STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 17 day of May, 2001 by and among Rite Aid Corporation, a Delaware
corporation (the "Company"), Transamerica Investment Management, LLC
("Transamerica") and the Other Purchasers (as defined below) (together with
Transamerica, the "Purchasers").
W I T N E S S E T H
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, shares of the Company's
common stock, par value $1.00 per share (the "Common Stock"), all in accordance
with the terms and provisions of this Agreement; and
WHEREAS, this Agreement memorializes an oral understanding between the
parties hereto reached on March 22, 2001 and May 2, 2001 with respect to the
issuance and sale to the Purchaser of the Common Stock at the Purchase Price and
the Additional Purchase Price (as defined herein);
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
1. Sale and Purchase of the Securities.
(a) Upon the terms and subject to the conditions herein contained,
the Company agrees to sell to the Purchasers, and the Purchasers agree,
severally and not jointly, to purchase from the Company, at the Closing (as
hereinafter defined), such number of whole shares (the "Shares") of Common Stock
as shall equal the dollar amount (such amount with respect to each Purchaser,
the "Investment") set forth for opposite the name of such Purchaser on Schedule
1 hereto, divided by the Purchase Price (as hereinafter defined). The aggregate
amount of all Investments shall equal $125,000,000. Subject to Section 3 below,
the purchase price per share (the "Purchase Price") will equal ninety-five
percent (95%) (the "VWAC Discount") of the average of the volume weighted
average price (based on a trading day from 9:30 a.m. to 4:00 p.m. New York City
time) on the New York Stock Exchange (the "NYSE") as reported by Bloomberg
Financial LP using the AQR function (the "VWAC") for the Common Stock for each
of the thirty (30) consecutive trading days (the "Pricing Period") ending on and
including the third trading day prior to the Closing Date (as defined herein).
The Company will inform the Purchaser not later than 6:00 p.m. New York City
time on the last date of the Pricing Period as to the amount of the Purchase
Price. Notwithstanding anything to the contrary contained herein, in no event
shall the Purchase Price be greater than $5.50.
(b) The term "Other Purchasers" means certain funds internal to
Transamerica, not yet identified, to be designated by Transamerica by written
notice delivered to the Company not later than 5:00 p.m. New York City time on
the business day immediately following the last day of the Pricing Period, and
which will execute a counterpart to this Agreement. Such counterpart shall
include the amount of any Investment and any Additional Purchase Amount, as
defined below, to be made by such Other Purchaser.
2. Additional Purchase. Upon the terms and subject to the conditions
herein contained, the Purchasers have also agreed, severally and not jointly, to
purchase in the aggregate from the Company, and the Company agrees to sell to
the Purchasers, such number of additional whole shares of Common Stock (the
"Additional Purchase Shares" and together with the Shares, the "Securities") as
shall equal the dollar amount set forth opposite the name of such Purchaser on
Schedule 1 hereto, (such amount with respect to each Purchaser, the "Additional
Purchase Amount") divided by $6.50 (the "Additional Purchase Price"). The
aggregate amount of all Additional Purchase Amounts shall equal $25,000,000.
Transamerica will inform the Company not later than 5:00 p.m. New York City time
on the business day immediately following the last day of the Pricing Period as
to the number of Additional Purchase Shares each Purchaser will purchase and
Transamerica shall provide the Company prior to the Closing with a supplement to
or amendment of Schedule 1 hereto detailing such Additional Purchase Shares.
3. Purchase Price Protection. If the Company enters into any agreement
with a third party whereby the Company agrees to sell substantially for cash
from the date hereof and prior to the Closing Date, Common Stock or any security
convertible or exchangeable into Common Stock and such sale is contingent upon
the consummation of the Refinancings (as defined herein) (each, an "Other
Financing"), then the Purchase Price shall be adjusted, but only if such
adjustment would result in a lower Purchase Price to the Purchaser, to equal the
effective purchase price per share of Common Stock paid by such third party.
Notwithstanding anything to the contrary contained herein, in no event will
there be an adjustment to the Additional Purchase Price.
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4. Closing. The closing of the sale to, and purchase by, the
Purchasers of the Shares and the Additional Purchase Shares (the "Closing")
shall occur at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four
Times Square, New York, New York 10036-6522, simultaneously with closing of the
Refinancings or at such other time and place as the Company and Transamerica may
mutually agree in writing (the "Closing Date"). At the Closing, the Company
shall deliver to Transamerica on behalf of the Purchasers, one or more
certificates evidencing the Securities (in such denominations and registered in
the names set forth on Schedule 1 hereto as supplemented or amended form time to
time prior to the Closing) against delivery to the Company of the Investments
and the Additional Purchase Amounts, payable in each case by wire transfer of
immediately available funds to an account that the Company will designate in
writing to Transamerica.
5. Representations and Warranties of the Purchaser; Restrictions on
Transfer. Each Purchaser severally and not jointly represents and warrants to
the Company as follows:
5.1 Organization. The Purchaser is validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
requisite corporate power and authority to enter into this Agreement and the
Registration Rights Agreement (as defined herein) and to consummate the
transactions contemplated hereby and thereby.
5.2 Validity. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action, corporate or otherwise, on the part of the Purchaser. This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Purchaser and constitute a valid and binding obligations of the
Purchaser enforceable against it in accordance with their terms.
5.3 Brokers. There is no broker, investment banker, financial
advisor, finder or other person which has been retained by or is authorized to
act on behalf of the Purchaser who might be entitled to any fee or commission
for which the Company will be liable in connection with the execution of this
Agreement or the transactions contemplated hereby.
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5.4 Restrictions on Dispositions. The Purchaser understands that
the Securities have not been, and will not upon issuance be, registered under
the Securities Act of 1933, as amended (the "Securities Act"), and that the
certificates evidencing the Securities shall bear the following legend to that
effect:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
The Company agrees to remove such restrictive legend on a certificate
representing the Securities duly presented and upon satisfaction of the
conditions set forth in the immediately preceding paragraph.
5.5 Acquisition for Own Account. The Purchaser is acquiring the
Securities for its own account for investment and not with a view toward
distribution in a manner which would violate the Securities Act.
5.6 Ability to Protect Its Own Interests and Bear Economic Risks.
The Purchaser represents that by reason of the business and financial experience
of its management, the Purchaser has the capacity to evaluate the risks and
merits of, and make an informed decision with regard to, an investment in the
Company and the transactions contemplated by this Agreement and the Registration
Rights Agreement. The Purchaser further represents that the Purchaser is able
to bear the economic risk of an investment in the Securities, and has an
adequate income independent of any income produced from an investment in the
Securities and has sufficient net worth to sustain a loss of all of its
investment in the Securities without economic hardship if such a loss should
occur.
5.7 Accredited Investor. The Purchaser represents that it is an
"accredited investor" as that term is defined in Regulation D promulgated under
the Securities Act.
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5.8 Access to Information. The Issuer has made available to the
Purchaser all reports, schedules, forms, statements and other documents required
to be filed by the Company with the Securities and Exchange Commission pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the Purchaser has received physical delivery of all
such documents, records and information which the Purchaser has requested, and
has had adequate opportunity to ask questions of, and receive answers from, the
Company's officers, employees, agents, accountants, and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities, and all other matters relevant to its investment in the Securities.
6. Representations and Warranties by the Company. The Company
represents and warrants to the Purchaser as follows:
6.1 Organization. The Company is duly organized and validly
existing and in good standing under the laws of Delaware, and has all requisite
corporate power and authority to enter into this Agreement and the Registration
Rights Agreement (as defined herein) and to consummate the transactions
contemplated hereby and thereby.
6.2 Validity. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action, corporate or otherwise, on the part of the Company. This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitutes legal, valid and binding obligations of
the Company enforceable against it in accordance with their terms.
6.3 Brokers. There is no broker, investment banker, financial
advisor, finder or other person which has been retained by or is authorized to
act on behalf of the Company who might be entitled to any fee or commission for
which the Purchaser will be liable in connection with the execution of this
Agreement or the transactions contemplated hereby.
6.4 Capital Stock and Related Matters.
(a) As of May 14, 2001 and without giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
Company consisted of (i) 600,000,000 shares of Common Stock, of which
approximately 394,341,787 shares were issued and outstanding and (ii) 20,000,000
shares of preferred stock, of which 3,360,237 shares of Series B Preferred Stock
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were outstanding. The outstanding shares of Common Stock and Preferred Stock
are validly issued, fully paid and non-assessable and have been issued in
compliance with applicable law. None of the outstanding shares of Common Stock
or Preferred Stock are entitled to cumulative voting rights or preemptive
rights. Except as set forth on Schedule 6.4 or Schedule 6.19 hereto, the Company
has outstanding no option, warrant or other commitment to issue or to acquire
any shares of its capital stock or any security or obligations convertible into
or exchangeable for its capital stock, nor has it given any person or entity any
right to acquire from the Company or sell to the Company any shares of its
capital stock. Schedule 6.4 hereto sets forth as of the date hereof the
outstanding shares of Common Stock, assuming the exercise of all outstanding
options and warrants, the conversion of all securities or obligations
convertible into or exchangeable for shares of its Common Stock and the issuance
of the maximum number of shares of Common Stock subject to outstanding
commitments of the Company.
6.5 Governmental Consents, etc. No consent, approval or
authorization of, or declaration or filing with, any governmental authority or
agency or any securities exchange on the part of the Company is required for the
valid execution and delivery of this Agreement and the Registration Rights
Agreement, the consummation of the transactions contemplated hereby and thereby,
or the valid offer, issue, sale and delivery of the Securities pursuant to this
Agreement other than the filings with the Securities and Exchange Commission
required to comply with its obligations under the Registration Rights Agreement.
The Company is not in violation of any of the listing requirements of the New
York Stock Exchange, except where such violation would not, individually or in
the aggregate, have a material adverse effect on (i) the Securities, (ii) the
ability of the Company to perform its obligations under this Agreement and the
Registration Rights Agreement, or (iii) the assets, business, properties or
financial condition of the Company (as such business is presently conducted and
as it is presently proposed to be conducted).
6.6 Offering of Securities. Neither the Company nor any person,
firm or corporation acting on its behalf has sold or offered the Securities or
any similar securities of the Company to, or solicited any offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any person or persons in such manner as would subject the offering, issuance or
sale of any of the Securities to the provisions of Section 5 of the Securities
Act. Neither the Company nor any person, firm or corporation acting on behalf of
the Company has taken or will take any action which would subject the offering,
issuance or sale of any of the Securities to the provisions of Section 5 of the
Securities Act.
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6.7 Integration. Neither the Company nor any affiliate (as such
term is defined in Rule 501(b) under the Securities Act) nor any person, firm or
corporation acting on its behalf has, directly or indirectly, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the sale of the Securities in a manner that would require the registration of
the Securities under the Securities Act.
6.8 Compliance with Other Instruments, etc. Neither the execution
and delivery by the Company of this Agreement or the Registration Rights
Agreement, nor the consummation of the transactions contemplated hereby or
thereby, nor the issuance and sale of the Securities will (a) conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, including any agreement or instrument relating to the
Refinancings, (b) result in any violation of the provisions of the certificate
of incorporation or by-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its properties, (c) result in the creation under any
agreement or instrument of any lien, security interest, encumbrance or other
claim upon any of the assets of the Company, or (d) create in any person or
entity any right to terminate any agreement with the Company or otherwise
exercise any rights against the Company or cause any payment or performance
obligation of the Company to be accelerated, except in each case (a-d) as would
not, individually or in the aggregate have a material adverse effect on the
business, results of operations, prospects or financial condition of the Company
(as such business is presently conducted and as it is presently proposed to be
conducted).
6.9 Valid Issuance of Securities. The Securities have been duly
authorized for issuance and sale to the Purchaser pursuant to this Agreement,
and, when issued, sold and delivered in accordance with this Agreement against
payment therefore of the consideration expressed herein, will be duly and
validly issued, fully paid and non-assessable and will be free of restrictions
on transfer other than restrictions on transfer set forth under this Agreement.
The issuance of the Securities is not subject to preemptive rights.
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6.10 Permits. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now being
conducted by it, except for those franchises, permits, licenses the lack of
which would not materially and adversely affect the business, properties,
prospects or financial condition of the Company, and believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as presently conducted or proposed to be conducted. The Company is not
in default in any material respect under any such franchises, permits, licenses
or other similar authority.
6.11 Offering. Assuming the truth and accuracy of Transamerica's
and each other Purchaser's representations and warranties set forth in this
Agreement, the offer and sale and issuance of the Securities as contemplated by
this Agreement are exempt from the registration requirements of the Securities
Act, and neither the Company nor any authorized agent acting on its behalf will
take any action hereof that would cause the loss of such exemption.
6.12 Financial Statements. The Company has caused to be delivered
to the Purchaser a restated audited consolidated balance sheet of the Company as
of February 26, 2000 (the "Balance Sheet") and restated audited consolidated
statements of income and retained earnings and cash flows of the Company for the
fiscal year ended February 26, 2000 (collectively with the Balance Sheet, the
"Financial Statements"), together with an unqualified opinion thereon from the
Company's independent accountants. The Company has also caused to be delivered
to the Purchaser unaudited consolidated balance sheets of the Company as of May
27, 2000, August 26, 2000, and November 25, 2000 (the "Unaudited Balance
Sheets") and unaudited consolidated statements of income and retained earnings
and cash flows of the Company for the thirteen weeks ended May 27, 2000,
twenty-six weeks ended August 26, 2000, and thirty-nine weeks ended November 25,
2000 (collectively with the Unaudited Balance Sheet, the "Unaudited Financial
Statements"). The Financial Statements and Unaudited Financial Statements were
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto)
and fairly present, in all material respects, the financial position and the
results of operations of the Company as of the dates, and for the periods,
referred to therein.
6.13 Environmental and Safety Laws. To the best of its knowledge,
the Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, except where any
such violations would not, individually or in the aggregate, have a material
adverse effect on the assets, business, properties, prospects or financial
condition of the Company (as such business is presently conducted and as it is
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presently proposed to be conducted) and to the best of its knowledge, no
material expenditures are or are reasonably expected to be required in order to
comply with any such existing statute, law, or regulation.
6.14 Litigation. Except as disclosed in the SEC Documents, as
hereinafter defined, or on Schedule 6.14 hereto, there is no action, suit,
proceeding, or investigation pending, or to the Company's knowledge, currently
threatened against the Company that questions the validity of this Agreement or
the Registration Rights Agreement, or the Company's ability to consummate the
transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse change in the assets,
business, properties, prospects or financial condition of the Company (as such
business is presently conducted and as it is presently proposed to be
conducted).
6.15 Intellectual Property. To the best of its knowledge, (but
without having conducted any special investigation or patent search), the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for its business as now conducted and
as proposed to be conducted without conflict with, or infringement of, the
rights of others, except where the failure to have such rights, individually or
in the aggregate, would not have a material adverse effect on the assets,
business, properties, prospects or financial condition of the Company (as such
business is presently conducted and as it is presently proposed to be
conducted).
6.16 Securities and Exchange Commission Documents. Since October
11, 2000, the Company has timely filed, and at the Closing Date the Company
will have timely filed, all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
filed prior to the Closing Date and after October 10, 2000, and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as the
"SEC Documents"). The Company has made available to the Purchaser true and
complete copies of the SEC Documents. As of their respective filing dates, the
SEC Documents complied with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder applicable to the SEC
Documents, except for the failure to include certain financial information as
described therein, and none of the SEC Documents, at the time they were filed
with the Securities and Exchange Commission, contained any untrue statement of a
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material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.17 Employee Relations. To the best of the Company's knowledge,
there is no strike, labor dispute or union organization activities pending or
threatened between the Company and its employees. To the best of its knowledge
and except as disclosed in the SEC Documents, the Company has complied in all
material respects with all applicable state and federal equal opportunity and
other laws related to employment. The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate
employment with the Company, nor does the Company have any present intention to
terminate the employment of any of the foregoing.
6.18 Compliance With Laws. Except as disclosed in the SEC
Documents, the Company has not received any notification from any governmental
entity (a) asserting a violation of any law, statute, ordinance or regulation or
the terms of any judgements, orders, decrees, injunctions or writs applicable to
the conduct of its business, (b) threatening to revoke any license, franchise
permit or government authorization, or (c) restricting or in any way limiting
its operations as currently conducted or proposed to be conducted, except where
any such violations would not, individually or in the aggregate, have a material
adverse effect on the assets, business, properties, prospects or financial
condition of the Company (as such business is presently conducted and as it is
presently proposed to be conducted).
6.19 Changes. Except for transactions contemplated by this
Agreement and the Registration Rights Agreement, the Refinancings or as
disclosed in the SEC Documents or on Schedule 6.19 hereto, and other than
transactions conducted in the ordinary course of business, since March 3, 2001,
there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company, that have not been and are not expected to be,
individually or in the aggregate, materially adverse to the assets, business,
properties, prospects or financial condition of the Company (as such business is
presently conducted and as it is presently proposed to be conducted);
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is presently proposed to be conducted);
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(c) any waiver or compromise by the Company of a valuable right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company;
(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any key employee, officer, director or stockholder other than
that certain amendment to Xxxxxx Xxxxxx'x Employment Agreement dated May 7,
2001, and that certain amendment to Xxxx Xxxxxx'x employment agreement dated May
7, 2001, copies of which are attached as Exhibit A hereto;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets;
(h) any resignation or termination of employment of any key officer
of the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable or contested by the
Company in good faith;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, stockholders, officers, or directors, or any members
of their immediate families, other than travel advances and other advances made
in the ordinary course of its business, except for certain short term loans made
by the Company to its officers described on Schedule 6.19 hereto;
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(l) any declaration, setting aside, or payment of any dividend or
other distribution of the Company's assets in respect of any of the Company's
capital stock, except for dividends paid-in-kind on outstanding Series B
Preferred Stock or any dividends payable on the proposed Series C Preferred
Stock, or any direct or indirect redemption, purchase, or other acquisition of
any of such stock by the Company;
(m) any other event or condition of any character that would
reasonably be expected to have a material and adverse effect on the business,
properties, prospects, or financial condition of the Company (as such business
is presently conducted and as it is presently proposed to be conducted); or
(n) any agreement or commitment by the Company to do any of the
things described in this Section 6.19.
7. Conditions of Parties' Obligations.
7.1 Conditions of the Purchaser's Obligations. The obligations of
the Purchaser under Sections 1, 2 and 4 hereof are subject to the fulfillment
prior to or on the Closing Date of all of the following conditions, any of which
may be waived in whole or in part by the Purchaser.
(a) Continued Accuracy of the Company's Covenants, Representations
and Warranties. The representations and warranties of the Company contained in
Section 6 shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except to the extent expressly made as of an earlier date, in
which case as of such earlier date).
(b) Consents and Waivers. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state or any stock exchange or of any third party that are
required in connection with the issuance and sale of the Securities pursuant to
this Agreement shall be duly obtained and effective as of the Closing Date.
(c) No Material Adverse Change. There shall be no material adverse
change in the business, properties, prospects, or assets of the Company from and
after the date of this Agreement.
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(d) Officer's Certificate. The Company shall have delivered to the
Purchaser a certificate dated the Closing Date, executed by the Senior Executive
Vice President and General Counsel of the Company, certifying the satisfaction
of the conditions specified in (a), (b) and (c) of this Section 7.1.
(e) Registration Rights Agreement. The Purchaser and the Company
shall have executed and delivered the Registration Rights Agreement in
substantially the form of Exhibit B hereto.
(f) Refinancings. The Company shall have (i) increased the
aggregate principal amount of borrowings available under its Senior Credit
Agreement dated as of June 12, 2000 (the "Senior Credit Agreement") by at least
$800 million, or entered into a new senior credit agreement having an aggregate
principal amount of borrowings available under it equal to at least $1.9 billion
(a "New Senior Credit Agreement"), or any combination thereof, (ii) extended the
maturity of the Senior Credit Agreement to, or entered into a New Senior Credit
Agreement with, a maturity date no earlier than January 1, 2005, and (iii) as a
result of clauses (i) and (ii) in this Section 7(f), the Company shall have no
more than $400 million of indebtedness for borrowed money outstanding, having a
final maturity date earlier than January 1, 2005; provided, however, such amount
shall not include any such balance that constitutes an accrued expense or trade
payable or the Company's 10.5% Senior Secured Notes due 2002, (the events set
forth in clauses (i), (ii) and (iii) above being hereinafter referred to herein
as the "Refinancings"), all of which on terms and conditions not materially less
favorable to the Company than the terms and conditions set forth on Exhibit C
hereto (the "Commitment Letter").
(g) 2001 Financial Statements. The Company shall have delivered to
the Purchaser the audited consolidated balance sheet of the Company as of March
3, 2001 (the "2001 Audited Balance Sheet") and audited consolidated statements
of income and retained earnings and cash flows of the Company for the fiscal
year ended March 3, 2001 (collectively, with the 2001 Audited Balance Sheet, the
"2001 Audited Financial Statements"), together with an unqualified opinion
thereon from Deloitte & Touche LLP. Upon delivery of the 2001 Financial
Statements to the Purchaser, the Company hereby represents and warrants that the
2001 Audited Financial Statements were prepared in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto) and will fairly present, in all material
respects, the financial position and the results of operations of the Company as
of the dates, and for the periods, referred to therein.
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(h) Opinion of Counsel. The Purchaser shall have received an
opinion of the counsel to the Company, dated as of the Closing Date with respect
to the due authorization and valid issuance of the Securities, subject to
customary qualifications and assumptions.
7.2 Conditions of the Company's Obligations. The obligations of the
Company under Section 1, 2 and 4 hereof are subject to the fulfillment prior to
or on the Closing Date of all of the following conditions, any of which may be
waived in whole or in part by the Company.
(a) Continued Accuracy of Purchaser's Covenants, Representations
and Warranties. The representations and warranties of the Purchaser contained in
Section 5 shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except to the extent expressly made as of an earlier date, in
which case as of such earlier date).
7.3 Conditions of Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereunder
are subject to the parties being reasonably satisfied as to the absence of (a)
litigation challenging or seeking damages in connection with the transactions
contemplated by this Agreement, and (b) any provision of any applicable law or
regulation, or any judgment, injunction, order or decree prohibiting or
enjoining the transactions contemplated by this Agreement.
8. Negative Covenants of the Company. From the date hereof through the
Closing Date, the Company shall promptly advise the Purchaser of any change that
the Company reasonably believes would cause a representation or warranty to be
untrue, cause a covenant to be unsatisfied, or would have a material adverse
effect on the business, assets, properties or financial condition of the Company
(as such business is presently conducted and as it is presently proposed to be
conducted). Nothing contained in this Section 8 will prevent the Company from
consummating any additional debt-for-equity exchanges, or any sale of equity or
debt securities of the Company or the other transactions contemplated by or
required by the Commitment Letter.
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9. Registration Rights Agreement. The Company and the Purchaser will
enter into a registration rights agreement (the "Registration Rights Agreement")
providing among other matters, that (i) the Company will file a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission registering the Securities for resale within thirty (30) days
following the Closing Date, (ii) the Company will use its reasonable best
efforts to cause the Registration Statement to become effective as soon as
practicable, but no later than one hundred twenty (120) days following the
Closing Date, and (iii) the Purchaser shall have customary piggyback
registration rights.
The Company will use its reasonable best efforts to keep the
Registration Statement effective for a period ending on the earlier of (i) two
(2) years from the effective date of the Registration Statement or such shorter
period that will terminate when the Securities have been sold pursuant to the
Registration Statement, and (ii) the date on which the Securities become
eligible for resale pursuant to Rule 144(k) under the Securities Act. The
Purchaser's registration rights will be subject to customary blackout and
cutback provisions. The Company will use its reasonable best efforts to become
eligible to use the registration statement on Form S-3 as soon as possible on or
after October 12, 2001.
10. Indemnification.
(a) The Company will indemnify the Purchaser, each of its
directors, officers, agents, employees, representatives and controlling persons
against all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of any inaccuracy or
breach or any representation or warranty made by the Company (for as long as
such representations and warranties survive pursuant to Section 11.3 hereof), or
the breach of any of the agreements or covenants contained in this Agreement,
and will reimburse each such indemnified person for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability or action. It is agreed that
the indemnity agreement contained in this Section 10 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed).
(b) Each Purchaser, severally and not jointly, shall indemnify the
Company, each of its directors, officers, agents, employees, representatives and
controlling persons against all expenses, claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising
out of any inaccuracy or breach of any representation or warranty made by the
15
Purchaser (for as long as such representatives and warranties survive pursuant
to Section 11.3 herein), or the breach of any of the agreements or covenants
contained in this Agreement, and will reimburse each such indemnified person for
any legal and any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss, damage, liability
or action. It is agreed that the indemnity agreement contained in this Section
10 shall not apply to amounts paid in settlement of any such claims, losses,
damages or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Purchaser (which consent shall not be
unreasonably withheld).
(c) Each party entitled to indemnification under this Section 10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense with counsel reasonably acceptable to and paid for by the
Indemnifying Party but otherwise at the Indemnified Party's expense, and
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 10 to the extent such failure is not materially prejudicial.
No Indemnifying Party in the defense of any such claim or litigation shall
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include an unconditional
release of such Indemnified Party from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
16
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation (within the
meaning of section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
11. Miscellaneous.
11.1 Termination. Either party to this Agreement may terminate this
Agreement by giving written notice to such other non-terminating party if the
Closing has not occurred by August 31, 2001; provided, however, that the right
to terminate this Agreement under this Section 11.01 shall not be available to
any party who is in breach of this Agreement and such breach has not been waived
by the other party hereto, or whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before August 31, 2001. If this Agreement is terminated pursuant to
this Section 11.1, then all rights and obligations of the parties hereunder
shall terminate without any liability of either party to the other party;
provided, however, that Section 11.9 shall survive any termination of this
Agreement.
11.2 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and such
Agreement supersedes and replaces all other prior agreements, written or oral,
among the parties hereto with respect to the subject matter hereof.
11.3 Survival of Representations and Warranties.. Notwithstanding
any investigation conducted or notice or knowledge obtained by or on behalf of
any party hereto, each representation and warranty in this Agreement or in any
schedules hereto or certificates delivered pursuant to this Agreement shall
survive the Closing for a period of 180 days. Any claim for indemnification
under Section 10 arising out of the inaccuracy or breach of any representation
or warranty must be made prior to the termination of the applicable survival
period and such representation or warranty which is the subject of such claim
shall survive with respect to such claim until the final resolution thereof.
11.4 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
17
11.5 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York without giving effect to
conflicts of laws, rules or principles.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other party hereto.
11.7 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
11.8 Notices. Unless otherwise provided, all notices and other
communications required or permitted under this Agreement shall be in writing
and shall be mailed by United States first-class mail, postage prepaid, sent by
facsimile or delivered personally by hand or by a nationally recognized courier
addressed to the party to be notified at the address or facsimile number
indicated for such person on the signature page hereof, or at such other address
or facsimile number as such party may designate. All such notices and other
written communications shall be effective on the date of mailing, confirmed
facsimile transfer or delivery.
11.9 Expenses. The Company shall pay all reasonable legal fees and
expenses incurred by the Purchaser in connection with the preparation and
negotiation of this Agreement, and the consummation of the transactions
contemplated hereby, up to a maximum of $80,000; provided, however, that if the
Closing does not occur and the failure of the Closing to occur is not
attributable to the breach by the Company of its obligations under Section 7.1
hereof which have not been waived in whole or in part by the Purchaser, then the
Company shall not have any liability for any fees or expenses of the Purchaser.
11.10 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and disbursements
in addition to any other relief to which such party may be entitled.
18
11.11 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Purchaser.
11.12 Jurisdiction.
Any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby may be brought in any federal or state court
located in the State of New York, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 11.8
shall be deemed effective service of process on such party.
11.13 No Implied Waiver. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by law.
11.14 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.15 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated so
19
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
[Execution Page Follows]
20
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
RITE AID CORPORATION
By:_________________________
Name:
Title:
Address: 00 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
TRANSAMERICA INVESTMENT
MANAGEMENT, LLC
By:_________________________
Name:
Title:
Address:____________________
____________________
____________________
Telephone No:_______________
Facsimile No:_______________
21
SCHEDULE 1
INVESTMENT
(Including Additional Purchase Amount)
Number of Number of
shares Additional Additional
of Common Purchase Purchase
Investment Stock Amount Shares
---------- --------- ---------- ----------
Transamerica Investment Management,
LLC $150,000,000 $25,000,000
22
SCHEDULE 6.4
CAPITALIZATION
Rite Aid Common Stock Outstanding as of May 14, 2001: 394,341,787
3,360,237 Series B, $100 Par, Preferred Stock Convertible to Common Stock
at $5.50 per Share: 61,095,218
In the Money Stock Options (a) 44,172,650
Common Stock on a Fully diluted Basis as of May 15, 2001: 499,609,655
Debt for Equity Exchanges Agreed to and Priced but Not Yet Settled:
Exchange of PCS Facility for stock 714,979
Exchange of RCF Facility for stock 1,429,957
Exchange of RCF Facility for stock 1,443,814
Exchange of RCF Facility for stock 8,562,174(b)
Exchange of RCF Facility for stock 12,654,598(b)
-----------
24,805,522
-----------
Common Stock on a Pro Forma Fully diluted Basis as of May 15, 2001: 524,415,177
===========
(a) Includes 38.2 million shares which are not yet vested.
(b) May be issued initially as Series C Convertible Preferred Stock.
Not Included in the Above Total are the Following:
A: $152,016,000 of 5.25% Convertible Subordinated Notes due 2002 that are
Convertible into 27.672 Shares of Common Stock per $1,000 note.
B. Warrants Held by X.X. Xxxxxx to purchase 2,500,000 Shares of Rite Aid Common
Stock at $11.00 per Share.
23
C. Private Debt for Equity Exchanges that were Agreed to but Not Yet Priced:
$40,000,000 Exchange of 10.5% Notes Due 9/15/02 for stock
$15,300,000 Exchange of 10.5% Notes Due 9/15/02 for stock
$ 2,200,000 Exchange for RCF Facility for stock
-----------
$57,500,000
===========
D. Shareholder suit settlement for 20,000,000 shares of common stock.
E. 3,000,000 common stock purchase warrants proposed to be issued in connection
with the exchange of $152 million of the Company's 10.5% Senior Secured Notes
for a new series of 12.5% Senior Secured Notes due 2006.
F. 9,244,149 stock options that are not in the money including 1,819,000 shares
not yet vested.
24
SCHEDULE 6.14
LITIGATION
Federal Investigations
There are currently pending federal governmental investigations, both
civil and criminal, by the SEC and the United States Attorney, involving our
financial reporting and other matters. We are cooperating fully with the SEC and
the United States Attorney.
The U.S. Department of Labor has commenced an investigation of matters
relating to our employee benefit plans, including our principal 401(k) plan,
which permitted employees to purchase our common stock. Purchases of our common
stock under the plan were suspended in October 1999. In January 2001, we
appointed an independent trustee to represent the interests of these plans in
relation to the company and to investigate possible claims the plans may have
against us. Both the independent trustee and the Department of Labor have
asserted that the plans may have claims against us. The investigations, with
which we are cooperating fully, are ongoing and we cannot predict their
outcomes. In addition, a purported class action lawsuit on behalf of the plans
and their participants has been filed by a participant in the plans in the
United States District Court for the Eastern District of Pennsylvania.
These investigations are ongoing and we cannot predict their outcomes.
If we were convicted of any crime, certain contracts and licenses that are
material to our operations may be revoked, which would have a material adverse
effect on our results of operations and financial condition. In addition,
substantial penalties, damages or other monetary remedies assessed against us
could also have a material adverse effect on our results of operations,
financial condition and cash flows.
Stockholder Litigation
We, certain of our directors, our former chief executive officer Xxxxxx
Xxxxx, our former president Xxxxxxx Xxxxxx, our former chief financial officer
Xxxxx Xxxxxxxx, and our former auditor KPMG LLP, have been sued in a number of
actions, most of which purport to be class actions, brought on behalf of
stockholders who purchased our securities on the open market between May 2, 1997
and November 10, 1999. All of these cases have been consolidated in the U.S.
District Court for the Eastern District of Pennsylvania. On November 9, 2000, we
announced that we had reached an agreement to settle the consolidated securities
class action lawsuits pending against us in the U.S. District Court for the
Eastern District of Pennsylvania and the derivative lawsuits pending there and
in the Delaware Court of Chancery.
25
Under the agreement, which has been submitted to the courts for approval, we
will pay $45 million in cash, which will be fully funded by our officers' and
directors' liability insurance, and issue shares of common stock in 2002. The
shares will be valued over a 10 day trading period in January 2002. If the value
determined is at least $7.75 per share, we will issue 20 million shares. If the
value determined is less than $7.75 per share, we have the option to deliver any
combination of common stock, cash and short-term notes, with a total value of
$155 million. As additional consideration for the settlement, we have assigned
to the plaintiffs all of our claims against the above named executives and KPMG
LLP. Several members of the class have elected to "opt-out" of the class and, as
a result, if the settlement is approved by the court, they will be free to
individually pursue their claims. Management believes that their claims,
individually and in the aggregate, are not material.
Drug Pricing and Reimbursement Matters
On October 5, 2000, we settled, for an immaterial amount, and without
admitting any violation of the law, the lawsuit filed by the Florida Attorney
General alleging that our non-uniform pricing policy for cash prescription
purchases was unlawful under Florida law.
The filing of the complaint by the Florida Attorney General, and our
press release issued in conjunction therewith, precipitated the filing of a
purported federal class action in California and several purported state class
actions, all of which (other than those pending in New York that were filed on
October 5, 1999 and those pending in California that were filed on January 3,
2000 ) have been dismissed. A motion to dismiss the action in New York is
currently pending. We believe that the remaining lawsuits are without merit
under applicable state consumer protection laws. As a result, we intend to
continue to vigorously defend against them and we do not anticipate that if
fully adjudicated, they will result in an award of damages. However, such
outcomes cannot be assured and a ruling against us could have a material adverse
effect on the financial position and results of operations of the company as
well as necessitate substantial additional expenditures to cover legal costs as
we pursue all available defenses.
We are being investigated by multiple state attorneys general for our
reimbursement practices relating to partially-filled prescriptions and
fully-filled prescriptions that are not picked up by ordering customers. We are
supplying similar information with respect to these matters to the Department of
Justice. We believe that these investigations are similar to investigations
which were, and are being, undertaken with respect to the practices of others in
the retail drug industry. We also believe that our existing policies and
procedures fully comply with the requirement of applicable law and intend to
26
fully cooperate with these investigations. We cannot, however, predict their
outcomes at this time.
An individual acting on behalf of the United States of America, has
filed a lawsuit in the United States District Court for the Eastern District of
Pennsylvania under the Federal False Claims Act alleging that we defrauded
federal health care plans by failing to appropriately issue refunds for
partially filled prescriptions and prescriptions which were not picked up by
customers. The Department of Justice has not decided whether to join this
lawsuit, as is its right under the law, and its investigation is continuing. We
have filed a motion to dismiss the complaint for failure to state a claim.
If any of these cases result in a substantial monetary judgment against
us or is settled on unfavorable terms, our results of operations, financial
position and cash flows could be materially adversely affected.
Store Management Overtime Litigation
We are a defendant in a class action pending in the California Superior
Court in San Diego with three subclasses, comprised of our California store
managers, assistant managers and managers-in-training. The plaintiffs seek back
pay for overtime not paid to them and injunctive relief to require us to treat
our store management as non-exempt. They allege that we decided to minimize
labor costs by causing managers, assistant managers and managers-in-training to
perform the duties and functions of associates for an excess of forty hours per
week without paying them overtime. We believe that in-store management were and
are properly classified as exempt from the overtime provisions of California
law. We have filed a motion to decertify the class which is currently pending.
Our results of operations and financial position could be materially adversely
affected by an adverse judgment in this matter.
Other
We are subject from time to time to lawsuits arising in the ordinary
course of business. In the opinion of our management, these matters are
adequately covered by insurance or, if not so covered, are without merit or are
of such nature or involve amounts that would not have a material adverse effect
on our financial condition, results of operations or cash flows if decided
adversely.
27
SCHEDULE 6.19
CHANGES
Rite Aid Corporation
Restricted Stock Loans issued 5/01-6/15/01
Vested Int. Rate: 4.25%
Name SS # Shares Gross Income Total W/H Loan Amt. Interest Total
---------------------- ----------- ------- -------------- -------------- -------------- ------------ --------------
Xxxxxx ###-##-#### 10,000 $ 84,500.00 $ 28,096.25 $ 28,096.25 $ 107.96 $ 28,204.21
------- -------------- -------------- -------------- ------------ --------------
Non ss.16b Officer 10,000 $ 84,500.00 $ 28,096.25 $ 28,096.25 $ 107.96 $ 28,204.21
------- -------------- -------------- -------------- ------------ --------------
Gerson ###-##-#### 12,500 $ 106,750.00 $ 47,877.38 $ 47,877.38 $ 2,074.90 $ 49,952.28
Hall ###-##-#### 36,591 $ 312,487.14 $ 140,150.49 $ 140,150.49 $ 6,073.80 $ 146,224.29
Xxxxxxx ###-##-#### 124,622 $ 1,064,271.88 $ 477,325.94 $ 477,325.94 $ 20,686.22 $ 498,012.16
Xxxxxxxx ###-##-#### 12,500 $ 106,750.00 $ 47,877.38 $ 47,877.38 $ 2,074.90 $ 49,952.28
Xxxxxx ###-##-#### 382,387 $ 3,265,584.98 $ 1,464,614.87 $ 1,464,614.87 $ 63,473.06 $ 1,528,087.93
Xxxxxxx ###-##-#### 247,841 $ 2,116,562.14 $ 949,278.13 $ 949,278.13 $ 41,139.55 $ 990,417.68
Sari ###-##-#### 8,750 $ 74,725.00 $ 33,514.17 $ 33,514.17 $ 1,452.43 $ 34,966.60
Sorkin ###-##-#### 8,750 $ 74,725.00 $ 33,514.17 $ 33,514.17 $ 1,452.43 $ 34,966.60
Xxxxxxxx ###-##-#### 124,622 $ 1,064,271.88 $ 477,325.94 $ 477,325.94 $ 20,686.22 $ 498,012.16
------- -------------- -------------- -------------- ------------ --------------
ss.16b Officer's 958,563 $ 8,186,128.02 $ 3,671,478.47 $ 3,671,478.47 $ 159,113.49 $ 3,830,591.97
------- -------------- -------------- -------------- ------------ --------------
Total Loan Amounts 968,563 $ 8,270,628.02 $ 3,699,574.72 $ 3,699,574.72 $ 159,221.45 $ 3,858,796.18
======= ============== ============== ============== ============ ==============
28
On May 16, 2001, Rite Aid issued a press release announcing the details
of a comprehensive $3.0 billion refinancing package that includes a commitment
for a new $1.9 billion senior secured credit facility fully underwritten by
Citibank NA, X.X. Xxxxxx Chase & Co., Credit Suisse First Boston Corporation and
Fleet Retail Finance, Inc.
The closing of the new credit facility is subject to the satisfaction
of customary closing conditions and Rite Aid's issuance of approximately $1.05
billion in new debt or equity securities, of which $527 million, as of May 16,
2001, has been committed or arranged.. Rite Aid plans to raise, at a minimum,
the additional $523 million by issuing equity and fixed income securities and
through real estate mortgage financings in transactions which are intended to
close simultaneously with, and which will be conditioned upon, the closing of
the new credit facility. The new credit facility will be secured by inventory,
accounts receivable and certain other assets owned by Rite Aid's subsidiaries.
The facility will be used to repay Rite Aid's first and second lien debt, pay
expenses associated with the planned refinancing and for general working capital
purposes.
Rite Aid also announced that one of the holders has committed to
exchange $152 million of our 10.5% senior secured notes due 2002 for $152
million of new 12.5% senior secured notes maturing in 2006. The new notes will
be secured by a second lien on the collateral securing the new credit facility.
In connection with the exchange, the holder will receive five-year warrants to
purchase 3.0 million shares of Rite Aid common stock at $6.00 per share. The
exchange will take place simultaneously with, and is contingent upon, the
closing of the new credit facility.
Rite Aid also announced that included in the $527 million that has
already been committed are recently completed or contracted private exchanges of
common stock for $226.2 million of our bank debt and 10.5% senior secured notes
due 2002.
29
EXHIBIT A
AMENDMENT TO EMPLOYMENT AGREEMENT
30
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
31
EXHIBIT C
COMMITMENT LETTER
32
June 25, 2001
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Senior Executive Vice President and
General Counsel
Ladies and Gentlemen:
Reference is made to that certain stock purchase agreement made as of
May 17, (the "Stock Purchase Agreement") by and between Rite Aid Corporation
("Rite Aid") and Transamerica Investment Management, LLC the Other Purchasers
(collectively, the "Purchasers"). All capitalized terms used but not defined
herein shall have the meanings set forth in the Stock Purchase Agreement. In
connection with the sale of the Shares by Rite Aid, we hereby agree that the
following will be added to the end of Section 2.1(d) of the Registration Rights
Agreement and shall be included in the Registration Rights Agreement executed by
Rite Aid and the Purchasers:
"Notwithstanding anything to the contrary contained in this Section
2.1(d), the Company may cause one or more additional Blackout Periods
(each, an "Additional Blackout Period"), in order to file a post
effective amendment to the Shelf Registration Statement to: (i) include
and update the Company's financial statements for the Company's first
fiscal quarter ending June 2, 2001, which post effective amendment will
be filed with the Commission not later than the three (3) business days
following the date the Company files its Quarterly Report on Form 10-Q
for such quarter with the Commission, and (ii) include and update the
Company's financial statements for the Company's second quarter ending
September 1, 2001, which post effective amendment will be filed with
the Commission not later than the three (3) business days following the
date the Company files its Quarterly Report on Form 10-Q for such
quarter with the Commission. No Additional Blackout Period shall count
against the Blackout Periods permitted above, provided, that, the
Commission declares the post effective amendment which resulted in the
Additional Blackout Period effective not later than the twentieth (20)
day following the date the Company files such post effective amendment
with the Commission. In the event the Commission does not declare any
such post effective amendment effective within such twenty-day period,
then such Additional Blackout Period shall count as a Blackout Period."
In addition, Section 2.1(d) will be amended by replacing "ninety (90)"
with "seventy-five (75)".
If you are in agreement with the foregoing, please execute and return a
copy of this Letter Agreement which will constitute our agreement with respect
to the subject matter hereof.
2
Very truly yours,
TRANSAMERICA INVESTMENT
MANAGEMENT, LLC
By:____________________
Name:
Title:
Agreed to and accepted as of
the date first written above
RITE AID CORPORATION
By:______________________________________
Name: Xxxxxx X. Xxxxxx
Title: Senior Executive Vice President
and General Counsel
3
