RITE AID CORPORATION
$150,000,000
11 1/4% Senior Notes Due 2008
Purchase Agreement
New York, New York
June 20, 2001
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
Credit Suisse First Boston Corporation
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Fleet Securities, Inc.
As Representatives of the Initial Purchasers
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Rite Aid Corporation, a corporation organized under the laws
of Delaware (the "Company"), proposes to issue and sell to the several parties
named in Schedule I hereto (the "Initial Purchasers"), for whom you (the
"Representatives") are acting as representatives, $150,000,000 principal amount
of its 11 1/4% Senior Notes Due 2008 (the "Securities"). The Securities are to
be issued under an indenture (the "Indenture"), to be dated as of June 27, 2001,
between the Company and BNY Midwest Trust Company, as trustee (the "Trustee").
The Securities have the benefit of a Registration Rights Agreement (the
"Registration Rights Agreement"), to be dated June 27, 2001, among the Company
and the Initial Purchasers, pursuant to which the Company has agreed to register
the Securities under the Act subject to the terms and conditions therein
specified. To the extent there are no additional parties listed on Schedule I
other than you, the term Representatives as used herein shall mean you as the
Initial Purchasers, and the terms Representatives and Initial Purchasers shall
mean either the singular or plural as the context requires. The use of the
neuter in this Agreement shall include the feminine and masculine wherever
appropriate. Certain terms used herein are defined in Section 17 hereof and the
Transaction Description attached hereto as Exhibit B.
The sale of the Securities to the Initial Purchasers will be
made without registration of the Securities under the Act in reliance upon
exemptions from the registration requirements of the Act.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated June 15, 2001 (as amended or
supplemented at the Execution Time, including any and all exhibits thereto and
any information incorporated by reference therein, the "Preliminary
Memorandum"), and a final offering memorandum, dated June 20, 2001 (as amended
or supplemented at the Execution Time, the "Final Memorandum"). Each of the
Preliminary Memorandum and the Final Memorandum sets forth certain information
concerning the Company and the Securities. The Company hereby confirms that it
has authorized the use of the Preliminary Memorandum and the Final Memorandum,
and any amendment or supplement thereto, in connection with the offer and sale
of the Securities by the Initial Purchasers.
Prior to or concurrently with the Closing (as defined herein),
the Company will enter into the transactions described in Exhibit B hereto (the
"Transaction Description").
1. Representations and Warranties. The Company represents and
warrants to each Initial Purchaser as set forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. At the
Execution Time and on the Closing Date (as defined in Section 3
hereof), the Final Memorandum did not, and will not (and any amendment
or supplement thereto, at the date thereof and at the Closing Date,
will not), contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or warranty
as to the information contained in or omitted from the Preliminary
Memorandum or the Final Memorandum, or any amendment or supplement
thereto, in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of the Initial Purchasers
through the Representatives specifically for inclusion therein.
(b) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has,
directly or indirectly, made offers or sales of any security, or
solicited offers to buy any security, under circumstances that would
require the registration of the Securities under the Act.
(c) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States.
(d) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Act.
(e) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation) has engaged
in any directed selling efforts with respect to the Securities being
sold in reliance on Regulation S, and each of them has complied with
the offering restrictions requirements of Regulation S. Terms used in
this paragraph have the meanings given to them by Regulation S.
(f) The Company is not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Final Memorandum will not be, an
"investment company" within the meaning of the Investment Company Act.
(g) The Company is subject to and in compliance, in all
material respects, with the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act.
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(h) The Company has not paid or agreed to pay to any person
any compensation for soliciting another to purchase any Securities
(except as contemplated by this Agreement).
(i) The Company has not taken, directly or indirectly, any
action designed to or that would constitute or that might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(j) On the Closing Date, the Indenture will conform in all
material respects to the description thereof contained in the Final
Memorandum.
(k) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized with full corporate power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business
as described in the Final Memorandum, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification except to
the extent that failure to be so qualified or be in good standing would
not reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business (a "Material Adverse Effect").
(l) All the outstanding shares of capital stock of each
subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except for Rx USA, Inc., Rite Aid
Lease Management Corporation and Rite Aid Risk Management Corp., all
outstanding shares of capital stock of the subsidiaries of the Company
are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any perfected security interest or any
other security interests, claims, liens or encumbrances.
(m) The Company's authorized equity capitalization is as set
forth in the Final Memorandum.
(n) The statements in the Final Memorandum under the headings
"Certain United States Federal Income Tax Considerations for Non-United
States Holders", "Description of Notes", "Exchange Offer; Registration
Rights", "Regulation" and "Legal Proceedings", "Description of Other
Indebtedness", "Refinancing Transactions" and "Risk Factors" fairly
summarize the matters therein described.
(o) This Agreement has been duly authorized, executed and
delivered by the Company; the Indenture has been duly authorized and,
assuming due authorization, execution and delivery thereof by the
Trustee, when executed and delivered by the Company, will constitute a
legal, valid and binding instrument enforceable against the Company in
accordance with its terms (subject, as to the enforcement of remedies,
to applicable bankruptcy, fraudulent conveyance, reorganization,
insolvency, moratorium or other laws affecting creditors' rights
generally from time to time in effect and to general principles of
equity); the Securities have been duly authorized, and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers, will have been
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duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery of the Indenture by the Trustee)
will constitute the legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture (subject, as to the
enforcement of remedies, to applicable bankruptcy, fraudulent
conveyance, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and
to general principles of equity); and the Registration Rights Agreement
has been duly authorized and, when executed and delivered by the
Company, will constitute a legal, valid and binding instrument
enforceable against the Company in accordance with its terms (subject,
as to the enforcement of remedies, to applicable bankruptcy, fraudulent
conveyance, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and
to general principles of equity and except that the enforceability of
any rights to contribution or indemnification may be violative of
public policy under any law, rule or regulation).
(p) Subject to compliance by the Initial Purchasers with the
representations, warranties and agreements set forth in Section 4 of
this Agreement, no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions contemplated herein, in the Indenture
or the Registration Rights Agreement or the other Transactions, except
such as will be obtained under the Act and the Trust Indenture Act, the
securities laws of any jurisdiction outside the U.S. in which the
Securities are offered and such as may be required under the blue sky
laws of any jurisdiction and the National Association of Securities
Dealers Inc. in connection with the purchase and distribution of the
Securities by the Initial Purchasers in the manner contemplated herein
and in the Final Memorandum and the Registration Rights Agreement.
(q) On the Closing Date, neither the execution and delivery of
the Indenture, this Agreement or the Registration Rights Agreement, the
issue and sale of the Securities, nor the consummation of any other of
the Transactions, nor the fulfillment of the terms hereof or thereof
will conflict with, result in a breach or violation of, or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to (other than the liens
securing the New Credit Facility, the 10.5% Notes and the 12.5% Notes
and the notes issued in exchange therefor), (i) the charter or by-laws
of either of the Company or any subsidiary, (ii) any statute, rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, as applicable or
(iii) any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is
bound or to which any of the properties of the Company or any of its
subsidiaries is subject.
(r) The consolidated historical financial statements of the
Company and its consolidated subsidiaries included in the Final
Memorandum present fairly in all material respects the financial
condition, results of operations and cash flows of the Company as of
the dates and for the periods indicated, comply as to form with the
applicable accounting requirements of the Act and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise
noted therein); the selected financial data set forth under the caption
"Selected Consolidated Financial Information" in the Final Memorandum
fairly present, on the basis stated in the Final Memorandum, the
information included therein.
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(s) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or its or their property is pending
or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a material adverse effect on the
performance of this Agreement, the Indenture or the Registration Rights
Agreement, or the consummation of any of the transactions contemplated
hereby or thereby or any of the other Transactions; or (ii) could
reasonably be expected to have a Material Adverse Effect, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereto).
(t) The Company and each of its subsidiaries own or lease all
such properties as are necessary to the conduct of their respective
operations as presently conducted, except where the failure to own or
lease such property could not reasonably be expected to have a Material
Adverse Effect.
(u) Neither the Company nor any subsidiary is in violation or
default of (i) any provision of its charter or bylaws; (ii) the terms
of any agreement or instrument to which it is a party or bound or to
which its property is subject; or (iii) any statute, rule, regulation
or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, as applicable, except in the case
of (ii) and (iii), such violation or default that could not reasonably
by expected to have a Material Adverse Effect.
(v) Deloitte & Touche LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements included in the Final Memorandum, are, to the
knowledge of the Company, independent public accountants with respect
to the Company within the meaning of the Act and the applicable
published rules and regulations thereunder.
(w) There are no stamp or other issuance or transfer taxes or
duties or other similar fees or charges required to be paid in
connection with the execution and delivery of this Agreement or the
issuance or sale by the Company of the Securities.
(x) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Final Memorandum (exclusive of any amendment or
supplement thereto)) and has paid all taxes required to be paid by it
and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any
such assessment, fine or penalty that is currently being contested in
good faith or as would not have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Final
Memorandum (exclusive of any amendment or supplement thereto).
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(y) No labor problem or dispute with the employees of the
Company or any of its subsidiaries exists or is threatened or imminent,
and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its subsidiaries'
principal suppliers, contractors or customers that could reasonably be
expected to have a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereto).
(z) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; the Company and its subsidiaries
are in compliance with the terms of such policies and instruments in
all material respects, except where noncompliance could not reasonably
be expected to have a Material Adverse Effect; and neither the Company
nor any such subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Final Memorandum (exclusive of any amendment or
supplement thereto).
(aa) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from
the Company or from transferring any of such subsidiary's property or
assets to the Company or any other subsidiary of the Company, except as
described in or contemplated by the Final Memorandum.
(bb) The Company and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, except where the failure to
possess such licenses, certificates, permits and other authorizations
could not reasonably be expected to have a Material Adverse Effect, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Final
Memorandum (exclusive of any amendment or supplement thereto).
(cc) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"); (ii) have received and are in
compliance with all permits, licenses or other approvals required of
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them under applicable Environmental Laws to conduct their respective
businesses; and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except where such non-compliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals, or liability would not, individually or in the
aggregate, have a material adverse change in the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereto); except as set forth in the Final
Memorandum, neither the Company nor any of the subsidiaries has been
named as a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended.
(dd) Each of the Company and its subsidiaries has fulfilled
its obligations, if any, under the minimum funding standards of ▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the regulations and published
interpretations thereunder with respect to each "plan" (as defined in
Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company and its subsidiaries
are eligible to participate; the Company and its subsidiaries have not
incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the ordinary
course) or to any such plan under Title IV of ERISA.
(ee) The Company and its subsidiaries own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service ▇▇▇▇
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct
of the Company's business as now conducted or as proposed in the Final
Memorandum to be conducted, except where the failure to own such
Intellectual Property could not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received any charge, complaint, claim, demand or
notice alleging any interference, infringement, misappropriation or
violation of a third party's right in Intellectual Property (including
any claim that the Company or any of its subsidiaries must license or
refrain from using such Intellectual Property), which, if the subject
of any unfavorable ruling, decision or finding could, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Initial Purchasers in
connection with the offering of the Securities shall be deemed a representation
and warranty by the Company, as to matters covered thereby, to each Initial
Purchaser.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Initial Purchaser, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 100.00% of the principal amount thereof, plus accrued interest, if any,
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from June 20, 2001 to the Closing Date, the principal amount of Securities set
forth opposite such Initial Purchaser's name on Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 12:00 P.M., New York City time, on June 27, 2001,
which date and time may be postponed by agreement between the Representatives
and the Company or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing Date").
Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Initial Purchasers against payment by the
several Initial Purchasers through the Representatives of the purchase price
thereof to or upon the order of the Company by wire transfer payable in same-day
funds to the account specified by the Company. Delivery of the Securities shall
be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.
4. Offering by Initial Purchasers. Each Initial Purchaser,
severally and not jointly, represents and warrants to and agrees with the
Company that:
(a) It is a qualified institutional buyer (as defined in Rule
144A under the Act) or an institutional accredited investor (as defined
in Rule 501(a) under the Act).
(b) It has not offered or sold, and will not offer or sell,
any Securities except (i) to those persons it reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the Act)
and that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such Securities is
aware that such sale is being made in reliance on Rule 144A; or (ii) in
accordance with the restrictions set forth in Exhibit A hereto.
(c) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Securities in the United States by
means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States.
5. Agreements. The Company agrees with each Initial Purchaser
that:
(a) The Company will furnish to each Initial Purchaser and to
counsel for the Initial Purchasers, without charge, during the period
referred to in paragraph (c) below, as many copies of the Final
Memorandum and any amendments and supplements thereto as you may
reasonably request.
(b) The Company will not amend or supplement the Final
Memorandum without the prior written consent of the Representatives,
which consent will not be unreasonably withheld or delayed.
(c) If at any time prior to the completion of the sale of the
Securities by the Initial Purchasers (as determined by the
Representatives), any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Final Memorandum to
comply with applicable law, the Company promptly (i) will notify the
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Representatives of any such event; (ii) subject to the requirements of
paragraph (b) of this Section 5, will prepare an amendment or
supplement that will correct such statement or omission or effect such
compliance; and (iii) will supply any supplemented or amended Final
Memorandum to the several Initial Purchasers and counsel for the
Initial Purchasers without charge in such quantities as you may
reasonably request.
(d) The Company will arrange, if necessary, for the
qualification of the Securities for sale by the Initial Purchasers
under the laws of such jurisdictions as the Representatives may
designate and will maintain such qualifications in effect so long as
required for the sale of the Securities; provided that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Securities, in any
jurisdiction where it is not now so subject. The Company will promptly
advise the Representatives of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(e) The Company will not, and will not permit any of its
controlled Affiliates to, and will use its reasonable best efforts not
to permit any of its other Affiliates to, resell any Securities that
have been acquired by any of them.
(f) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers) will, directly or indirectly, make offers or sales of any
security, or solicit offers to buy any security, under circumstances
that would require the registration of the Securities under the Act.
(g) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers) will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities in the United States.
(h) So long as any of the Securities are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act, the
Company will, during any period in which it is not subject to and in
compliance with Section 13 or 15(d) of the Exchange Act or it is not
exempt from such reporting requirements pursuant to and in compliance
with Rule 12g3-2(b) under the Exchange Act, provide to each holder of
such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser, any information
required to be provided by Rule 144A(d)(4) under the Act. This covenant
is intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such
restricted securities.
(i) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf (other than the Initial
Purchasers) will engage in any directed selling efforts with respect to
the Securities, and each of them will comply with the offering
restrictions requirements of Regulation S. Terms used in this paragraph
have the meanings given to them by Regulation S.
9
(j) The Company will cooperate with the Representatives and
use its best efforts to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company.
(k) The Company will not offer, sell, contract to sell, grant
any other option to purchase or otherwise dispose of, directly or
indirectly, or announce the offering of, or file a registration
statement for, any debt securities issued or guaranteed by the Company
or any of its direct or indirect subsidiaries, or enter into any
agreement to do any of the foregoing (other than (w) the Securities,
the New Securities (as defined in the Registration Rights Agreement)
and the 12.5% Notes, (x) the exchange offer registration statement
filed in connection with the Company's 10.5% Notes and the 12.5% Notes,
(y) pursuant to any credit facility permitted under the Indenture and
(z) purchase money debt permitted under the Indenture) for a period of
90 days from the date the Securities are issued without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
(l) The Company will not take, directly or indirectly, any
action designed to or that would constitute or that might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(m) The Company currently has no plan or intent to be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act.
(n) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation of the Indenture and the
Registration Rights Agreement and the issuance of the Securities; (ii)
the preparation, printing or reproduction of the Preliminary Memorandum
and Final Memorandum and each amendment or supplement to either of
them; (iii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of
such copies of the Preliminary Memorandum and Final Memorandum, and all
amendments or supplements to either of them, as may, in each case, be
reasonably requested for use in connection with the offering and sale
of the Securities; (iv) the preparation, printing, authentication,
issuance and delivery of certificates for the Securities, including any
stamp or transfer taxes in connection with the original issuance and
sale of the Securities; (v) the printing (or reproduction) and delivery
of this Agreement, any blue sky memorandum and all other agreements or
documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (vi) any registration or qualification of
the Securities for offer and sale under the securities or blue sky laws
of the several states (including filing fees and the reasonable fees
and expenses of counsel for the Initial Purchasers relating to such
registration and qualification); (vii) admitting the Securities for
trading in The Portal Market of the NASD; (viii) the transportation and
other expenses incurred by or on behalf of Company representatives in
connection with presentations to prospective purchasers of the
Securities; (ix) the fees and expenses of the Company's accountants and
the fees and expenses of counsel (including local and special counsel)
for the Company; and (x) all other costs and expenses incident to the
performance by the Company of its and their obligations hereunder and
under the Indenture and the Registration Rights Agreement. It is
understood, however, that, except as provided in Section 5 and Sections
10
7 and 8 of this Agreement, the Initial Purchasers will pay all of their
own costs and expenses, including the fees of their counsel.
6. Conditions to the Obligations of the Initial Purchasers.
The obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein at the Execution Time and the Closing Date, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Initial Purchasers shall have received an opinion,
dated the Closing Date, of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., general counsel for
the Company, substantially to the effect set forth below:
(i) each of the Company and its Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and
authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the
Final Memorandum, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification, except to
the extent that the failure to be so qualified or in good
standing could not reasonably be expected to have a Material
Adverse Effect;
(ii) all the outstanding shares of capital stock of the
Company and each Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except for Rx USA, Inc., Rite Aid Lease Management
Corporation and Rite Aid Risk Management Corp., all
outstanding shares of capital stock of the Subsidiaries are
owned by the Company either directly or through wholly owned
subsidiaries free and clear of any perfected security interest
and, to the knowledge of such counsel, after due inquiry, any
other security interests, claims, liens or encumbrances;
(iii) the Company's authorized capital stock is as set
forth in the Final Memorandum;
(iv) to the knowledge of such counsel, there is no pending
or threatened action, suit or proceeding by or before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries or
its or their property that would be required to be disclosed
in a registration statement on Form S-1 under the Act and that
is not adequately disclosed in the Final Memorandum, except in
each case for such proceedings that, if the subject of an
unfavorable decision, ruling or finding would not singly or in
the aggregate, result in a material adverse change in the
condition (financial or otherwise), prospects, earnings,
business or properties or results of operations of the Company
and its subsidiaries, taken as a whole;
11
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) neither the execution and delivery of the Indenture,
this Agreement or the Registration Rights Agreement, the issue
and sale of the Securities, nor the consummation of any other
of the Transactions, nor the fulfillment of the terms hereof
or thereof will conflict with, result in a breach or violation
of, or imposition of any lien, charge or encumbrance upon any
property or asset of the Company or any of its subsidiaries
(other than the liens securing the New Credit Facility, the
10.5% Notes and the 12.5% Notes and the notes issued in
exchange therefor) pursuant to, (i) the charter or by-laws of
the Company or any of its subsidiaries; (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any
of its subsidiaries is a party or bound or to which any of
their respective properties is subject; or (iii) any statute,
law, rule, regulation, judgment, order or decree applicable to
the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the
Company, any of its subsidiaries or any of their respective
properties, except such conflicts, breaches or violations as
could not reasonably be expected to have a Material Adverse
Effect; or could not reasonably be expected to have a material
adverse effect on the Company's performance of this Agreement,
the Indenture or the Registration Rights Agreement, or the
consummation of any of the transactions contemplated by the
Purchase Agreement or such other agreements or any of the
other Transactions;
(vii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required
in connection with the transactions contemplated herein or in
the Indenture or the Registration Rights Agreement or the
other Transactions, except such as will be obtained under the
Act and the Trust Indenture Act in connection with the
transactions contemplated by the Registration Rights Agreement
and such as may be required under the blue sky or securities
laws of any jurisdiction in connection with the transactions
contemplated by this Agreement and the Registration Rights
Agreement and such other approvals (specified in such opinion)
as have been obtained; and
(viii) the statements in the Final Memorandum under the
headings "Regulation" and "Legal Proceedings"; insofar as such
statements summarized legal matters, agreements, documents or
proceedings discussed therein, are accurate and fair summaries
of such legal matters, agreements, documents or proceedings.
In addition, such counsel will state that it has
participated in conferences with officers and other
representatives of the Company, counsel for the Company,
representatives of the independent accountants of the Company
and the Initial Purchasers and their counsel at which the
contents of the Final Memorandum and related matters were
discussed; although it is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Final Memorandum
12
and has made no independent check or verification thereof, on
the basis of the foregoing such counsel has no reason to
believe that at the Execution Time and on the Closing Date the
Final Memorandum contained or contains any untrue statement of
a material fact or omitted or omits to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in
each case, other than the financial statements and other
financial information contained therein, as to which such
counsel need express no opinion).
(b) The Initial Purchasers shall have received an opinion,
dated the Closing Date, of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
counsel for the Company, substantially to the effect set forth below:
(i) Based solely on such counsel's review of good-standing
certificates, the Company is validly existing as a corporation
in good standing under the laws of the jurisdiction in which
it is chartered or organized, with full corporate power and
authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the
Final Memorandum;
(ii) the Indenture has been duly authorized, executed and
delivered, and is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms
(subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time
in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether considered
in a proceeding in equity or at law and such counsel need not
express any opinion as to the applicability or effect of any
fraudulent transfer, preference or similar law); the
Securities have been duly authorized and when executed by the
Company and delivered to and paid for by the Initial
Purchasers under this Agreement (assuming due execution and
authentication of the Securities by the Trustee under the
Indenture), will constitute legal, valid and binding
obligations of the Company entitled to the benefits of the
Indenture (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally from time
to time in effect and to general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of
whether considered in a proceeding in equity or at law and
such counsel need not express any opinion as to the
applicability or effect of any fraudulent transfer, preference
or similar law); the Registration Rights Agreement has been
duly authorized, executed and delivered and is a valid and
binding agreement by the Company enforceable against the
Company in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, fraudulent
conveyance, reorganization, insolvency, moratorium or other
laws affecting creditors' rights generally from time to time
in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether considered
in a proceeding in equity or at law and such counsel need not
express any opinion as to the applicability or effect of any
fraudulent transfer, preference or similar law); and the
13
statements set forth under the heading "Description of Notes"
and "Exchange Offer; Registration Rights" in the Final
Memorandum, insofar as such statements purport to summarize
certain provisions of the Securities, the Indenture and the
Registration Rights Agreement, fairly summarize such
provisions in all material respects;
(iii) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding by or before
any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries or
its or their property that is not adequately disclosed in the
Final Memorandum, except in each case for such proceedings
that, if the subject of an unfavorable decision, ruling or
finding would not singly or in the aggregate, result in a
material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties or
results of operations of the Company and its subsidiaries,
taken as a whole; and the statements in the Final Memorandum
under the headings "Certain United States Federal Income Tax
Considerations for Non-United States Holders", "Description
of Other Indebtedness" and "Refinancing Transactions"; insofar
as such statements summarized legal matters, agreements,
documents or proceedings discussed therein, are accurate and
fair summaries of such legal matters, agreements, documents or
proceedings;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) the execution and delivery of the Indenture, this
Agreement, the Registration Rights Agreement, the issue and
sale of the Securities, nor the consummation of any other of
the Transactions, nor the fulfillment of the terms hereof or
thereof will not (i) conflict with the charter or by-laws of
the Company; (ii) constitute a violation of, or a breach or
default under the terms of any Applicable Contract or (iii)
violate or conflict with, or result in any contravention of,
any Applicable Law or Applicable Order. Such counsel need not
express any opinion, however, as to whether such execution,
delivery or performance will constitute a violation of, or
default under, any covenant, restriction or provision with
respect to financial ratios or tests or any aspect of the
financial condition or results of operation of the Company or
any of its subsidiaries;
(vi) assuming (i) the accuracy of the representations and
warranties of the Company set forth in Section 1 of the
Purchase Agreement and of you in Section 4 of the Purchase
Agreement, (ii) the due performance by the Company of the
covenants and agreements set forth in Section 5 of the
Purchase Agreement and the due performance by you of the
covenants and agreements set forth in Section 4 of the
Purchase Agreement, (iii) your compliance with the offering
and transfer procedures and restrictions described in the
Offering Memorandum and (iv) the accuracy of the
representations and warranties made in accordance with the
Offering Memorandum by purchasers to whom you initially resell
the Securities, the offer, sale and delivery of the Securities
to you in the manner contemplated by the Purchase Agreement
and the Offering Memorandum and the initial resale of the
Securities by you in the manner contemplated in the Offering
Memorandum and the Purchase Agreement, do not require
14
registration under the Securities Act of 1933, as amended, and
the Indenture does not require qualification under the Trust
Indenture Act of 1939, as amended, it being understood that
such counsel does not express any opinion as to any subsequent
resale of any Security;
(vii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Final Memorandum, will
not be an "investment company" as defined in the Investment
Company Act;
(viii) no Governmental Approval is required in connection
with the transactions contemplated herein or in the Indenture
or the Registration Rights Agreement or the other Transactions
(other than the filing of Uniform Commercial Code financing
statements to create the liens securing the New Credit
Facility, the 10.5% Notes and the 12.5% Notes), except such as
will be obtained under the Act and the Trust Indenture Act in
connection with the transactions contemplated by the
Registration Rights Agreement; and
(ix) such counsel will state that it has participated in
conferences with officers and other representatives of the
Company, counsel for the Company, representatives of the
independent accountants of the Company and you and your
counsel at which the contents of the Offering Memorandum and
related matters were discussed. Although it is not passing
upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained
in the Offering Memorandum and has made no independent check
or verification thereof (except to the limited extent referred
to above), on the basis of the foregoing, no facts have come
to its attention that have led it to believe that the Offering
Memorandum, as of its date or as of Closing Date, contained or
contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that such counsel need
not express any opinion or belief with respect to the
financial statements, schedules and other financial data
included or excluded therefrom.
The following definitions apply to this paragraph (b):
"Applicable Contracts" means those agreements or
instruments identified in a schedule to the opinion.
"Applicable Laws" means Delaware General Corporation
Law (the "DGCL") and those laws, rules and regulations of the
State of New York and the federal laws of the United States of
America, in each case, which, in our experience, are normally
applicable to transactions of the type contemplated by the
Agreement, the Indenture, the Registration Rights Agreement
and instruments and agreements defining the terms of the
Transactions (other than the United States Federal securities
laws, state and foreign securities or blue sky laws, antifraud
laws and the rules and regulations of the National Association
of Securities Dealers Inc.), but without such counsel having
made any investigation as to any other laws, rules or
15
regulations, and which are not the subject of a specific
opinion therein referring expressly to a particular law or
laws.
"Governmental Authorities" means any court,
regulatory body, administrative agency or governmental body of
the State of New York or the United States of America having
jurisdiction over the Company under Applicable Laws.
"Governmental Approval" means any consent, approval,
license, authorization or validation of, or filing,
qualification or registration with, any Governmental Authority
required to be made or obtained by the Company pursuant to
Applicable Laws.
"Applicable Orders" means those judgments, orders or
decrees, if any, of any Governmental Authority.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
jurisdiction of incorporation of the Company, the State of New York or the
Federal laws of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the Initial
Purchasers; and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
References to the Final Memorandum in this Section 6(a) include any amendment or
supplement thereto at the Closing Date.
(c) The Representatives shall have received from Cravath,
Swaine & ▇▇▇▇▇, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date and addressed to the Representatives,
with respect to the issuance and sale of the Securities, the Indenture,
the Registration Rights Agreement, the Final Memorandum (as amended or
supplemented at the Closing Date) and other related matters as the
Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request for
the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any amendment
or supplement to the Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct on and as of the Closing
Date with the same effect as if made on the Closing Date, and
the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial
statements included in the Final Memorandum (exclusive of any
amendment or supplement thereto), there has been no material
16
adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except
as set forth in or contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereto).
(e) At the Execution Time and at the Closing Date, the Company
shall have requested and caused Deloitte & Touche LLP to furnish to the
Representatives letters, dated respectively as of the Execution Time
and as of the Closing Date, in form and substance satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Act and the Exchange Act and the respective
applicable rules and regulations adopted by the Commission thereunder,
and stating in effect that:
(i) in their opinion the audited financial statements
included or incorporated in the Final Memorandum and reported
on by them comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
related rules and regulations adopted by the Commission
thereunder that would apply to the Final Memorandum if the
Final Memorandum were a prospectus included in a registration
statement on Form S-1 under the Act;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; carrying out certain specified procedures (but
not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters
of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders, directors and audit, executive and compensation
committees of the Company and the Subsidiaries; and inquiries
of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to March
3, 2001, nothing came to their attention which caused them to
believe that:
(1) with respect to the period subsequent to March 3,
2001, there were any changes, at a specified date not more
than five days prior to the date of the letter, in the
long-term debt less current maturities of the Company and
its subsidiaries or common stock of the Company or
decreases in the stockholders' equity (deficit) of the
Company as compared with the amounts shown on the March 3,
2001 consolidated balance sheet included or incorporated
in the Final Memorandum, or for the period from March 4,
2001 to such specified date there were any decreases, as
compared with the corresponding period in the preceding
year in revenues, net loss or loss from continuing
operations before income taxes and cumulative effect of
accounting change or in net loss per share of the Company
and its subsidiaries, except in all instances for changes
or decreases set forth in such letter, in which case the
letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said
explanation is not deemed necessary by the
Representatives; or
17
(2) the information included in response to
Regulation S-K, Item 301 (Selected Financial Data), Item
302 (Supplementary Financial Information), Item 402
(Executive Compensation) and Item 503(d) (Ratio of
Earnings to Fixed Charges) is not in conformity with the
disclosure requirements of Regulation S-K.
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Final
Memorandum, including the information set forth under the
captions "Offering Memorandum Summary", "Risk Factors", "Use
of Proceeds", "Capitalization", "Selected Consolidated
Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Business",
"Management", "Executive Officer Compensation", "Security
Ownership of Certain Beneficial Owners and Management",
"Certain Relationships and Related Transactions", and
"Description of Other Indebtedness" in the Final Memorandum,
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation;
References to the Final Memorandum in this Section 6(e)
include any amendment or supplement thereto at the date of the
applicable letter.
(f) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Final Memorandum (exclusive of
any amendment or supplement thereto), there shall not have been (i) any
change or decrease specified in the letter or letters referred to in
paragraph (e) of this Section 6; or (ii) any change, or any development
involving a prospective change, in or affecting the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereto) the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the sole judgment of
the Representatives, so material and adverse as to make it impractical
or inadvisable to market the Securities as contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereto).
(g) The Securities shall have been designated as
Portal-eligible securities in accordance with the rules and regulations
of the NASD, and the Securities shall be eligible for clearance and
settlement through The Depository Trust Company.
(h) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), any notice given of
any intended or potential decrease in any such rating (including notice
of an adverse change in the outlook for such rating) or of a possible
change in any such rating that does not indicate the direction of the
possible change.
18
(i) On the Closing Date, the Transactions will have been
consummated substantially as described in the Final Memorandum and the
Representatives will have received evidence satisfactory thereof, and
the agreements and other documents related thereto shall be in full
force and effect.
(j) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates
and documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 will
be delivered at the office of counsel for the Initial Purchasers, at Cravath,
Swaine & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on the Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Initial Purchasers, the Company will reimburse the Initial
Purchasers severally through ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. on demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum (or in any supplement or amendment thereto), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
19
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Initial Purchasers through the
Representatives specifically for inclusion therein; provided further, that with
respect to any untrue statement or omission of material fact made in any
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of any Initial Purchaser from whom the person
asserting any such loss, claim, damage or liability purchased the securities
concerned, to the extent that any such loss, claim, damage or liability of such
Initial Purchaser occurs under the circumstance where it shall have been
determined by a court of competent jurisdiction by final and nonappealable
judgment that (x) the Company had previously furnished copies of the Final
Memorandum to the Representatives, (y) the untrue statement or omission of a
material fact contained in the Preliminary Memorandum was corrected in the Final
Memorandum and (z) there was not sent or given to such person, at or prior to
the written confirmation of the sale of such securities to such person, a copy
of the Final Memorandum. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Initial Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers, and each person who controls the Company within the meaning of either
the Act or the Exchange Act, to the same extent as the foregoing indemnity from
the Company to each Initial Purchaser, but only with reference to written
information relating to such Initial Purchaser furnished to the Company by or on
behalf of such Initial Purchaser through the Representatives specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto). This indemnity agreement will be in addition
to any liability which any Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page regarding the delivery of the Securities and, under the heading "Plan of
Distribution", (i) the list of Initial Purchasers and their respective
participation in the sale of the Securities; (ii) the sentences related to
concessions and reallowances; and (iii) the paragraph related to stabilization,
syndicate covering transactions and penalty bids in the Preliminary Memorandum
and the Final Memorandum, constitute the only information furnished in writing
by or on behalf of the Initial Purchasers for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses;
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
20
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Initial Purchasers may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by the Initial Purchasers on the other from the
offering of the Securities; provided, however, that in no case shall any Initial
Purchaser (except as may be provided in any agreement among the Initial
Purchasers relating to the offering of the Securities) be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by such Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Company and the Initial Purchasers severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Initial Purchasers
on the other in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by the Company, and
benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions in each case set forth on the cover of
the Final Memorandum. Relative fault shall be determined by reference to, among
other things, whether any untrue or any alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information provided by the Company on the one hand or the Initial Purchasers on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
21
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Initial Purchaser within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of an Initial Purchaser shall have the same rights to contribution as such
Initial Purchaser, and each person who controls the Company within the meaning
of either the Act or the Exchange Act and each officer and director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (d).
9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names on Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth on Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such nondefaulting Initial Purchasers do not purchase all
the Securities, this Agreement will terminate without liability to any
nondefaulting Initial Purchaser or the Company. In the event of a default by any
Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding two Business Days, as the
Representatives and the Company shall determine in order that the required
changes in the Final Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or any nondefaulting
Initial Purchaser for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission, the New York Stock Exchange or the Pacific
Stock Exchange or trading in securities generally on the New York Stock Exchange
or the Pacific Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on either such Exchange; (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities; or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum (exclusive of any amendment or supplement
thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
22
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors, employees, agents or controlling persons
referred to in Section 8 hereof, and will survive delivery of and payment for
the Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. General Counsel (fax
no.: (▇▇▇) ▇▇▇-▇▇▇▇) and confirmed to the General Counsel, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
Inc. at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇) and confirmed to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq., Rite Aid Corporation, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Affiliate" shall have the meaning specified in Rule 501(b) of
Regulation D.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in The City of New York.
"Commission" shall mean the Securities and Exchange
Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
23
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission promulgated
thereunder.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Regulation D" shall mean Regulation D under the Act.
"Regulation S" shall mean Regulation S under the Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Commission promulgated
thereunder.
24
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
between the Company and the several Initial Purchasers.
Very truly yours,
Rite Aid Corporation,
By_________________________
Name:
Title:
25
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
Credit Suisse First Boston Corporation
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Fleet Securities, Inc.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
By____________________________
Name:
Title:
For themselves and the other several Initial Purchasers named in Schedule I to
the foregoing Agreement.
26
SCHEDULE I
Principal
Amount of
Securities
Initial Purchasers to be Purchased
------------------ ---------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. ............................ $ 45,000,000
Credit Suisse First Boston Corporation................ $ 45,000,000
▇.▇. ▇▇▇▇▇▇ Securities Inc............................ $ 45,000,000
Fleet Securities, Inc................................. $ 15,000,000
------------
Total ....................................... $150,000,000
27
EXHIBIT A
Selling Restrictions for Offers and
Sales outside the United States
(1)(a) The Securities have not been and will not be registered
under the Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Act or pursuant to an exemption from the registration requirements
of the Act. Each Initial Purchaser represents and agrees that, except as
otherwise permitted by Section 4(a)(i) or (ii) of the Agreement to which this is
an exhibit, it has offered and sold the Securities, and will offer and sell the
Securities, (i) as part of their distribution at any time; and (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, only in accordance with Rule 903 of Regulation S under the Act.
Accordingly, each Initial Purchaser represents and agrees that neither it, nor
any of its Affiliates nor any person acting on its or their behalf has engaged
or will engage in any directed selling efforts with respect to the Securities,
and that it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Initial Purchaser agrees that, at
or prior to the confirmation of sale of Securities (other than a sale of
Securities pursuant to Section 4(a)(i) or (ii) of the Agreement to which this is
an exhibit), it shall have sent to each distributor, dealer or person receiving
a selling concession, fee or other remuneration that purchases Securities from
it during the distribution compliance period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Act") and may not be
offered or sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after
the later of the commencement of the offering and June 27,
2001, except in either case in accordance with Regulation S or
Rule 144A under the Act. Terms used above have the meanings
given to them by Regulation S."
(b) Each Initial Purchaser also represents and agrees that it
has not entered and will not enter into any contractual arrangement with any
distributor with respect to the distribution of the Securities, except with its
Affiliates or with the prior written consent of the Company.
(c) Terms used in this section have the meanings given to them
by Regulation S.
(2) Each Initial Purchaser represents and agrees that (i) it
has not offered or sold, and prior to the expiration of the period of six months
from the issue date of the Securities will not offer or sell, any Securities in
the United Kingdom, other than to persons whose ordinary business it is to buy,
hold, manage or dispose of investments, whether as principal or as agent, for
the purpose of their businesses or in circumstances which do not constitute an
offer to the public within the meaning of the Public Offers of Securities
Regulations 1995 (the "POSR") or the Financial Services ▇▇▇ ▇▇▇▇ of the United
Kingdom (the "FSA); (ii) it has complied and will comply with all applicable
provisions of the POSR and the FSA with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom;
and (iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services ▇▇▇ ▇▇▇▇ (Investment Advertisements) (Exemptions) Order 1996
(as amended) or is a person to whom the document may otherwise lawfully be
issued or passed on.
A-1
EXHIBIT B
Transaction Description
The following transactions are referred to herein as the
"Transactions".
(i) A new senior secured credit facility (the "New Credit Facility"),
which will consist of term loans in an aggregate principal amount of up
to $1,400,000,000 and a revolving loan in an aggregate principal amount
of $500,000,000, which will be unconditionally guaranteed by the
subsidiary guarantors party thereto (the "Subsidiary Guarantors") and
those guarantees will be secured by a first priority security interest
in certain collateral of the Subsidiary Guarantors (the "Collateral").
(ii) A committed $552.0 million private placement of common stock.
(iii) A commitment by a financial institution to exchange $152.0
million of our 10.5% senior secured notes due 2002 (the "10.5% Notes")
for $152.0 million of new 12.5 senior secured notes due 2006 (the
"12.5% Notes"). The 12.5% senior secured notes will be secured by a
second lien on the collateral securing the new credit facility.
(iv) Private exchanges of common stock for $303.7 million of the
Company's debt under its existing bank facility and 10.5% senior
secured notes due 2002, $92.0 million of which had been completed
through June 15, 2001.
(v) A synthetic lease transaction with respect to two of the Company's
distribution centers in the amount of approximately $107.0 million.
(vi) The Tender Offer for the 10.5% Notes as set forth in the Offer to
Purchase dated May 24, 2001.
(vii) The Company will repay the following:
(a) all outstanding amounts under its existing senior credit
facility, which will be terminated;
(b) all outstanding amounts under the RCF Facility, which will
be terminated;
(c) all outstanding amounts under the PCS Facility, which will
be terminated;
(d) all outstanding amounts under the Exchange Debt Facility,
which will be terminated;
(e) all outstanding amounts under (i) the Master Lease and
Security Agreement, dated as of March 19, 1998, between RAC
Leasing LLC and Rite Aid Realty Corp. and (ii) the Master
Lease and Security Agreement, dated as of May 30, 1997,
between Sumitomo Bank Leasing and Finance, Inc. and Rite Aid
Realty Corp., which will be terminated; and
(f) amounts under notes held by Prudential Insurance Company,
which will be cancelled.
A-2
