Form 8-K - Current report

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported):

November 1, 2023 (October 23, 2023)

 

Rite Aid Corporation

(Exact name of registrant as specified in its charter)

 

Delaware		1-5742		23-1614034
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification Number)

 

P.O. Box 3165

Harrisburg, Pennsylvania 17105

(Address of principal executive offices, including zip code)

 

[phone]

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $1.00 par value		RADCQ		OTCMKTS*

 

*Rite Aid Corporation’s common stock began trading exclusively on the over-the-counter market on October 17, 2023 under the symbol RADCQ.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company      ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

 

 

 

 

 

Item 1.01.

Entry into a Material Definitive Agreement.

 

On October 23, 2023, Rite Aid Corporation (the “Company”) and McKesson Corporation (“McKesson”) entered into the interim supply agreement (the “Interim Supply Agreement”), which supplements that certain Supply Agreement, effective as of December 22, 2003 and restated in its entirety by the Seventh Amendment entered into and dated as of April 1, 2014, between the Company and McKesson for the supply by McKesson to the Company of prescription drugs and other health and beauty care products and the provision of related services. The Interim Supply Agreement sets forth certain trade terms governing payment for goods and services for the period after the Company filed for Chapter 11 bankruptcy (the “Chapter 11 Cases”) in the United States Bankruptcy Court of the District of New Jersey (the “Court”). On October 26, 2023, the terms set forth in the Interim Supply Agreement were approved by the Court on an interim basis. The terms of the Interim Supply Agreement are intended to help ensure that there is no disruption to the Company’s business and operations during the course of the Chapter 11 Cases in relation to the goods and services provided by McKesson to the Company. There is a hearing scheduled for November 9, 2023, whereby the Court will consider approval of the terms set forth in the Interim Supply Agreement on a final basis.

 

The foregoing summary of the Interim Supply Agreement does not purport to be complete and is qualified in its entirety by reference to the Interim Supply Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number		Description
10.1		Interim Supply Agreement, by and between Rite Aid Corporation and McKesson Corporation, dated as of October 23, 2023.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

 

Date: November 1, 2023
	RITE AID CORPORATION
		By:	/s/ Thomas Sabatino
		Name:	Thomas Sabatino
		Title:	Executive Vice President and Chief Legal Officer

 

 

 

 

 

 

 

Exhibit 10.1

 

Confidential

 

Execution Version

McKesson Corporation--Rite Aid Corporation

Interim Post-Petition Supply Agreement

October 23, 2023

 

This Interim Post-Petition Supply Agreement sets forth certain trade terms applicable to the interim supply agreement (the “Interim Supply Agreement”) agreed to by Rite Aid Corporation (together with its affiliates, “RAC”) and McKesson Corporation (together with its affiliates, “McKesson”) (McKesson and RAC each a “Party” and collectively the “Parties”). All other terms of this Interim Supply Agreement other than those specifically detailed herein shall be the same as in that certain Supply Agreement originally entered into and dated December 22, 2003 and restated in its entirety by the Seventh Amendment entered into and dated as of April 1, 2014 (and as the same has been previously amended, the “Prepetition Supply Agreement”), including, without limitation, section 7.7 thereof, between RAC and McKesson.

 

Topic

Terms

Effectiveness

All terms of this Interim Supply Agreement (other than those set forth under the section below titled “Superpriority Claims”) shall be effective as of October 15, 2023 (the “Petition Date”), the date the bankruptcy cases of RAC and certain of its affiliates (the “Debtors”) proceeding under the caption In re Rite Aid Corporation, Case No. 23-18993 (MBK) (the “Chapter 11 Cases”) were filed in the United States Bankruptcy Court for the District of New Jersey (the “Court”).   Not later than the first day after the execution of this Interim Supply Agreement, the Debtors shall file a motion in the Chapter 11 Cases seeking approval of this Interim Supply Agreement pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. The agreements set forth under the section titled “Superpriority Claims” of this Interim Supply Agreement shall be effective automatically upon entry of an order of such approval by the Court (the “9019 Order”). Upon entry of the 9019 Order, the Debtors will promptly file a notice dismissing the Complaint1 and TRO Motion2 with prejudice, except as expressly set forth in the “Reservation of Rights” section of this Interim Supply Agreement.

 

 

1

As used herein, “Complaint” means the Verified Adversary Complaint filed in the adversary proceeding captioned Rite Aid Corp. v. McKesson Corp., Adv. Pro. No. 23-01294 (MBK) in connection with the Chapter 11 Cases (the “Adversary Proceeding”) at Docket No. 1.

 

2

As used herein, “TRO Motion” means the Application in Support of the Debtors’ Request for a Temporary Restraining Order and Preliminary Injunction filed in the Adversary Proceeding at Docket No. 2.

 

1

 

 

Confidential

 

Topic	Terms
Payment Terms	Invoices for deliveries of products to RAC (including to any retail or specialty pharmacy owned and operated by RAC or its affiliates) (collectively, “Pharmacies”) shall be due and paid on or before the seventh (7th) day after the date of delivery of such invoice (the “Invoice Date”), except that, in the case of orders to warehouses, the Invoice Date is the date that the order departs the RDC, unless an alternate delivery time has been requested by RAC, in which event, such Invoice Date shall be the date the product is ready for shipment from the RDC;3 provided, however, that if a payment is due on a Saturday, then the payment shall instead be due on the preceding Business Day.4 If a payment is due on a day specified as a Sunday or a Holiday, then payment shall instead be due on the following Business Day. Each date such a payment is required to be made in relation to an invoice is referred to herein as a “Payment Due Date”.
Applicable Cure Period	RAC shall timely pay all invoices when due for goods delivered on and after the Petition Date, but in the case that RAC (i) fails to pay at least 95% of the full amount owed to McKesson by the applicable Payment Due Date, or (ii) has three (3) or more unresolved, unpaid Payment Shortfalls (as defined below) outstanding concurrently (each, an “Unsatisfactory Payment Performance”), then RAC may elect to cure such Unsatisfactory Payment Performance within the following periods (each a, “Cure Period”):

		Type of Unsatisfactory Payment Performance	Applicable Cure Period
		An invoice is partially paid (95% or less)   or   Three (3) or more concurrent unresolved, unpaid Payment Shortfalls	The second (2nd) Business Day after McKesson delivers written notice, including by email, of such Unsatisfactory Payment Performance (an “Unsatisfactory Payment Notice”, which shall set forth in reasonable detail the grounds or basis for such determination) to RAC.5
		No part of an invoice is paid	The first (1st) Business Day after McKesson delivers an Unsatisfactory Payment Notice to RAC

Any payment of less than 100% but greater than 95% of the full amount owed to McKesson by the applicable Payment Due Date (each, a “Payment Shortfall”) will be solely due to error (which RAC will resolve immediately upon discovery) or a dispute over an invoice (which RAC and McKesson will work in good faith to resolve promptly and in accordance with historical practices); provided that for these purposes notices via email from McKesson of a Payment Shortfall will suffice.  RAC shall pay any Payment Shortfall no later than one (1) Business Day after resolution of any such error or dispute, including in the event of any partial resolution of a dispute; provided, however, that the Cure Period set forth above will apply in the event that three (3) or more Payment Shortfalls are outstanding concurrently.    McKesson acknowledges that RAC shall contemporaneously send to the ABL Agents6 and the advisors to the Ad Hoc Secured Noteholder Group7 any notices that McKesson sends to RAC pursuant to this “Applicable Cure Period” section.

 

 

3

As used herein, “RDC” means a McKesson redistribution center.

 

4

As used herein:

 

“Business Day” means any day that is not a Saturday, Sunday, or Holiday.

 

“Holiday” means a day on which banks are legally authorized to close in the State of New York

 

5

Email notice shall also include counsel to RAC: [e-mail] and [e-mail]

 

6

As used herein, “ABL Agents” shall have the meaning given to such term in the Declaration of Jeffrey S. Stein in Support of Debtors’ Chapter 11 Petitions and First Day Motions filed in the Chapter 11 Cases at Docket No. 20 (the “Stein Declaration”).

 

7

As used herein “Ad Hoc Secured Noteholder Group” shall have the meaning given to such term in the Stein Declaration.

 

2

 

 

Confidential

 

Topic	Terms
Change in Payment Terms	In addition to any other rights and remedies under the Interim Supply Agreement, upon the expiration of any Cure Period following any Unsatisfactory Payment Performance, without cure from RAC, and without any further notice or consent of RAC or any other person, McKesson may elect to (i) suspend or discontinue the shipment of any additional orders to RAC or any of its Pharmacies and/or (ii) change any of the payment terms of this Interim Supply Agreement including, without limitation, by imposing the requirement for all future invoices of cash payment upon delivery, subject to payment in full of all outstanding invoices for goods delivered on and after the Petition Date.
Superpriority Claims	All amounts owed by RAC to McKesson on account of goods shipped on and after the Petition Date shall be granted a superpriority administrative expense claim against each of the Debtors’ estates pursuant to Section 364(c)(1) of the Bankruptcy Code8 (the “Superpriority Claims”), which for the purposes of section 1129(a)(9)(A) of the Bankruptcy Code shall be considered an administrative expense allowed in full under section 503(b) of the Bankruptcy Code.  McKesson’s Superpriority Claims shall be senior to all administrative claims in the Bankruptcy Cases and shall be immediately junior to (i) the DIP Superpriority Claims, (ii) any Adequate Protection Superpriority Claims, and (iii) for the avoidance of doubt, the Carve Out.9

 

 

8

As used herein, “Bankruptcy Code” means title 11 of the United States Code, as amended.

 

9

As used herein, the terms “DIP Superpriority Claims”, “Adequate Protection Superpriority Claims”, and “Carve Out” shall have the meanings given to such terms in the Interim Order (I) Authorizing the Debtors to Obtain Postpetition Financing, (II) Authorizing the Debtors to Use Cash Collateral, (III) Granting Liens and Providing Superpriority Administrative Expense Claims, (IV) Granting Adequate Protection, (V) Modifying the Automatic Stay, (VI) Scheduling a Final Hearing, and (VII) Granting Related Relief, entered in the Chapter 11 Cases at Docket No. 120 (the “Interim DIP Order”).

 

 

3

 

 

Confidential

 

Topic	Terms
Additional Interim Supply Agreement Reporting Rights	On and after the date of this Interim Supply Agreement, McKesson shall receive copies of all certificates, notices or other reporting (financial or otherwise) as and when provided to the DIP Lenders, the ABL Lenders, the Ad Hoc Secured Noteholder Group, to any Prepetition Secured Parties, to the holders of the holders of the Unsecured Notes or any other post-petition secured parties from time to time, whether provided pursuant to the Prepetition Debt Documents, DIP Documents, the Restructuring Support Agreement10 or in other agreements with holders of material indebtedness, as may be agreed from time to time, (including, without limitation, any compliance certificates, borrowing base certificates, periodic reports and notices of any default or event of default).
Case Direction Meetings	The Debtors will use best efforts to arrange regular case-direction meetings among the Debtors, McKesson, the Ad Hoc Secured Noteholder Group, the DIP ABL and Term Loan Agent and the ABL Agent, and any other creditor groups that form after the date of this Interim Supply Agreement and entry of the 9019 Order (or, in each case, professionals thereto).

 

 

10

As used herein, “ABL Lenders”, “Ad Hoc Secured Noteholder Group”, “Prepetition Secured Parties”, “Unsecured Notes”, “Prepetition Debt Documents”, “DIP Documents”, and “Restructuring Support Agreement” shall have the meanings given to such terms in the Stein Declaration.

 

4

 

 

Confidential

 

Topic	Terms
Reservation of Rights	RAC and McKesson expressly reserve all rights with respect to the purported termination of the Prepetition Supply Agreement on or before the Petition Date, and any future motion to reject or assume the Prepetition Supply Agreement under Section 365 of the Bankruptcy Code.  In addition, for the avoidance of doubt, RAC and McKesson expressly reserve all rights and remedies with respect to the enforcement of this Interim Supply Agreement.
Acknowledgement of Prepetition Claim	By RAC’s signature hereto, the Debtors hereby acknowledge McKesson’s prepetition claim for goods delivered prior to the Petition Date and that such claim constitutes an administrative claim under Section 503(b)(9) of the Bankruptcy Code.   McKesson and the Debtors agree that the pricing set forth in the invoices is determinative of the value of the products received by RAC. The 503(b)(9) claim amount may be adjusted from time to time to incorporate updated delivery information.
Term of Interim Supply Agreement	Unless earlier terminated pursuant to the terms set forth herein or as otherwise agreed by the Parties, the terms of this Interim Supply Agreement set forth herein shall remain in force until the earliest of (i) the closing date of a sale of substantially all of the Debtors’ pharmacy operations, (ii) the liquidation of substantially all of the Debtors’ pharmacy assets, and (iii) the effective date of a chapter 11 plan in the Chapter 11 Cases.
Good Faith Cooperation	During the term of this Interim Supply Agreement, RAC and McKesson shall use best efforts to negotiate a mutually beneficial go-forward post-bankruptcy supply agreement with McKesson.   With respect to all product orders, returns, and rebates, RAC and McKesson will cooperate in good faith to identify the Invoice Date and delivery date of the products in order to properly classify and allocate obligations relating to the period prior to the Petition Date versus obligations arising under the Interim Supply Agreement.

 

[Signature Page Follows]

 

5

 

 

Confidential

 

Each of the signatories to this Interim Supply Agreement represents that s/he is authorized to execute on behalf of each respective Party.

 

	RITE AID CORPORATION
	By:	/s/ Matthew Schroeder
	Name:	Matthew Schroeder
	Title:	Executive Vice President and Chief Financial Officer
	MCKESSON CORPORATION
	By:	/s/ Britt Vitalone
	Name:	Britt Vitalone
	Title:	Executive Vice President and Chief Financial Officer

 

6

 

 

 

 

 

Cover	Oct. 23, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Oct. 23, 2023
Entity File Number	1-5742
Entity Registrant Name	Rite Aid Corporation
Entity Central Index Key	0000084129
Entity Tax Identification Number	23-1614034
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	P.O. Box 3165
Entity Address, City or Town	Harrisburg
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	17105
City Area Code	717
Local Phone Number	761-2633
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	RADCQ
Entity Emerging Growth Company	false

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