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CONSEQUENCES OF NOT EXCHANGING OLD NOTES

        If you do not exchange your old notes in the exchange offer, your old notes will continue to be subject to the restrictions on transfer described in the legend on the certificate for your old notes. In general, you may offer or sell your old notes only:

•

if they are registered under the Securities Act and applicable state securities laws;



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if they are offered or sold under an exemption from registration under the Securities Act and applicable state securities laws; or



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if they are offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.

        We do not currently intend to register the old notes under the Securities Act. Under some circumstances, however, holders of the old notes, including holders who are not permitted to participate in the exchange offer or who may not freely resell new notes received in the exchange offer, may require us to file, and to cause to become effective, a shelf registration statement covering resales of old notes by these holders. For more information regarding the consequences of not tendering your old notes and our obligation to file a shelf registration statement,see "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes" and "Description of the New Notes—Registration Rights and Additional Interest."

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Summary Description of the New Notes

        The terms of the new notes and those of the outstanding old notes are substantially identical, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes. For a more complete understanding of the new notes, see "Description of the New Notes."

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***

        Our headquarters are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011, and our telephone number is (717) 761-2633. We were incorporated in 1968 and are a Delaware corporation.

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RISK FACTORS

        You should consider carefully the following factors, as well as the other information set forthincluded and incorporated by reference in this prospectus, before tendering your old notes in the exchange offer. When we use the term "notes" in this prospectus, the term includes the old notes and the new notes. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. We cannot assure you that any of the events discussed in the risk factors below will not occur. If they do, our business, financial condition or results of operations could be materially and adversely affected. In such case, the trading price of our securities could decline, and you might lose all or part of your investment.

Risks Related to the Exchange Offer and Holding the New Notes

Holders who fail to exchange their old notes will continue to be subject to restrictions on transfer.

        If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes" and "Material Federal Income Tax Considerations."

You must comply with the exchange offer procedures in order to receive new, freely tradable new notes.

        Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following:

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certificates for old notes or a book-entry confirmation of a book-entry transfer of old notes into the Exchange Agent's account at DTC, New York, New York as depository, including an Agent's Message (as defined herein) if the tendering holder does not deliver a letter of transmittal;



•

a completed and signed letter of transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in lieu of the letter of transmittal; and



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any other documents required by the letter of transmittal.

        Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the registration rights agreement will terminate.See "The Exchange Offer—Procedures for Tendering Old Notes" and "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes."

Some holders who exchange their old notes may be deemed to be underwriters and these holders will be required to comply with the registration and prospectus delivery requirements in connection with any resale transaction.

        If you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities and, if so, will

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be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.

The guarantees of the new notes will be subordinated to the guarantees of our senior lien debt, including our senior credit facility and our 9.750% senior secured notes due 2016, and the guarantees of the new notes will be secured only to the extent that the senior lien debt is oversecured; the terms of the new notes permit, without the consent of holders of new notes, various releases of the collateral securing the new notes and subsidiary guarantees as well as various amendments to the second priority collateral documents that could be adverse to holders of the new notes.

        Our obligations under the new notes will be guaranteed, subject to certain limitations, by all the Subsidiary Guarantors. These guarantees will, however, be subordinated to the guarantees of our senior lien debt, including our senior credit facility and our 9.750% senior secured notes due 2016. The collateral that secures the guarantees of the new notes on a second priority basis also will secure the guarantees of certain existing and future indebtedness, including our senior credit facility and our 9.750% senior secured notes due 2016 on a senior lien basis, as well as the guarantees of our 10.375% senior secured notes due 2016, 7.5% senior secured notes due 2017, and possible additional future indebtedness on a senior or second priority basis. Any rights to payment and claims by the holders of the new notes will therefore be fully subordinated to any rights to payment or claims by our creditors under our senior credit facility, our 9.750% senior secured notes due 2016 and other senior lien debt, with respect to distributions of Collateral. Further, other second priority debt may require the proceeds of Collateral dispositions to be allocated to prepay, repurchase or provide for the prepayment or repurchase of other second priority debt when no such prepayment, repurchase or provision is required with respect to the new notes.

        Only when our obligations under our senior credit facility, our 9.750% senior secured notes due 2016 and other senior lien debt are satisfied in full will the proceeds of such Collateral be available, subject to other permitted liens, to satisfy obligations under guarantees of the new notes and the other debt secured by the shared second priority liens. Even if the proceeds from the sale or liquidation of such Collateral are sufficient to satisfy our obligations under our senior credit facility, our 9.750% senior secured notes due 2016 and any additional senior lien debt, if the amount of such remaining proceeds is less than the aggregate outstanding principal amount of debt secured by the shared second priority liens, we may be unable to fully satisfy our obligations under the guarantees of the new notes. As a result, our obligations that are secured, subject to permitted liens, by the shared second priority liens on the Collateral are secured only to the extent that (i) our senior credit facility, our 9.750% senior secured notes due 2016 and other senior lien debt is oversecured, and (ii) the oversecured amount is sufficient, subject to other permitted liens, to fully secure the new notes, our 10.375% senior secured notes due 2016, 7.5% senior secured notes due 2017 and any other second priority debt. Pursuant to the indentures governing the new notes, our 10.375% senior secured notes due 2016 and 7.5% senior secured notes due 2017, and the second priority collateral documents, substantial additional debt may share the second priority liens securing the subsidiary guarantees of the new notes without the consent of holders of new notes.

        Pursuant to the security agreements and intercreditor agreements governing our senior and second lien indebtedness, any actions that may be taken with respect to the Collateral, including the ability to cause the commencement of enforcement proceedings against the Collateral, to control such proceedings and to approve amendments to releases of the Collateral from the lien of, and waive past defaults under, such documents relating to the Collateral, will be controlled by the senior collateral agent, acting at the direction of the parties to the senior credit facility, until the senior credit facility is terminated and after the senior secured credit facility is terminated, acting at the direction of the authorized representative of the holders of the next largest outstanding principal amount of indebtedness secured by a senior lien on the collateral. In addition, if the senior collateral agent, acting

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under the direction of the parties to the senior credit facility, releases the liens securing the obligations under the senior lien debt, then, under the terms of the indenture governing the new notes, the holders of the new notes will be deemed to have given approval for the release of the liens securing the new notes, subject to certain limitations. All Collateral used, sold, transferred or otherwise disposed of in accordance with the terms of the second priority debt will automatically be released from the lien securing the subsidiary guarantees of the new notes. Accordingly, any such sale, transfer or disposition in a transaction that does not violate the asset disposition covenant in the indenture governing the new notes may result in a release of Collateral. Because the asset disposition covenant of the indenture governing the new notes does not restrict transfers of assets by our subsidiaries to us, any transfer of Collateral to us could result in such assets ceasing to constitute Collateral. The liens securing guarantees of the new notes may also be released pursuant to instructions by representatives of a majority of the second priority debt obligations, unless the release involves all or substantially all the Collateral, in which case release shall require the consent of the holders of the new notes. The new notes do not and in the future may not represent a majority of the second priority debt obligations. Accordingly, substantial Collateral may be released automatically without consent of the holders of the new notes or the trustee under the indenture governing the new notes. In addition, if the senior collateral agent, acting under the direction of the parties to the senior credit facility, releases any of the subsidiary guarantors securing the obligations under the senior lien debt, then the holders of the new notes will be deemed to have given approval for such release of any such subsidiary guarantor from its obligations under the subsidiary guarantee, subject to certain limitations. The second priority collateral documents may be amended with the consent of holders representing a majority of the second priority debt obligations. In addition, the terms of the new notes permit various other releases of Collateral and subsidiary guarantees as well as various amendments to the second priority collateral documents without the consent of holders of new notes that could be adverse to holders of the new notes.

If the guarantees of the new notes and the liens that secure these guarantees are held to be invalid or unenforceable or are limited by fraudulent conveyance or other laws, the new notes will be unsecured and structurally subordinated to the debt of our subsidiaries.

        We are a holding company with no direct operations. Our principal assets are the equity interests we hold in our operating subsidiaries. As a result, we are dependent upon dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations, including the payment of principal of and interest on our outstanding debt. Our subsidiaries are legally distinct from us and have no obligation to pay amounts due on our debt or to make funds available to us for such payment. Accordingly, our debt that is not guaranteed by our subsidiaries is structurally subordinated to the debt and other liabilities of our subsidiaries.

        Our creditors or the creditors of the Subsidiary Guarantors could challenge the guarantees of the new notes and the liens securing the new notes as fraudulent conveyances or on other grounds. The delivery of these guarantees or the grant of these liens could be found to be a fraudulent conveyance and declared void if a court determined that: the Subsidiary Guarantorsubsidiary delivered the guarantee or granted a lien with the intent to hinder, delay or defraud its existing or future creditors; the Subsidiary Guarantor did not receive fair consideration for the delivery of the guarantee or the grant of the liens; or the Subsidiary Guarantor was insolvent at the time it delivered the guarantee or granted a lien. We cannot assure you that a court would not reach one of these conclusions. In the event that a court declares these guarantees or liens to be void, or in the event that the guarantees or liens must be limited or voided in accordance with their terms, any claim you may make against us for amounts payable on the new notes would be effectively subordinated to the obligations of our subsidiaries, including trade payables and other liabilities that constitute indebtedness.

Table In addition, even if the guarantees of Contentsthe new notes and the liens securing the new notes remain in force, under most circumstances, while you share equally and ratably with the other senior secured parties in all proceeds from any realization on the Collateral, while our senior credit facility or any other larger first lien tranche remains outstanding, you will not control the rights and remedies with respect to the Collateral upon an event of default and the exercise of any such rights and remedies following such an event of default will be made by the senior collateral agent, acting at the direction of the secured parties to our senior credit facility or other such tranche.

We may be unable to purchase the new notes upon a change of control.

        Upon a change of control event, we would be required to offer to purchase the new notes for cash at a price equal to 101% of the aggregate principal amount of the new notes, plus accrued and unpaid interest, if any. The change of control provisions may not protect you if we undergo a highly leveraged transaction, reorganization, restructuring, acquisition or similar transaction that may adversely affect you unless the transaction is included within the definition of a change of control.

        Our senior credit facility provides that the occurrence of certain events that would constitute a change of control for the purposes of the indenture governing the new notes constitutes a default under such facilities. Much of our other debt also requires us to repurchase such debt upon an event that would constitute a change of control for the purposes of the new notes. Other future debt may contain prohibitions of events that would constitute a change of control or would require such debt to be repurchased upon a change of control. Moreover, the exercise by holders of the new notes of their right to require us to repurchase the new notes could cause a default under our existing or future debt, even if the change of control itself does not result in a default under existing or future debt. Finally, our ability to pay cash to holders of the new notes upon a repurchase may be limited by our financial resources at the time of such repurchase or by the terms of our outstanding debt agreements at the time. Therefore, we cannot assure you that sufficient funds will be available when necessary to make any required repurchases. Our failure to purchase the new notes in connection with a change of control would result in a default under the indenture governing the new notes. Such a default would, in turn,

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constitute a default under much of our existing debt, and may constitute a default under future debt as well.

There may not be an active trading market for the new notes, and their price may be volatile. Holders may be unable to sell their new notes at the price desired or at all.

        There is no existing trading market for the new notes. As a result, there can be no assurance that a liquid market will develop or be maintained for the new notes, that holders will be able to sell any of the new notes at a particular time (if at all) or that the prices holders receive if or when they sell the new notes will be above their initial offering price. If the new notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the price and volatility in the price of our common stock, our performance and other factors. We do not intend to list the new notes on any national securities exchange.

        The liquidity of any market for the new notes will depend on a number of factors, including:

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the number of holders of the new notes;



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our operating performance and financial condition;



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the market for similar securities;



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the interest of securities dealers in making a market in the new notes; and



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prevailing interest rates.

        An active market for the new notes may not develop and, if it develops, may not continue.

The value of the Collateral securing the new notes may not be sufficient to satisfy our obligations under the new notes.

        No appraisal of the value of the Collateral has been made in connection with this offering, and the fair market value of the Collateral is subject to fluctuations based on factors that include, among others, general economic conditions and similar factors. The amount to be received upon a sale of the Collateral would be

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dependent on numerous factors, including, but not limited to, the actual fair market value of the Collateral at such time, the timing and the manner of the sale and the availability of buyers. By its nature, portions of the Collateral may be illiquid and may have no readily ascertainable market value. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, the Collateral may not be sold in a timely or orderly manner, and the proceeds from any sale or liquidation of the Collateral may not be sufficient to pay our obligations under the new notes.

Even though the guarantees of the new notes will benefit from a senior lien on the Collateral, the senior collateral agent, acting at the direction of the parties to the senior credit facility, will control most actions with respect to the Collateral.

        The rights of holders of the new notes with respect to the Collateral will be subject to a senior lien intercreditor agreement among us, the senior collateral agent, acting at the direction of the parties to our senior credit facility, and the trustee, who is the authorized representative of the 9.75% senior secured notes due 2016, the old notes and will be the authorized representative for the new notes offered hereby. Under the senior lien intercreditor agreement, any actions that may be taken with respect to the Collateral, including the ability to cause the commencement of enforcement proceedings against the Collateral, to control such proceedings and to approve amendments to releases of the Collateral from the lien of, and waive past defaults under, such documents relating to the Collateral, will be controlled by the senior collateral agent, acting at the direction of the parties to the senior credit facility.

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        In addition, the senior credit facility permits and the indenture will permit us to issue additional series of notes or other indebtedness that also have a senior lien on the Collateral. After the senior credit facility is terminated, at which time the parties to the senior credit facility will no longer have the right to direct the actions of the senior collateral agent with respect to the Collateral pursuant to the senior lien intercreditor agreement, that right passes to the authorized representative of holders of the next largest outstanding principal amount of indebtedness secured by a senior lien on the Collateral. If the aggregate principal amount of our 9.75% senior secured notes due 2016 or the old notes outstanding at such time exceeds the aggregate principal amount of the new notes offered hereby or if we issue additional senior lien indebtedness in the future in a greater principal amount than the new notes offered hereby, then the authorized representative for the 9.75% senior secured notes due 2016, the old notes or such additional indebtedness, as applicable, would be next in line to direct the senior collateral agent to exercise rights under the senior lien intercreditor agreement, rather than the authorized representative for the new notes offered hereby.

        Under the senior lien intercreditor agreement, the authorized representative of holders of the new notes offered hereby may not object following the filing of a bankruptcy petition to any debtor-in-possession financing or to the use of the shared collateral to secure that financing, subject to conditions and limited exceptions. After such a filing, the value of the Collateral could materially deteriorate, and holders of the new notes would be unable to raise an objection.

        The Collateral will also be subject to any and all exceptions, defects, encumbrances, liens and other imperfections as may be accepted by the senior collateral agent, acting at the direction of the parties to our senior credit facility, prior to termination of the senior credit facility.

        The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral as well as the ability of the senior collateral agent to realize or foreclose on the Collateral for the benefit of holders of the new notes. Neither we nor the initial purchasers have analyzed the effect of, or participated in any negotiations relating to, such exceptions, defects, encumbrances, liens and imperfections, and the existence thereof could adversely affect the value of the Collateral that will secure the guarantees of the new notes as well as the ability of the senior collateral agent to realize or foreclose on the Collateral for the benefit of holders of the new notes.

        If at any time the total credit exposure outstanding under our senior credit facility, together with the principal amount of our 9.750% senior secured notes due 2016, the old notes and the new notes offered hereby, and the principal amount of any other senior obligations, including other term loans, other revolving exposures and any additional senior debt, exceeds the borrowing base, we must, first, repay the outstanding revolving loans and swingline loans under the senior credit facility, second, cash collateralize letters of credit issued under the senior credit facility, and, third, repay our outstanding term loans under the senior credit facility (on a pro rata basis) to eliminate such shortfall.

There are circumstances other than repayment or discharge of the new notes under which the Collateral will be released automatically, without your consent or the consent of the trustee, and you may not realize any payment upon disposition of such Collateral.

        Under various circumstances, the Collateral will be released automatically, including a sale, transfer or other disposal in a transaction not prohibited under the senior debt documents and, with respect to the Collateral upon which the guarantees of the new notes have a senior lien, upon any release in connection with a foreclosure or exercise of remedies with respect to that Collateral by the senior collateral agent, acting at the direction of the parties to our senior credit facility, prior to the termination of the senior credit facility. Even though holders of the new notes share ratably with the lenders under our senior credit facility, the senior collateral agent, acting at the direction of the secured parties to our senior credit facility, until the termination of the senior credit facility, will

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initially control actions with respect to the Collateral, whether or not holders of the new notes agree or disagree with those actions. See "—Even though the guarantees of the new notes will benefit from a senior lien on the Collateral, the senior collateral agent, acting at the direction of the parties to the senior credit facility, will control most actions with respect to the Collateral." In addition, upon certain sales of the assets that comprise the Collateral, if our borrowing capacity under our revolving credit facility and any future revolving facilities under our senior credit facility is less than $900.0 million or if the proceeds of such Collateral disposition are received during a cash sweep period pursuant to the senior credit facility, we will be required to repay amounts outstanding under such applicable revolving facility (without a reduction in commitment), prior to repayment of any of our other senior obligations, including the new notes, with the proceeds of such Collateral disposition.

Your rights in the Collateral may be adversely affected by the failure to perfect security interests in certain collateral in the future.

        Applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. The trustee or the senior collateral agent may not monitor, or we may not inform the trustee or the senior collateral agent of, the future acquisition of property and rights that constitute Collateral, and necessary action may not be taken to properly perfect the security interest in such after-acquiredafter acquired collateral. The trustee for the new notes has no obligation to monitor the acquisition of additional property or rights that constitute Collateral or the perfection of any security interest in favor of the guarantees of the new notes against third parties. Such failure may result in the loss of the security interest therein or the priority of the security interest in favor of the new notes against third parties.

If we were to file for bankruptcy protection, the ability of holders of the new notes to realize upon the Collateral will be subject to certain bankruptcy law limitations.

        The ability of holders of the new notes to realize upon the Collateral will be subject to certain bankruptcy law limitations if we were to file for bankruptcy protection. Under applicable U.S. federal bankruptcy laws, secured creditors are prohibited from repossessing their security from a debtor in a bankruptcy case without bankruptcy court approval and may be prohibited from disposing of security repossessed from such a debtor without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to retain collateral, including cash collateral, even though the debtor is in default under the applicable debt instruments,provided that the secured creditor is given "adequate protection."adequate protection."

        The meaning of the term "adequate protection""adequate protection" may vary according to the circumstances, but is intended generally to protect the value of the secured creditor's interest in the collateral at the commencement of the bankruptcy case and may include cash payments or the granting of additional security if and at such times as the court, in its discretion, determines that a diminution in the value of the collateral occurs as a result of the stay of repossession or the disposition of the collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection""adequate protection" and the broad discretionary powers of a U.S. bankruptcy court, we cannot predict whether or when the collateral agent for the new notes could foreclose upon or sell the collateral or whether or to what extent holders of new notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of "adequate protection."adequate protection."

If a bankruptcy petition were filed by or against us, holders of new notes may receive a lesser amount for their claim than they would have been entitled to receive under the indenture governing the new notes.

        If a bankruptcy petition were filed by or against us under the U.S. Bankruptcy Code after the issuance of the new notes, the claim by any holder of the new notes for the principal amount of the new notes may be limited to an amount equal to the sum of the original issue price for the new notes

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and that portion of the original issue discount that does not constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code.

Table        Any original issue discount that was not amortized as of Contentsthe date of the bankruptcy filing would constitute unmatured interest. Accordingly, holders of the new notes under these circumstances may receive a lesser amount than they would be entitled to receive under the terms of the indenture governing the new notes, even if sufficient funds are available.

Risks Related to our Financial Condition

Current economic conditions may adversely affect our industry, business and results of operations.

        The United States economy is currentlycontinuing to feel the impact of the economic downturn that began in a recession and a period of unprecedented volatility,late 2007, and the future economic environment may continue to be less favorable than that of recentprior years. This recessioneconomic uncertainty has and could further lead to reduced consumer spending for the foreseeable future. We expect our front-end sales to continue to experience downward pressure during the remainder of fiscal 2010 due to the current economic environment, which is causing consumers to spend less on non-essential items and be more aggressive about searching for promotional sales. If consumer spending continues to decrease, we will likely not be able to improve our same store sales. In addition, reduced or flat consumer spending may drive us and our competitors to offer additional products at promotional prices, which would have a negative impact on our gross profit. A continued softening or slow recovery in consumer spending may adversely affect our industry, business suppliers and results of operations. Reduced revenues as a result of decreased consumer spending may also reduce our liquidity and otherwise hinder our ability to implement our long term strategy.

We are highly leveraged. Our substantial indebtedness could limit cash flow available for our operations and could adversely affect our ability to service debt or obtain additional financing if necessary.

        We had, as of August 29, 2009, $5.928, 2010, $6.2 billion of outstanding indebtedness (not including $400.0 millionand stockholders' deficit of outstanding amounts under our then existing securitization facilities which were repaid with the proceeds of the Refinancing Transactions) and negative stockholders' equity of $1.4$1.9 billion. We also had additional borrowing capacity under our existing$1.175 billion senior secured revolving credit facility of approximately $734.4 million,$1.032 billion, net of outstanding letters of credit. Ascredit of August 29,$143.3 million.

        Our earnings were insufficient to cover fixed charges and preferred stock dividends for fiscal 2010, 2009, after giving effect to the Refinancing Transactions, the total outstanding debt of us2008, 2007 and the Subsidiary Guarantors would have been approximately $6.32006 by $498.4 million, $2.6 billion, $340.6 million, $50.8 million and we would have had approximately $971.3$23.1 million, of additional borrowing capacity under our revolving credit facility, net of letters of credit. Although we have extended our debt maturities to September 2012 and beyond, ourrespectively.

        Our high level of indebtedness will continue to restrict our operations. Among other things, our indebtedness will:

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limit our flexibility in planning for, or reacting to, changes in the marketmarkets in which we compete;



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place us at a competitive disadvantage relative to our competitors with less indebtedness;



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render us more vulnerable to general adverse economic, regulatory and industry conditions; and



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require us to dedicate a substantial portion of our cash flow to service our debt.

        Our ability to meet our cash requirements, including our debt service obligations, is dependent upon our ability to substantially improve our operating performance, which will be subject to general economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. We cannot provide assurance that our business will generate sufficient cash flow from operations to fund our cash requirements and debt service obligations including with respector to the new notes.achieve our strategy of reducing our debt.

        The United States credit markets continue to experience an unprecedented contraction. As a resultTable of the current condition of the credit markets, we may not be able to obtain additional financing on favorable terms, or at all.Contents

        We believe we have adequate sources of liquidity to meet our anticipated requirements for working capital, debt service and capital expenditures through fiscal 20102011 and have no material maturities prior to September 2012.August 2013. However, if our operating results, cash flow or capital resources prove inadequate, or if interest rates rise significantly, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt and other obligations or otherwise be required to delay our planned activities. Additionally, decreases in the valuation of the Collateral securing our senior credit facility, and our 9.750%the 9.75% senior secured notes due

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2016, have previouslythe old notes and could in the futurenew notes could result in a reduction of availability under our seniorrevolving credit facility. If we are unable to service our debt including the new notes or experience a significant reduction in our liquidity, we could be forced to reduce or delay planned capital expenditures and other initiatives, sell assets, restructure or refinance our debt or seek additional equity capital, and we may be unable to take any of these actions on satisfactory terms or in a timely manner. Additionally, since we did not pay a dividend, which could have been paid in additional shares, to holders of our Series G and H Preferred Stock on March 31, 2009 (even though we are now current on all dividends owed to holders of our preferred stock), we are not currently eligible to use Form S-3 to register securities with the SEC. We will be eligible to use Form S-3 to register securities with the SEC beginning on February 27, 2010. Further, any of these actions may not be sufficient to allow us to service our debt obligations, including with respect to the new notes, or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debts or refinance our indebtedness couldwould have a material adverse effect on us.

Borrowings under our senior credit facility are based upon variable rates of interest, which couldwould result in higher expense in the event of increases in interest rates.

        As of August 29, 2009, after giving effect to the Refinancing Transactions,28, 2010, approximately $2.1$1.4 billion of our outstanding indebtedness would have bornebore interest at a rate that varies depending upon the London Interbank Offered Rate ("LIBOR"), subject, in the case of the Tranche 3 Term Loan, (as defined herein), the Tranche 4 Term Loan (as defined herein) and the Amended Revolver (as defined herein), to a minimum LIBOR floor.floor of 300 basis points. If we borrow additional amounts under the Amended Revolver,our senior secured revolving credit facility, the interest rate on those borrowings maywill also vary depending upon LIBOR. LIBOR has experienced unprecedented volatility in connection with the ongoing recession and credit crisis. If LIBOR rises, the interest rates on outstanding debt will increase. Therefore an increase in LIBOR would increase our interest payment obligations under thesethose loans and have a negative effect on our cash flow and financial condition. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest.

The covenants in the instruments that govern our current indebtedness includingand the new notes offered hereby may limit our operating and financial flexibility.

        The covenants in the instruments that govern our current indebtedness as well as the new notes, limit our ability to:

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incur debt and liens;



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pay dividends;



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make redemptions and repurchases of capital stock;



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make loans and investments;



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prepay, redeem or repurchase debt;



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engage in acquisitions, consolidations, asset dispositions, sale-leaseback transactions and affiliate transactions;



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change our business;



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amend some of our debt and other material agreements;



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issue and sell capital stock of subsidiaries;



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restrict distributions from subsidiaries; and



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grant negative pledges to other creditors.

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        In addition, if we have less than $150.0 million of revolver availability under the Amended Revolver, we will be subject toour senior credit facility currently has a fixed charge coverage ratio maintenance test.test that is applicable if availability on the senior secured revolving credit facility is less than $150.0 million. The required coverage ratio increased from 1.05 to 1.10 beginning in the first quarter of fiscal 2011. On August 19, 2010, we entered into certain amendments to our senior credit facility that, among other things, reduced the fixed charge coverage ratio test to 0.95 for the second and third quarters of fiscal 2011 and will subsequently increase thereafter. If we are unable to meet the terms of the financial covenants or if we breach any of these covenants, a default could result under one or more of these agreements. A default, if not waived by our lenders, could result in the acceleration of our outstanding indebtedness and cause our debt to become immediately due and payable. If acceleration occurs, we would not be able to repay our debt, including the new notes, and it is unlikely that we would be able to borrow sufficient additional funds to refinance such debt, particularly in light of the current credit crisis.debt. Even if new financing is made available to us, it may not be available on terms acceptable to us. If we obtain modifications of our agreements, or are required to obtain waivers of defaults, we may incur significant fees and transaction costs or become subject to more stringent covenants and restrictions on our operations.

We are in compliance with allIf we do not meet the New York Stock Exchange continued listing requirements. However, if we do not continue to maintain compliance with such requirements, our common stock may be delisted. Upon such event, we may be required to repurchase or refinance our 8.5% convertible notes due 2015.

        On July 1, 2009,        Our Board of Directors has approved a reverse stock split of our common stock, subject to stockholder approval, if such a split is necessary to cure the minimum share price deficiency. The objective of a reverse stock split would be to ensure that we were notified by the New York Stock Exchange (the "NYSE") that, as of July 1, 2009, we regainedregain compliance with the NYSENYSE's minimum share price rule and maintain our listing requirement. Accordingly,on the NYSE. Per the NYSE rules, we do notare required to bring our closing share price and average closing share price for a 30 trading-day period back above $1.00 within six months following the notification. We can cure our share price deficiency by attaining a closing share price and average closing share price for a trailing 30 trading-day period on the last trading day of any calendar month during the cure period or on the last day of the cure period. If we opt to cure the price condition by taking action that will require a stockholder vote, such as a reverse stock split, the NYSE will generally permit us to wait until our next annual meeting, even if such meeting occurs after the expiration of the six-month period. Our average closing share price over the 30 consecutive trading-day period ended October 22, 2010, was $0.96. We intend to implementseek stockholder approval for the reverse stock split previously approvedat or prior to our next annual meeting of stockholders, if necessary to bring our share price over $1.00 and to cure the share price deficiency. The terms of the reverse stock split, including selection of appropriate reverse split ratios and setting the date for the meeting of stockholders, will be determined at a later date by our Board of Directors. The Board of Directors will base its decision regarding the reverse stock split upon its evaluation of when, and on what terms, such action would be most advantageous to us and our stockholders. Our common stock continues to be listed on the NYSE and trade as usual.

        We are in compliance with all other NYSE listing rules, have actively been taking steps to maintain our listing and expect our efforts to maintain our NYSE listing will be successful. However, there can be no assurance that we will regain or maintain compliance with the NYSE minimum share price rule or other continued listing requirements. InIf our common stock is not listed on the event of a delisting,NYSE or another national exchange, holders of our $64.2 million of outstanding 8.5% convertible notes due 2015 (the "8.5% Convertible Notes") couldwould be entitled to require us to repurchase their 8.5%Convertible Notes. Our senior credit facility permits us to make such a repurchase of the Convertible Notes; provided that, before and after such transaction, no default or event of default shall have occurred and be continuing under the senior credit facility and we have at least $100.0 million of availability under our revolving credit facility. Our ability to pay cash to holders of the Convertible Notes which would result in a default undermay be limited by our senior credit facility. Although there canfinancial resources at the time of such repurchase. We cannot assure you that sufficient funds will be no assurance that we would be ableavailable on terms acceptable to do so, we may seekus if necessary to refinance or otherwise acquire the 8.5% Convertible Notes to avoid such a scenario. As a resultmake any required repurchase of the Credit Agreement Amendments (as defined herein), we have the flexibility to refinance or otherwise acquire the 8.5% Convertible Notes under certain circumstances.Notes.

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Risks Related to Our Operations

We need to continue to improve our operations in order to improve our financial condition, but our operations will not improve if we cannot continue to effectively implement our business strategy or if our strategy is negatively affected by generalworsening economic conditions.

        We have not yet achieved the sales productivity level of our major competitors. We believe that improving the sales of existing stores is important to improving profitability and operating cash flow. If we are not successful in implementing our strategies, including our efforts to further reduce costs, or if our strategies are not effective, we may not be able to improve our operations. In addition, any further adverse change or continued downturn in general economic conditions or major industries can adversely affect drug benefit plans and reduce our pharmacy sales. Adverse changes in general economic conditions such as the current recession, affect consumer buying practices and consequently reduce our sales of front end products, and cause a decrease in our profitability. Failure to continue to improve operations or a continued decline in major industries or general economic conditions would adversely affect our results of operations, financial condition and cash flows and our ability to make principal or interest payments on our debt, including the new notes.debt.

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For so long as Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu family) maintain certain levels of Rite Aid stock ownership, Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu family) could exercise significant influence over us.

        As of November        At August 28, 2009,2010, Jean Coutu Group owned 252.0 million shares of our common stock, which represented approximately 27.6%27.5% of the totalvoting power of Rite Aid voting power.Aid. As a result, Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu family) generally has the ability to significantly influence the outcome of any matter submitted for the vote of our stockholders. The stockholder agreement (the "Stockholder Agreement") that we entered into at the time of the Brooks Eckerd acquisition provides that Jean Coutu Group (and, subject to certain conditions, certain members of the Coutu family) has the right to designate four of the fourteen members of our Board of Directors, subject to adjustment based on its ownership position in us. Accordingly, Jean Coutu Group generally is able to significantly influence the outcome of all matters that come before our Board of Directors. As a result of its significant interest in us, Jean Coutu Group may have the power, subject to applicable law (including the fiduciary duties of the directors designated by Jean Coutu Group), to significantly influence actions that might be favorable to Jean Coutu Group, but not necessarily favorable to our financial condition and results of operations. In addition, the ownership position and governance rights of Jean Coutu Group could discourage a third party from proposing a change of control or other strategic transaction concerning us. Additionally, the Stockholder Agreement provides the Jean Coutu Group with certain preemptive rights andthat provide the Jean Coutu Group with the ability to maintain their ownership percentage in Rite Aid.Aid and requires two-thirds of our Board of Directors to approve certain transactions.

Conflicts of interest may arise between us and Jean Coutu Group, which may be resolved in a manner that adversely affects our business, financial condition or results of operations.

        Following the Brooks Eckerd acquisition, Jean Coutu Group has continued its Canadian operations but no longer has any operations in the United States, and we currently have no operations in Canada. Despite the lack of geographic overlap, conflicts of interest may arise between us and Jean Coutu Group in areas relating to past, ongoing and future relationships, including corporate opportunities, potential acquisitions or financing transactions, sales or other dispositions by Jean Coutu Group of its interests in us and the exercise by Jean Coutu Group of its influence over our management and affairs.

        As a result of the Acquisition,Brooks Eckerd acquisition, a number of the directors on our Board of Directors are persons who are also officers or directors of Jean Coutu Group or its subsidiaries. Service as a

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director or officer of both Rite Aid and Jean Coutu Group or its other subsidiaries could create conflicts of interest if such directors or officers are faced with decisions that could have materially different implications for Rite Aid and for Jean Coutu Group. Apart from the conflicts of interest policy contained in our Code of Ethics and Business Conduct and applicable to our directors, we and Jean Coutu Group have not established any formal procedures for us and Jean Coutu Group to resolve potential or actual conflicts of interest between us. There can be no assurance that any of the foregoing conflicts will be resolved in a manner that does not adversely affect our business, financial condition or results of operations.

We are dependent on our management team, and the loss of their services could have a material adverse effect on our business, and thefinancial condition or results of our operations or financial condition.operations.

        The success of our business is materially dependent upon the continued services of our executive management team. The loss of key personnel could have a material adverse effect on the results of our operations, financial condition or cash flows. Additionally, we cannot assure you that we will be able to attract or retain other skilled personnel in the future.

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We are substantially dependent on a single wholesaler of branded pharmaceutical products to sell products to us on satisfactory terms. A disruption in this relationship may have a negative effect on our results of operations, financial condition and cash flow.

        We purchase all of our brand prescription drugs from a single wholesaler, McKesson, Corporation ("McKesson"), pursuant to a contract that runs through April 1, 2013. Pharmacy sales represented approximately 67%67.9% and 68%, respectively,68.2% of our total sales during fiscal 20092010 and for the thirty-ninetwenty-six weeks ended NovemberAugust 28, 20092010, respectively, and, therefore, our relationship with McKesson is important to us. Any significant disruptions in our relationship with McKesson would make it difficult for us to continue to operate our business until we executed a replacement wholesaler agreement or developed and implemented self-distribution processes. There can be no assurance that we would be able to find a replacement wholesaler on a timely basis or that such a wholesaler would be able to fulfill our demands on similar terms, which would have a material adverse effect on our results of operations, financial condition and cash flows.

Risks Related to Our Industry

The markets in which we operate are very competitive and further increases in competition could adversely affect us.

        We face intense competition with local, regional and national companies, including other drugstore chains, independently owned drugstores, supermarkets, mass merchandisers, discount stores, dollar stores, mail order and internet pharmacies. Our industry also faces growing competition from companies who import drugs directly from other countries, such as Canada, as well as from large-scalelarge scale retailers that offer generic drugs at a substantial discount. Some of our competitors have or may merge with or acquire pharmaceutical services companies or pharmacy benefit managers, which may further increase competition. We may not be able to effectively compete against them because our existing or potential competitors may have financial and other resources that are superior to ours. In addition, we may be at a competitive disadvantage because we are more highly leveraged than our competitors. The ability of our stores to achieve profitability depends on their ability to achieve a critical mass of loyal, repeat customers. We believe that the continued consolidation of the drugstore industry will further increase competitive pressures in the industry. We cannot assure you that we will be able to continue to effectively compete in our markets or increase our sales volume in response to further increased competition.

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Drug benefit plan sponsors and third party payors could change their plan eligibility criteria and further encourage or require the use of mail-order prescriptions which could decrease our sales and reduce our margins and have a material adverse effect on our business.

        An adverse trend for drugstore retailing has been initiatives to contain rising healthcare costs leading to the rapid growth in mail-order prescription processors. These prescription distribution methods have grown in market share relative to drugstores as a result of the rapid rise in drug costs experienced in recent years and are predicted to continue to rise. Mail-order prescription distribution methods are perceived by employers and insurers as being less costly than traditional distribution methods and are being encouraged, and, in some cases, required, by third party pharmacy benefit managers, employers and unions that administer benefits. As a result, some labor unions and employers are requiring, and others may encourage or require, that their members or employees obtain medications from mail-order pharmacies which offer drug prescriptions at prices lower than we are able to offer.

        Another adverse trend for drugstore retailing has been for drug benefit plan sponsors and third party payors to change their plan eligibility requirements resulting in fewer beneficiaries covered and a reduction in the number of prescriptions allowed.

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        Mail-order prescription distribution and drug benefit plan eligibility changes have negatively affected sales for traditional chain drug retailers, including us, in the last few years and we expect such negative effectseffect to continue in the future. There can be no assurance that our efforts to offset the effects of mail order and eligibility changes will be successful.successful nor can we predict whether the recently adopted health care reform legislation will exacerbate this risk.

The availability of pharmacy drugs is subject to governmental regulations.

        The continued conversion of various prescription drugs, including the planned conversion of a number of popular medications, to over-the-counter medications may reduce our pharmacy sales, and customers may seek to purchase such medications at non-pharmacy stores. Also, if the rate at which new prescription drugs become available slows or if new prescription drugs that are introduced into the market fail to achieve popularity, our pharmacy sales may be adversely affected. The withdrawal of certain drugs from the market or concerns about the safety or effectiveness of certain drugs or negative publicity surrounding certain categories of drugs may also have a negative effect on our pharmacy sales or may cause shifts in our pharmacy or front end product mix.

Changes in third party reimbursement levels for prescription drugs and changes in industry pricing benchmarks could reduce our margins and have a material adverse effect on our business.business, financial condition or results of operations.

        Sales of prescription drugs as a percentage of sales, and the percentage of prescription sales reimbursed by third parties, have been increasingparty payors, including the Medicare Part D plans and we expect them to continue to increase.state sponsored Medicaid agencies, represented 96.2% of our business in fiscal 2010 and the twenty-six weeks ended August 28, 2010, respectively. We also expect our pharmacy gross margin to be lower in fiscal 20102011 than in the prior yearpreviously experienced due to continued reimbursement rate pressures, fewer new generics, acquisition costs offewer cost reductions on existing generics and the impact of the recently implemented Average Wholesale Price ("AWP") cost adjustments on our Medicaid business, which went into effect at the end of September, 2009. Although we expect continued improvements in selling, general and administrative expense as a percentage of revenues to somewhat mitigate these factors, if our pharmacy gross margin continues to decrease, it would adversely affect our results of operations, financial condition and cash flows.business.

        In conjunction with a class action settlement with two entities that publish the AWP of pharmaceuticals, the methodology used to calculate the AWP, a pricing reference widely used in the pharmacy industry, reduced the AWP for many prescription drugs effective September 26, 2009. We have reached understandings with most of our third party payors to adjust reimbursements to correct for this change in methodology, but many state Medicaid programs that utilize AWP as a pricing reference have not taken action to make similar adjustments. As a result, we have experienced reduced Medicaid reimbursement levels and expect to continue to experience reduced Medicaid reimbursement

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levels in fiscal 20092011. In fiscal 2010 and the thirty-ninetwenty-six weeks ended NovemberAugust 28, 2009, sales of prescription drugs represented 67.2%2010, approximately 6.9% and 68.6% of our sales, respectively, and 96.3% and 96.2%7.7%, respectively, of all of the prescription drugs that we sold were with third party payors. During fiscal 2009 and the thirty-nine weeks ended November 28, 2009, the top five third party payors accounted for approximately 37.3% and 38.5% of our total sales, respectively, the largest of which in each period represented 12.6% and 14.3% of our total sales, respectively. Third party payors have and could further reduce the levels at which they will reimburse us for the prescription drugs that we provide to their members, which could impact our gross margins. Any significant loss of third party payor business or any significant reduction in reimbursement levels could have a material adverse effect on our business and results of operations.

        In fiscal 2009 and the thirty-nine weeks ended November 28, 2009, approximately 6.6% and 7.0% of our revenues respectively, were from state sponsored Medicaid agencies, the largest of which were less than 2%approximately 2.0% and equal to 2%2.1%, respectively, of our total sales, respectively. In fiscal 2009 andsales.

        Additionally, certain provisions of the thirty-nine weeks ended November 28, 2009, approximately 10.5% and 11.2%Deficit Reduction Act of our total sales, respectively, were2005 (the "DRA") sought to customers coveredreduce federal spending by Medicare Part D, and we expect these sales to continue.altering the Medicaid reimbursement formula for multi source (i.e., generic) drugs ("AMP"). Although those reductions did not go into effect, the Patient Care Act, signed into law on March 23, 2010, enacted a modified reimbursement formula for multi source drugs. The modified formula, when implemented, may reduce Medicaid reimbursements. There have also been a number of other recent proposals and enactments by the Federal government and various states to reduce Medicare Part D and Medicaid reimbursement levels in response to budget problems, including the recently implemented AWP cost adjustments.problems. We expect other similar proposals in the future. If

        The continued efforts of the Federal government, health maintenance organizations, managed care organizations, pharmacy benefit management companies, other State and local government entities, and other third party payors to reduce prescription drug costs and pharmacy reimbursement rates, as well as litigation relating to how drugs are priced, may impact our profitability. In addition, some of these entities may offer pricing terms that we may not be willing to accept or otherwise restrict our participation in their reimbursement levels or if Medicare Part D or state Medicaid programs cover prescription drugs at lower reimbursement levels, our margins on these sales would be reduced, and the profitabilitynetworks of our business and our results of operations, financial condition or cash flows could be adversely affected.pharmacy providers.

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We are subject to governmental regulations, procedures and requirements; our noncompliance or a significant regulatory change could adversely affect our business, thefinancial condition or results of our operations or our financial condition.operations.

        Our business is subject to federal, state and local government laws, regulations and administrative practices. We must comply with numerous provisions regulating health and safety, equal employment opportunity, minimum wage and licensing for the sale of drugs, alcoholic beverages, tobacco and other products. In addition, we must comply with regulations pertaining to product labeling, dating and pricing. Our pharmacy business is subject to local registrations in the states where our pharmacies are located, applicable Medicare and Medicaid regulations and prohibitions against paid referrals of patients. Failure to properly adhere to these and other applicable regulations could result in the imposition of civil and criminal penalties including suspension of payments from government programs; loss of required government certifications; loss of authorizations to participate in or exclusion from government reimbursement programs, such as the Medicare and Medicaid programs; loss of licenses; significant fines or monetary penalties for anti-kickback law violations, submission of false claims or other failures to meet reimbursement program requirements and could adversely affect the continued operation of our business. Additionally, any such failure could damage our reputation or brand.

        Our pharmacy business is subject to the patient privacy and other obligations including corporate, pharmacy and associate responsibility, imposed by the Health Insurance Portability and Accountability Act. As a covered entity, we are required to implement privacy standards, train our associates on the permitted use and disclosures of protected health information, properly dispose of related records, provide a notice of privacy practice to our pharmacy customers and permit pharmacy health customers to access and amend their records and receive an accounting of disclosures of protected health information. Failure to properly adhere to these requirements could result in the imposition of civil as well as criminal penalties.

        Federal and state reform programs, such as healthcare reform and enforcement initiatives of federal and state governments may also affect our pharmacy business. These initiatives include:

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proposals designed to significantly reduce spending on Medicare, Medicaid and other government programs;



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changes in programs providing for reimbursement for the cost of prescription drugs by third-partythird party plans;