hotline Rite Aid has a 24-hour hotline, 1-888-RITE-CALL (1-888-748-3225), which can be used to report violations of the Code, applicable laws and regulations, and the Corporation's policies, including the theft of Corporate assets or other types of business abuse. All calls are kept confidential. 62 3/14/2005 Vendor Supply Chain Guide VII. CODE OF ETHICS AND BUSINESS CONDUCT MANUAL Investigations of violations Reported violations will be promptly investigated and treated confidentially to the greatest extent possible. It is imperative that the associate reporting the violation not conduct a preliminary investigation of his/her own. Investigations of alleged violations may involve complex legal issues. Associates who act on their own may compromise the integrity of an investigation and adversely affect both themselves and the Corporation. Discipline for violations Rite Aid intends to use every reasonable effort to prevent the occurrence of conduct not in compliance with its Code of Ethics and Business Conduct and to halt any such conduct that may occur as soon as reasonably possible after its discovery. Associates who violate this Code and other Corporate policies and procedures may be subject to disciplinary action, up to and including discharge. In addition, disciplinary action, up to and including discharge, may be taken against anyone who directs or approves infractions or has knowledge of them and does not move promptly to correct them in accordance with the Corporation's policies. Associate reminder Ultimate responsibility to ensure that Rite Aid complies with the laws and ethical standards affecting its business rests on each of its associates. Associates must become familiar with and conduct themselves strictly in compliance with such laws and ethical standards as well as the Corporation's policies and guidelines pertaining to them. 63 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL This section outlines important procedures for Rite Aid's import vendors. Compliance to these procedures is mandatory. Please take the time and read each section carefully. Any deviations could result in a chargeback or other penalty. Please send copies of this section to all of your Vendors, as well as keeping a copy on file for easy reference. IMPORT DEPARTMENT CONTACTS Should you have any questions, please contact the Import Manager: Rite Aid 30 Hunter Lane Camp Hill, PA 17011 Phone: (717) 975-5860 Fax: (717) 975-5939 VENDOR SET UP FORMS Rite Aid requires that any vendor doing business with us must provide our Import department with: • Rite Aid vendor application - for new vendor set-up only • Rite Aid's standard defense and indemnity agreement signed by an officer of the company. • A certificate of insurance for a minimum $5.0 million coverage of general liability including products liability insurance with a vendor's endorsement noted on, or attached to, the policy. Certificate must list Rite Aid as an additional insured. • International Policies of Rite Aid signed by an officer of the company. • Customs Trade Partnership Against Terrorism (C-TPAT) questionnaire signed by an officer of the company, • Rite Aid returns agreement with a disposition option chose, signed by an officer of the company with the TradeCard Deduction Agreement attached.. • EDI/13213 Trading Partner Profile. Completed even if you are not EDI capable. • Written notification that you are registered on the TradeCard platform. QUOTATION SHEETS / OCEAN FREIGHT RATES THE RITE AID IMPORT QUOTE SHEET MUST BE COMPLETED IN FULL DETAIL BEFORE AN ITEM WILL BE CONSIDERED Rite Aid's quote sheets should be sent directly to the category manager, or, if a buying agent is facilitating the transaction, the quote should be directed to the agent. Three original quotes with color photographs and one additional color photograph (labeled with the item number and vendor) are required. Do not staple or glue photographs to the quote. The item description/intended use should answer the following: - What the item is used for - What the item is made of A composition/cost breakdown is required 64 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL • The HTS (Harmonized Tariff System) number/classification should be ten digits and accurate. A composition/cost breakdown, features of the product and intended use of the product must be included to verify the tariff category designation and consequently the applicable rate of duty. • Ocean freight rates vary according to the country of origin, commodity, and ultimate destination (east coast/west coast). Freight rates are based on carton cube and weight. Please supply factual information. Please contact Rite Aid's Traffic Analyst at (717) 731-6593 for current ocean freight rates. These freight rates will include ocean freight, consolidation, transloading of containers, drayage, and the rates are calculated per cubic foot. • Product quoted, as assortments should so be represented by picture and description. Please make sure assortment color(s) and style(s) are detailed sufficiently on the quote sheet. • Manufacturer's item number should be furnished on each import quote sheet. Please supply corresponding manufacturer's Universal Product Code (UPC) if available. • No increase in pricing will be accepted after the quote is received and negotiated. • Repeat items from previous purchases must have the Rite Aid code/item number filled in. THE FOLLOWING BOXES ON THE QUOTE SHEET ARE FOR RITE AID USE ONLY. PLEASE DO NOT FILL IN THESE AREAS OF THE QUOTE SHEET: - WAREHOUSE/QUANTITY/MASTER CASES/TOTAL CUBE/TOTAL $ - RETAIL INFORMATION AND PREVIOUS SELL THROUGH % MERCHANDISE SAMPLES • Merchandise samples are necessary to successfully conduct business in the international market. Failure to provide necessary samples can result in the cancellation of your order. • All samples shipped to Rite Aid should be shipped "PRE-PAID". Any samples shipped "COLLECT" will not be accepted. • A "sample request" will be issued designating the anticipated number of samples required. • All samples should be sent within three (3) weeks of receipt of sample request. Samples should be forwarded to: Rite Aid 451 St. Johns Road Camp Hill, PA 17011 Attn: Seasonal Category Manager • Each sample should be identifiable. Please affix a label to each item with the following information: • Vendor Name • Vendor Item Number • Vendor Item Description • Rite Aid Item Number (if repeat) • First Cost 65 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL Samples may be used for the following: • Planograms • Video presentations to field personnel • Artwork • Advertising • Tariff classification • Product Selection PRODUCT QUALITY AUDIT • As part of our company's commitment to providing Rite Aid customers with safe, high quality merchandise, Rite Aid has implemented an import testing program. This program will be managed by Bureau Veritas Consumer Products Services, Inc. Testing is required for all merchandise Rite Aid selects to purchase on a direct import basis. • Rite Aid policy requires that all product sold to Rite Aid be in compliance with applicable United States government regulations and industry standards (federal, state and local). • Testing will be required annually for all seasonal products. Additional testing may be required if: - change in country of origin - change in manufacturing site - multiple factories/sites • When submitting items to Bureau Veritas Consumer Products Services, Inc., request the review to be done in accordance with the Rite Aid Import Testing Program. Incomplete testing done on behalf of the vendor or manufacturer will not be accepted. • Samples should be delivered to Bureau Veritas Consumer Products Services, Inc. in the Rite Aid account name. • Rite Aid and Bureau Veritas Consumer Products Services, Inc. will determine which tests are required based on commodity type. • Testing charges are for the account of the vendor/manufaacturer. Invoicing, and payment arrangements will be managed by Bureau Veritas Consumer Products Services, Inc. • Test results / reports will be forwarded to the Vendor and to Rite Aid. Satisfactory testing will result in the issuance of a "Certificate of Approved Testing" by Rite Aid. This certification is indicated as a stipulation for payment on the TradeCard platform. • If testing is not satisfactory, the Vendor and Rite Aid will be notified. If by chance, any of the products or goods have already been shipped or are in the stores, the vendor shall accept return of all such product. • Testing will not alleviate defective product claims. *****CONTACT YOUR RESPECTIVE RITE AID AGENT REPRESENTATIVE FOR A COMPLETE ADMINISTRATIVE PROCEDURES OVERVIEW***** 66 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL ARTWORK AND PACKAGING It is the responsibility of the vendor and/or agent to produce product artwork and packaging. The cost of preparing artwork will be defined during purchase negotiations. Unless otherwise documented, the vendor and/or agent will be momentarily responsible for artwork. All expenses (including freight) for packaging proofs, which Rite Aid is to approve, will be absorbed by the vendor and/or agent. Packaging requirements/artwork will be advised to the vendor. The vendor must confirm packaging requirements/artwork thirty days prior to the required ship date. UPC CODING RITE AID HAS IMPLEMENTED SCANNING IN ALL OF ITS STORES. IT IS MANDATORY THAT EACH ITEM BE LABELED WITH A UNIVERSAL PRODUCT CODE (UPC). IN ADDITION, THE UPC MUST CONFORM TO ALL UCC STANDARDS. • Manufacturer's UPC should be indicated on the Rite Aid Import Quote Sheet. • Rite Aid will assign a Rite Aid UPC if a manufacturer's UPC is not available. PURCHASE ORDERS All purchase orders will be issued at/by our Camp Hill Corporate Headquarters Office. Rite Aid will not issue payment for product or services that are not defined on a Rite Aid Purchase Order. The purchase order indicates a "Date to Arrive". This date is defined as the date Rite Aid requires the product to physically be available at the distribution center facility. Following is how Rite Aid calculates their anticipated delivery schedule: Rite Aid West Coast Distribution Facilities Wilsonville Woodland Lancaster • 14 days = vendor booking, staging, stowing, delivery to freight forwarder • 40 days = ocean transportation, U.S. customs clearance, inland delivery to Rite Aid distribution facility, receipt Rite Aid East Coast Distribution Facilities Pontiac/Waterford Perryman Tuscaloosa Poca/Nitro Rome • 14 days = vendor booking, staging, stowing, delivery to freight forwarder • 40 days = ocean transportation, U.S. customs clearance, inland delivery to Rite Aid distribution facility, receipt ALL PURCHASE ORDERS MUST BE CONFIRMED BY THE MANUFACTURER/BENEFICIARY. THIS SHOULD BE ACCOMPLISHED ON THE TRADECARD PLATFORM WITHIN TEN DAYS RECEIPT OF THE ORDER. 67 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL Trade: Rite Aid - TradeCard Fact Sheet Rite Aid is pleased to announce that TradeCard will be implemented to provide online financial process automation and financial settlement services for all upcoming Purchase Orders. TradeCard is a hosted procurement-to-payment solution, enabling the electronic purchase, reconciliation and settlement of goods and services. TradeCard allows buyers and sellers to process and settle transactions securely, cost effectively and efficiently online. This method will replace both traditional Letter of Credit and open account approaches to offer your company the following benefits: o Electronic delivery of Purchase Orders o Automated creation of Commercial Invoice based on Purchase Order information o Automated document compliance checking o Real time visibility and reporting to all parties o Improved communication among all parties o Improved data quality across shipping documents o Improved planning and reporting capabilities o Payment assurance is available, if desired, for 100% of the value of an order o Access to a variety of export financing options Once you have completed the TradeCard registration process, TradeCard will assign a Client Manager to provide detailed training and ongoing support prior to your first transactions. In the meantime, please direct questions to Jerry Reinhardt at ireinhardt cDdteaid.com. You may also go to www.tradecard.com for additional information. Rite Aid TradeCard Workflow _J s 7 8 68 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL 1. Purchase Orders are initiated by Rite Aid and sent electronically to TradeCard. 2. Sellers will be notified of all new Purchase Orders, and asked to approve online. 3. Sellers create and approve Invoices on TradeCard as goods are readied for shipment. 4. Goods and documents are sent to the Logistics Service Provider (LSP). 5. The Logistics Service Provider will issue a hardcopy Forwarders Cargo Receipt to the Seller once goods have been received and all document requirements have been met. The LSP will then transmit Proof of Delivery (POD) data to TradeCard. 6. TradeCard's automated compliance check will compare the shipment documents (Invoice and POD) to the procurement documents (Purchase Order, including any amendments). 7. After compliance has been run, Rite Aid will be alerted to review any discrepancies and approve or negotiate the Payment Authorization document. Once finalized, payment will be determined based upon the terms of the transactions. 8. Rite Aid wires payment to TradeCard's payment service provider, JPMorgan Chase, who then remits payment to your account at the bank you designate. Frequently Asked Questions 1. Who is TradeCard? TradeCard is a provider of technology and services to automate the financial processes of a global supply chain. The TradeCard solution aligns the documentary and financial requirements of a domestic or international trade transaction with the physical movement of goods, eliminating time-consuming and error-prone manual processes. By streamlining and enhancing the steps necessary for Purchase Order approvals, payment decisions and settlement, TradeCard provides a cost-effective, practical and patented service for financial supply chain management. TradeCard's network of partners allows it to facilitate services such as credit protection and trade finance in many countries. TradeCard, Inc. is headquartered in New York City with offices in the San Francisco Bay Area, Hong Kong, Brussels, Taipei, Seoul and Tokyo. Visit www.tradecard.com for more information. 2. What are the minimum technical requirements needed for using TradeCard? TradeCard members must have access to the World Wide Web and Internet email. Minimum Internet browser requirements are Netscape version 4.07 or higher and Internet Explorer version 4.0 or higher. 3. How do we register on TradeCard? Completing the TradeCard Membership Application only takes a few minutes and can be easily accomplished online at: http://www.tradecard.com/resources/memberRecistration. 4. What are the terms and conditions of TradeCard membership? The terms and conditions of TradeCard membership are defined in a set of agreements that all members are required to execute during the application process. Please visit http://tradecard.com/resources to review and download the appropriate agreements. They include: o TradeCard Membership Agreement - Describes the terms and conditions of TradeCard membership. o TradeCard Settlement Services User Agreement - Describes the terms and conditions of the relationship between TradeCard members, TradeCard Settlement Services, LLC and JP Morgan Chase. o TradeCard Application Agreement - Acknowledgement of the accuracy of the information provided in the membership application and acceptance of the terms and conditions of the other referenced agreements. This document must be signed and returned to TradeCard. o Bank Signature Verification - This form is necessary to authenticate and authorize payments on the TradeCard system. This document needs to be signed and returned to TradeCard. o CIT Factoring Agreement (optional) - Sets forth the terms upon which CIT provides factoring services to sellers on the TradeCard Network Please return the original signed registration documents to your local TradeCard office or to the Corporate Headquarter office: Corporate Headquarters Asian Pacific Headquarters Taiwan Office TradeCard, Inc. Unit 1106, Tower 2 60, Tun Hwa South Road 75 Maiden Lane, 12'h Floor Lippo Centre, 89 Queensway Section 2, 2f-6 New York, N.Y. 10038 Admiralty, Hong Kong Taipei 106 Taiwan ROC Attn: Member Services Phone: (852) 2973-0578 Phone: (886) 2-2702-3000 Phone: (800) 905-8723 Fax: (852) 2973-0199 Fax: (886) 2-2754-2411 Fax: (212) 405-1801 69 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL As soon as your application is processed TradeCard will send you a welcome kit with instructions about how to process transactions and access the various services. 5. Who initiates a transaction on TradeCard? Rite Aid will initiate transactions (and amendments) by sending an electronic copy of the finalized purchase order to TradeCard. TradeCard will then send you an email with a link to review the purchase order for accuracy and approve it on the TradeCard system. 6. What documents are necessary for payment to take place? Your shipment of merchandise will take place as normal. You will be required to create an Invoice with commodity detail on the TradeCard platform. The Logistics Service provider will automatically forward to TradeCard data representing the Proof of Delivery. 7. Who makes the payment decision? After TradeCard's compliance check runs, all transactions that successfully pass compliance will be presented to Rite Aid for payment approval. In the event a discrepancy is identified then a Discrepancy Notice will be generated and both you and Rite Aid will be notified by email. Once any noted discrepancies are resolved the system will immediately trigger payment instructions based upon the terms of the Purchase Order. 8. How are payments made? Rite Aid wires payment to TradeCard's payment service provider, JPMorgan Chase, who then remits payment to your account at the bank you designate. 9. What Is TradeCard's role in the financing process? Tradecard facilitates the financing request and payment process. TradeCard provides the means for the seller to request financing and allows the financing bank view access to the transaction documentation to assist them in their financing decision. The seller and the financing bank negotiate the terms of their financing arrangement outside if the TradeCard platform and the financing bank will indicate their decision on the on-line finance request. If the bank agrees to finance the transaction, by approving the finance request, TradeCard will facilitate payment directly to the financing bank at time of settlement. 10. Will credit protection be available for this transaction? Yes. TradeCard has arranged for credit protection service through CIT, which can be purchased on a transaction basis. You will be asked if you want coverage at the time you approve the PO or Invoice on TradeCard and you can monitor your exposure to Rite Aid online in TradeCard. 11. Who is CIT? CIT Commercial Services is one of the most respected companies in the United States and a unit of CIT Group Inc. (NYSE: CIT), a leading commercial and consumer finance company. CIT Commercial Services is providing credit protection services to seller-members on the TradeCard platform. 12. What tools are used for workflow management? Users of TradeCard have online access to a flexible event-driven workflow management engine. The system moves information within and between all parties on each transaction according to their own business rules and provides alerts to pending tasks through e-mail reminders. All parties can track the status of their transaction online, 24 hours a day. 13. Who do I contact with questions? Please contact Jerry Reinhardt, Vice President of Category Management at 717-214-8506 or at ireinhardtCariteaid com. 70 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL COMMERCIAL SHIPPING DOCUMENTATION IT IS THE RESPONSIBILITY OF THE VENDOR TO PROVIDE THE NECESSARY REQUIRED DOCUMENTATION FOR LAWFUL IMPORT (TRANSPORT) INTO THE UNITED STATES OF AMERICA. The commercial shioaine invoice must include the following information: • The Seller complete name and address • The Buyer complete name and address • Full Item Description name by which item is known, the grade or quality, and the marks, numbers, and symbols under which sold by the seller or manufacturer to the trade in the country of exportation. Description should include what the item is made of (material component breakdown) and what the item is used for. • Quantity • Value • Currency • Terms of Sale • Country of Origin • Manufacturer Complete name and address • Solid Wood Packaging Material (SWPM) statement that shipments originating - being shipped from Hong Kong or China do not contain any SWPM • Rite Aid Destination statement that all cartons have been marked with the respective destination (city/state) as it appears on the corresponding purchase order 71 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL COUNTRY OF ORIGIN MARKINGS • Every article imported into the United States must be legibly marked in a conspicuous place as legibly, indelibly and permanently as to the nature of the article permits and in a manner to indicate the country of origin of the article to the ultimate purchaser in the United States. • The general rules of origin currently define the country of origin for a good as the country in which it is manufactured, produced or grown. Further work or material added to the good in another country must affect "substantial transformation" of the good in order to change the country of origin. Substantial transformation means production which results in a new and different good, that has a name, character and use different from those of its constituent materials. • The type and size printing "Made in (country of manufacture)" must be equal to or larger than that used for the Rite Aid name if both are to be printed on the package. • The country of origin marking and the Rite Aid name/address must be printed in close proximity on the packaging. This will alleviate any assumption by the consumer that the item is a product made in the United States of America. • It is the vendor's responsibility to provide the correct country of origin markings on Rite Aid product(s), as required by all United States government regulatory agencies. 72 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL CARTON MARKS IMPORT VENDORS ARE REQUIRED TO MARK ALL MASTER CARTONS IN THE FOLLOWING MANNER. PRINTING MUST BE DONE IN BLOCK LETTERS AND NUMBERS. NO HAND WRITTEN LETTERS OR NUMBERS. FRONT SIDE Rite Aid ZXRiteAid (Enter PO# Here) (Enter PO# Here) RITE AID ITEM # RITE AID ITEM # MFG. # MFG. # DESTINATION DESTINATION CARTON NO. OF MSTR. PACK INNER PACK GROSS WT. (LBS) NET WT. (LBS) MADE IN LENGTH (IN) WIDTH (IN) HEIGTH (IN) CUBE (FT) • All master packed cartons (including master pack with a single item) must be sealed; glue or staples. • Non shippable inner packs are not acceptable. • Inner packs must include item number and description. 73 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL RITE AID IMPORT SHIPPING INSTRUCTIONS THE FOLLOWING INSTRUCTIONS APPLY FOR SHIPMENTS TO ALL RITE AID DISTRIBUTION CENTERS. ALL SHIPMENTS ARE TO BE BOOKED THROUGH MAERSK LOGISTICS. • Shipments of less than 50 CBM to one distribution center are to be treated as CFS freight. • Shipments of 50 CBM or more to one distribution center may be factory loaded as CY/CY freight. CFS RECEIVING CHARGES ARE FOR THE ACCOUNT OF THE VENDOR ALL BOOKINGS FOR RITE AID CARGO ARE REQUIRED TO BE MADE IN THE MAERSK M*POWER SHIPPER SYSTEM. THE FOLLOWING DETAILS MUST BE PROVIDED TO MAERSK LOGISTICS AT THE TIME OF BOOKING: I . Rite Aid Purchase Order Number 2. Rite Aid Item Number 3. Quantity to be Shipped 4. Number of Cartons to be Shipped 5. Cube and Weight Measurements for Each Item UNDER NO CIRCUMSTANCES SHOULD FREIGHT FOR MORE THAN ONE RITE AID DISTRIBUTION CENTER BE LOADED INTO A CONTAINER BY THE VENDOR. Vendors are to book shipments at least fourteen (14) days in advance of delivery of the freight. If the booking is not made fourteen (14) days prior to delivery, equipment and/or space on the vessel may not be available. The vendor will be held accountable for not meeting the shipping window if the fourteen (14) day pre-delivery date has not been met. Three (3) complete sets of shipping documents are to be presented to Maersk Logistics within three (3) days of vessel sailing. Upon receipt of these documents, a Forwarders Cargo Receipt (FCR) will be issued. The FCR is a required document for payment on the TradeCard platform. Note: Taichung arbitrary for account of vendor. 74 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL Maersk Logistics Origin Offices m c m ° `o E O1 Cr rn o _ J F. m m U7 a s. rn - Cn _ rn c t t Z - o t n W Cj Y O Q o? C] c [? m U3 c Cj t o m o rn !? c Cr rn a E ; Ql m m C J (D F- Cr Cn n = m E [l 22 -'A Z 51 1? 'v m ai ° ?n g o ° m x m > n c m In ' at? m m C%l > m ?_3 - d LL '9 Q x E W CL C V E m Z F' O Z - c J O O v H - O°` I.L y r O H C m E °' ^ c [O _ H O C r Y m e -M m a: m m V w [l N W ~~ L m G N O 0 ° ll J L f? 4 Y L ? V m T U C m N CL o-- m c C d - [p z m d C ° C y C E m N t O o m g r L Lm U 1--- m ° c rn _ L , ck; m d E U _ 0 m e "N f .) _U O U V I'rL c 2. _ c Z m } S? m F!5 d. _ °+ ' o ai = m m m ry y CpV m W o+ U m ' c [l a [/l A li c ti -° 0 -i lL L t m c N v E o v s t E c o z m e '? `-? m E :c o n E 'c c c ?^ m CV ; 'c m ti t o t ' g `? F EX ~sc? rrt= cnx ? M;? cn?o ¢z Cr ~na s to ar °? if is o fR x a? ti o ? v are ^ co v f V ? `? N ryry ['?1 A EA ry [D A ry Ej A ?p m ^ ? ? cep R K ( y R mp C'`I ? of ry ~ ? m fD ( r ? m ? ? ? ^ m ? ?] p ] ?l R7 N Lf1 (p ff VVI (+ 7 ? . ? < ? L4C 7l ^ fff VVV tT 1 C V ? N ry ?V C V m ? ? ? ? ? ? .( x ? ? ? ? i . ? ? ? ? ? ? ? ? ? ? «. E Tv ° ? ' ° o c C.7 c m c ° o rJ. N Q o` U o ? n U U d W o c 0 0 0 ? o ? A o 0 0 W o u o .? u ft v U U c U E T ~ U U c - Q. C.1 . ° C N ° ° C u d N V J N d d . ° G y v O ?y . ° C ° vl ? . ° C 'S d '.' e y ° -2 ° '.' y M O CJ U U) O W UJ O W W V] U U J En U U] O CU U U U 01 O. ? j =_ N C C Of d °I n- Y C L s. (D _ m J V7 F!5w D- ° U d C ` `'? S d IY O O N L C ° Vl ?f m = C N O O tO C W ry °J ry 2L? _:3 1!5 C.D m Cn o ff Q 2 U L L ?- L C) C M C 'C LU Y ° y C rL C CD C 73 J fO o r.> C- C-) t ° ? c s rn Y c a ER c c rn '? a m c m " m H to J c o ? r ? rn c c m t c c m c o o_ . m A E E = m o J ? C7 x Z a I. z 2 ? L cn rn m m 1= O ? ?- ? m SZ ? c = m 2 J rn ? d ? r ? rn = N ? m om?} m 1 ° ° _ m U m o ? ii >> CD i!5 c S ? z s r d c z c z c g m !n Y U3 c m rn iZ ? C3 ? Y m j E cLn 75 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL PRODUCT RECEIVED DISCREPANCIES/DEFECTS WE EXPECT ALL ITEMS RECEIVED IN OUR FACILITY TO BE IN CONFORMITY TO OUR PURCHASE ORDER AND IMPORT ITEM QUOTE SHEET. ANY DEVIATIONS WILL RESULT IN PENALTY. • INCORRECT WEIGHT AND CUBE Deviations will result in a differential charge back. • PRODUCT DEFECTS Defects are defined as products that do not meet the standards and/or specifications for the purchased item (non-functional, discoloration, etc.). Each defect will be reviewed on a case-by-case basis and the vendor will be advised of a proposed resolution. • PACKAGING DISCREPANCIES Discrepancies are defined as non-compliance to packaging and/or artwork specifications (inner/master shipping unit, type face, incorrect coloring). Each discrepancy will be reviewed on a case-by-case basis and the vendor will be advised of a proposed solution. • INCORRECT OR UNSCANNABLE UNIVERSAL PRODUCT CODE (UPC) Deviations will result in a monetary penalty equal to the loss at point of sale. • INCORRECT PRE-PRICE Deviations will result in a monetary penalty equal to the loss at point of sale. • ITEM CANCELLATION A vendor must notify Rite Aid thirty days prior to the required shipdate if an item cannot meet the ship date for any reason. If the vendor does not notify Rite Aid and cancellation is affected, the vendor will be assessed a penalty at a rate of twenty-five (25) percent of the items first cost. • TRADEMARK/COPYRIGHT/PATENT REGULATIONS Non-compliant product will be returned to the vendor or destroyed at the vendor's expense. 76 3/14/2005 Vendor Supply Chain Guide VIII. IMPORT MANUAL RITE AID IMPORT QUOTE SHEET RA CODE # ITEM DESCRIPTION VENDOR # BENEFICIARY ADVISING BANK CONTACT TELEPHONE FAX TELEPHONE FAX # EMAIL DISTRIBUTION COST INFORMATION EAST COAST WEST COAST MFG CODE CLASS PPER S/U PER PIECE PER S/U MFG UPC FIRST COST RA UPC FREIGHT PA PLUSH LIC A DUTY BC RETAIL INFORMATION PREPRICE MISC 3% Y OR N E.L.C. FRT RATE' EC RETAIL #DIV/ OI WC RETAIL #DIV101 HTS # 10DIGIT PREVIOUS SELL THROUGH EAST WEST % BC BNO. RULING -4 OF DUTY SHIP POINT CTRY OF ORIGIN -PLEASE REFER TO FREIGHT RATE SCHEDULE FOR CORRECT FREIGHT RATES MASTER INNER S/U PER CASE WEIGHT CS CUBE C3 WHSE S/U QUANTITY MASTER CASES TOTAL CUBE TOTAL i MO-10 INTENDED USE: MI-28 AL-36 WV-60 NY-60 OR-80 SPECIAL FEATURES: CA-81 CA-88 TOTAL 77 3/14/2005 Vendor Supply Chain Guide IX. LETTER OF ACKNOWLEDGEMENT Wilson Lester Senior Vice President Supply Chain Rite Aid 30 Hunter Lane Camp Hill, PA 17011 Dear Valued Vendor Partner, The Vendor Supply Chain Guide (compliance requirements effective 03/01/02) was established to elevate awareness of critical gaps in the supply chain flow for Rite Aid and our vendors. By simply creating an awareness of these key measurements, we will work together to resolve some of the challenges that prevent maximization of customer satisfaction. Initially, our focus is to increase overall line on-time and complete; however, we still have a long way to go to providing timely and accurate shipment and receipt of product, and improving overall Supply Chain efficiency and effectiveness. As part of Rite Aid's commitment to continued improvement of supply chain performance, we continually review measures highlighting those areas that Rite Aid has determined to be of high priority. Our objective is to share only the most useful indicators of performance, focusing our attention on measurements that will result in the highest achievement standards throughout the Supply Chain. Our expectation is that the Vendor Supply Chain Guide will provide an opportunity to investigate Supply Chain challenges. Through joint process improvements, Rite Aid is committed to working with our vendors, making every effort to continually improve performance. In your review of the program, please take time to understand what each number represents. Please contact vendormg_mt^nariteaid.com if you have any questions. Upon complete review of the entire Rite Aid Vendor Supply Chain Guide, please return this page, signed and dated below, to Rite Aid Corp. office, Attn: Vendor Management Program, 30 Hunter Lane, Harrisburg, PA. 17011. Thank you for your support, Wilson Lester Acknowledgement made this day of year , 1 , on behalf of the Vendor named below, hereby certify that I have read the Vendor Supply Chain Guide. A copy of this policy will be retained for future reference. Vendor: By: Title: 78 3/14/2005 "? ?„ - :" t x:? °? "_'"? : _. :;?„ i:? , J°^ r Ann H. Rubin Carmody & Torrance LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 Telephone: (203) 573-1200 Facsimile: (203) 575-2600 arubin carmodylaw.com Attorneys for Defendant Timex Group U.S.A., Inc., f/k/a Timex Corporation, admitted pro hac vice Steven E. Grubb, Esq. (No. 75897) Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Group U.S.A., Inc., f/k/a Timex Corporation RITE AID HDQTRS. CORP., Plaintiff VS. TIMEX GROUP U.S.A., INC. f/k/a/ TIMEX CORPORATION, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL CIVIL ACTION - LAW January 13, 2009 Defendant Timex Group U.S.A., Inc.'s Response to Plaintiffs New Matter Defendant Timex Group U.S.A., Inc. ("Timex") by its undersigned attorneys, answers plaintiff Rite Aid HDQTRS. CORP.'s New Matter as follows: I . Denied. Legal conclusion to which no response is necessary under the Pennsylvania Rules of Civil Procedure. { W1665696) 2. Denied. Legal conclusion to which no response is necessary under the Pennsylvania Rules of Civil Procedure. To the extent that a factual averment has been made requiring reply, the same is denied on the basis of the factual averments of the Defendant's New Matter and Counterclaim which are incorporated herein by this reference as if set forth in their entirety herein. Strict proof to the contrary is demanded at time of trial. 3. Denied. Legal conclusion to which no response is necessary under the Pennsylvania Rules of Civil Procedure. To the extent that a factual averment has been made requiring reply, it is denied that Defendant's claims are barred by the doctrines of estoppel, laches, and waiver, and strict proof to the contrary is demanded at time of trial. 4. Denied. Legal conclusion to which no response is necessary under the Pennsylvania Rules of Civil Procedure. To the extent that a factual averment has been made requiring reply, it is denied that Plaintiff is entitled to an equitable right of setoff. 5. Denied. Legal conclusion to which no response is necessary under the Pennsylvania Rules of Civil Procedure. WHEREFORE, Defendant demands the relief that is prayed for in its New Matter and Counterclaim. (W16656961 2 Respectfully submitted, GROUP U.S.A., INC. Goldberg Katzman, P.C. 320 Market Street, P.O. Box 1268 Harrisburg, PA 17108-1268 (717) 234-4161 Attorneys for Defendant Timex Group U.S.A., Inc., f/k/a Timex Corporation Ann H. Rubin Carmody & Torrance LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 Telephone: (203) 573-1200 Facsimile: (203) 575-2600 arubingcarmodylaw.com Date: January 13, 2009 Attorneys for Defendant Timex Group U.S.A., Inc., f/k/a Timex Corporation, admitted pro hac vice { W 1665696} CERTIFICATE OF SERVICE I hereby certify that on January J3 --- , 20097 I served a copy of the foregoing Defendant Timex Group U.S.A., Inc. 's Response to Plaintiff's New Matter on counsel of record via United States mail, first class postage prepaid, addressed as follows: Natalie Grill Einsig Pepper Hamilton LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 t W 1665696} 5 --n rr s 1 ni _,_ i I,i - Cn RITE AID HDQTRS. CORP., Plaintiff, vs. TIMEX CORPORATION, Defendant. IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 08-3995 CIVIL CIVIL ACTION - LAW JOINT PRAECIPE TO DISCONTINUE TO THE PROTHONOTARY: Please mark all claims and counterclaims in the above-captioned matter settled and discontinued pursuant to Pa. R.C.P. 229. Respectfully sub 'tted, Brian P. Downey (PA 59891) Natalie Grill Einsig (PA 89791) PEPPER HAMILTON LLP 100 Market Street, Suite 200 P.O. Box 1181 Harrisburg, PA 17108-1181 717.255.1155 717.238.0575 Fax downeyb@pepperlaw.com einsign@pepperlaw.com Attorneys for Plaintiff Rite Aid HDQTRS. Corp. 14 Dated: May, 2009 Respec y sub m' d, ven E. Grubb 97) Goldberg Katzman, P.C. 320 Market Street P.O. Box 1268 Harrisburg, PA 17108-1268 717.234.4161 717.234.6808 Attorneys for Defendant Timex Corporation Iq Dated: May $, 2009 CERTIFICATE OF SERVICE I hereby certify that on May 14, 2009,1 served a copy of the foregoing Joint Praecipe to Discontinue on counsel of record via United States mail, first class postage prepaid, addressed as follows: Steven E. Grubb, Esquire Goldberg Katzman, P.C. 320 Market Street P.O. Box 1268 Harrisburg, PA 17108-1268 Ann H. Rubin, Esquire Carmody & Torrance, LLP 50 Leavenworth Street P.O. Box 1110 Waterbury, CT 06702 l Natalie Grill Einsig (PA 89791) O H 2099 MAY 15 PEE 12: 5;- i iw{ ¢a ti ? t. 9v%