Exhibit 10.1
October 18, 1999
Rite Aid Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Commitment with Respect to
Investment in Rite Aid Corporation
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Dear Sirs and Madams:
You have requested that Green Equity Investors III (the
"Purchaser") commit to purchase 3,000,000 shares of 8% convertible
pay-in-kind preferred stock (the "Preferred Stock") of Rite Aid
Corporation, a Delaware corporation (the "Company"), on the terms and
conditions described below. The closing of the sale of the Preferred Stock
is hereinafter referred to as the "Closing". The Closing is expected to
occur on October 25, 1999.
1. Authorization of Preferred Stock. The Company has approved the issuance
of 3,000,000 shares (the "Preferred Shares") of Preferred Stock to be
designated as its "8% Convertible Pay-in-Kind Preferred Stock". The
Preferred Stock shall have the relative rights, preferences and privileges,
including, without limitation, the right to convert the Preferred Stock
into shares of the Company's common stock, par value $1.00 per share (the
"Common Stock"), as described in Annex A hereto and to be set forth in a
Certificate of Designation to be filed pursuant to Section 151 of the
General Corporation Law of the State of Delaware (the "Certificate of
Designation").
2. Sale and Purchase of Stock. The Company will issue and sell to the
Purchaser and, subject to the terms and conditions of this Commitment, the
Purchaser will purchase from the Company, at the Closing, the Preferred
Shares at a purchase price of $100 per share, in immediately available
funds. The Closing shall take place on October 25, 1999 at 10:00 a.m. (New
York City time) at a place to be agreed by the Company and the Purchaser.
3. Conditions to Closing. The Purchaser's obligation to purchase and pay
for the Preferred Shares to be sold to the Purchaser at the Closing is
subject to the fulfillment, prior to or concurrently with the Closing, of
the following conditions:
3.1 Representations and Warranties. The representations and
warranties of the Company contained in this Commitment shall be in all
material respects correct when made and at the time of the Closing.
3.2 Certificate of Designation. The Certificate of Designation shall
have been duly filed under the laws of the State of Delaware, and the
Restated Certificate of Incorporation of the Company, as amended by the
Certificate of Designation, shall be in full force and effect, and shall
not have been otherwise amended or modified.
3.3 Amendment and Restatement of Credit Facilities. The Company's
credit facilities aggregating $2.75 billion shall have been amended and
restated, including any necessary waivers thereunder, which amendment and
restatement shall contain substantially the terms set forth in the drafts
dated October 16, 1999 previously furnished to the Purchaser.
3.4 Registration Rights Agreement. The Company and the Purchaser
shall have entered into a registration rights agreement containing
substantially the terms described in Annex A hereto (the "Registration
Rights Agreement").
3.5 Legal Opinions. The Purchaser shall have received a legal opinion
(which may contain customary assumptions and qualifications) dated the date
of the Closing from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to
the Company, covering the matters set forth on Schedule A hereto.
3.6 No Default. After giving effect to the amendment and restatement
of the credit facilities referred to in Section 3.3 hereof, there shall not
have occurred and be continuing any default or any event which with notice
or passage of time would constitute a default under any of the Company's
material agreements with respect to indebtedness for borrowed money.
3.7 Financial Statements. The contemplated restatement of the
Company's financial statements for all periods ending prior to the date
hereof is not expected to involve an aggregate reduction in the Company's
net equity as of August 28, 1999 of more than $700,000,000 on a pre-tax
basis.
4. Representations and Warranties. The Company represents and warrants
that:
4.1 Organization, Standing, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted
and as proposed to be conducted, to enter into and perform all of its
obligations under this Commitment, to issue and sell the Preferred Shares
to be issued and sold at the Closing and to carry out the transactions
contemplated hereby or thereby.
4.2 Capital Stock and Related Matters. As of September 25, 1999 and
without giving effect to the transactions contemplated by this Commitment,
the authorized capital stock of the Company consisted of (a) 600,000,000
shares of Common Stock, of which approximately 258,927,199 shares were
issued and outstanding and (b) 20,000,000 shares of preferred stock,
undesignated as to terms, none of which were outstanding. All of the
outstanding shares of Common Stock are validly issued and outstanding,
fully paid and non-assessable. As of September 25, 1999 and except (i) as
set forth in the Company's Annual Report on Form 10-K for the year ended
February 27, 1999, (ii) for employee stock options exercisable for
16,166,529 shares of the Company's Common Stock, (iii) the Company's 5.25%
Convertible Notes due 2002 which are currently convertible into 17,986,413
shares of the Company's Common Stock and (iv) stock appreciation rights
which may be settled in 6,076,895 shares of the Company's Common Stock, the
Company had no outstanding stock or securities convertible into or
exchangeable for any shares of its capital stock, or any outstanding rights
(either preemptive or other) to subscribe for or to purchase, or any
outstanding options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding calls,
commitments or claims of any character relating to, any capital stock or
any stock or securities convertible into or exchangeable for any capital
stock of the Company.
4.3 Governmental Consents, etc. No consent, approval or authorization
of, or declaration or filing with, any governmental authority on the part
of the Company is required for the valid execution and delivery of this
Commitment, the valid offer, issue, sale and delivery of the Preferred
Shares pursuant to this Commitment or the valid issue and delivery of
shares of Common Stock issuable upon conversion of the Preferred Stock.
4.4 Offering of Securities. Neither the Company nor any person acting
on its behalf has offered the Preferred Stock 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 other than the Purchaser in such manner as would subject the
offering, issuance or sale of any of the Preferred Shares to the provisions
of Section 5 of the Securities Act. Neither the Company nor any Person
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 Preferred Shares
to the provisions of Section 5 of the Securities Act.
4.5 Integration. Neither the Company nor any affiliate (as such term
is defined in Rule 501(b) under the Securities Act) has, directly or
through any agent, 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
Preferred Shares, in a manner that would require the registration of the
Securities under the Securities Act.
4.6 Enforceability. This Commitment has been duly authorized, and
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Purchaser) constitutes the valid and
binding obligation of the Company, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity).
4.7 Compliance with Other Instruments, etc. The execution and
delivery by the Company of this Commitment and the issuance and sale of the
Preferred Shares will not 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, nor
will such action 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, except in
each case as would not, individually or in the aggregate have a material
adverse effect on the Company's business, results of operations or
financial condition.
5. Investment Representations. The Purchaser understands that neither the
Preferred Shares nor any Common Stock issuable upon conversion, if any, of
the Preferred Shares has been registered under the Securities Act and that
the certificates for the Preferred Shares and such Common Stock will bear a
legend to that effect. The Purchaser also understands that the Preferred
Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act, based in part upon their
representations contained in this Commitment. The Purchaser hereby
represents and warrants as follows:
5.1 Acquisition for Own Account. The Purchaser is acquiring the
Preferred Shares for its own account for investment and not with a view
toward distribution in a manner which would violate the Securities Act.
5.2 Ability to Protect Own Interests. The Purchaser represents that
by reason of its business or financial experience, or the business and
financial experience of its management, the Purchaser has the capacity to
protect its own interests in connection with the transaction contemplated
in this Commitment. The Purchaser is not a corporation formed for the
specific purpose of consummating this transaction.
5.3 Accredited Investor. The Purchaser represents that it
is an "accredited investor" as that term is defined in Regulation D promulgated
under the Securities Act.
5.4 Access to Information. The Purchaser has been given access to all
Company documents, records, and other information, have received physical
delivery of all those 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
Preferred Shares.
5.5 Compliance with Laws. The Purchaser and its transferees will
comply with all filing and other reporting obligations under all applicable
law which shall be applicable to Purchaser with respect to the Preferred
Stock and to the Common Stock issuable or issued on conversion of the
Preferred Stock.
5.6 Enforceability. This Commitment has been duly authorized, and
executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery thereof by the Company) constitutes
the valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity).
6. Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Stock, the number of shares of Common Stock from time to time
issuable upon conversion of all shares of the Preferred Stock at the time
outstanding. All shares of Common Stock issuable upon conversion of the
Preferred Stock shall be duly authorized and, when issued upon such
conversion, shall be validly issued, fully paid and non-assessable.
7. Transfer Restrictions.
7.1 Restrictive Legends. Except as otherwise permitted by this
Section 7, each certificate for Preferred Stock (including each certificate
for Preferred Stock issued upon the transfer of any certificate for
Preferred Stock and each certificate issued in payment of dividends with
respect to the Preferred Stock) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The shares represented by this Certificate and any
shares of Common Stock issuable upon conversion of any such
shares have not been registered under the Securities Act of
1933 and may not be transferred in the absence of such
registration or an exemption therefrom under such Act. Such
shares and any such shares of Common Stock may be transferred
only in a transaction exempt from registration under the Act or
pursuant to a registration statement under the Act."
Except as otherwise permitted by this Section 7, each certificate for
Common Stock issued upon the conversion of any of the Preferred Stock, and
each certificate issued upon the transfer of any such Common Stock, shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and may not
be transferred in the absence of such registration or an
exemption therefrom under such Act. Such shares may be
transferred only in a transaction exempt from registration
under the Act or pursuant to a registration statement under
the Act."
7.2 Termination of Restrictions. The restrictions imposed by this
Section 7 upon the transferability of Preferred Stock and Common Stock
shall cease and terminate as to any particular securities when such
restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to
any securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any),
new certificates for such securities of like tenor not bearing the
applicable legends required by Section 7.1 hereof.
8. Survival of Representations and Warranties. The representations and
warranties contained in this Commitment shall survive the execution and
delivery of this Commitment and the Closing. No written or oral statements
made by or on behalf of the Company, other than in this Commitment, shall
constitute representations or warranties within the meaning of this
Commitment.
9. Amendments and Waivers. Any term of this Commitment may be amended or
modified and the observance of any term of this Commitment 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.
10. Termination. This Commitment may be terminated (a) by the mutual
written consent of the Purchaser and the Company at any time or (b) by the
Purchaser or the Company if the Closing shall not have been consummated on
or before November 15, 1999.
11. Standstill Agreement. Concurrently with the Closing, the Company and
the Purchaser agree to enter into a two-year standstill agreement
containing customary terms and provisions.
12. Election of ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as Directors. After the
Closing, it is agreed that ▇▇▇▇▇▇▇ ▇▇▇▇▇ will be elected to fill the
vacancy created by the resignation of ▇▇▇▇▇▇ ▇▇▇▇▇, and that ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ will be elected as a director, both of which will be
representatives of the Preferred Stock.
13. Closing Fee. Concurrently with the Closing, the Company agrees to pay
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners a fee of $3 million.
14. Consulting Fee. The Company shall pay to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners a
consulting fee of $1 million on each of the first, second and third
anniversaries of the
Closing.
15. Miscellaneous. This Commitment shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns and
affiliates of the parties hereto, whether so expressed or not. Except as
aforesaid, this Commitment shall not inure to the benefit of any third
party. This Commitment embodies the entire agreement and understanding
between the Purchaser and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Commitment
shall be construed and enforced in accordance with and governed by the law
of the State of New York without regard to the principles regarding
conflicts of laws. The headings in this Commitment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Commitment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
Each of the Company and the Purchaser represent and warrant
that it is duly authorized to execute and deliver and perform its
obligations under this commitment letter and that the execution of this
letter does not violate any contract or law or require any third party
consents.
Very truly yours,
Green Equity Investors III, L.P.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
By: LGP Management, Inc.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Accepted and agreed to
as of the date first written above:
Rite Aid Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
Schedule A
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Matters to be Covered in Legal Opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
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1. The issuance and sale of the Preferred Shares being sold by the Company
to you have been duly authorized by the Company and, upon payment therefor
and delivery of certificates evidencing the Preferred Shares in accordance
with the Commitment, will be validly issued, fully paid and non-assessable.
The Preferred Shares to be issued by the Company to you at the Closing
shall be entitled to all the rights, preferences and privileges set forth
in the Certificate of Designation. The stock certificates evidencing the
Preferred Shares will, upon due execution thereof by the Company, conform
in all material respects to the requirements of Section 151(f) of the DGCL
(as defined below).
2. The Commitment has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
3. To such counsel's knowledge, the execution and delivery of the
Commitment by the Company and the issuance and sale of the Preferred Shares
pursuant thereto will not (i) require any consent, approval, authorization,
or other order of, or qualification with, any Governmental Authorities
pursuant to Applicable Laws, (ii) conflict with the Certificate of
Incorporation or the By-laws, (iii) constitute a violation of or default
under the terms of any Applicable Contract (except that such counsel need
not express any opinion as to any covenant, restriction or provision of any
such agreement or instrument with respect to financial covenants, ratios or
tests or any aspect of the financial condition or results of operations of
the Company) or (iv) violate or conflict with, or result in any
contravention of, any Applicable Law or any Applicable Order.
For purposes of such opinion: (i) the term "Applicable Laws" means the
General Corporation Law of the State of Delaware (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 such counsel's
experience, are normally applicable to transactions of the type
contemplated by the Commitment (other than the United States federal
securities laws, state and foreign securities or Blue Sky laws, antifraud
laws, the rules and regulations of the National Association of Securities
Dealers, Inc.), but without having made any special investigation with
respect to any other laws, rules or regulations; (ii) the term "Applicable
Contracts" means those instruments or agreements that are filed as exhibits
to the Company's Annual Report on Form 10-K for the year ended February 27,
1999; (iii) the term "Governmental Authorities" means any court, regulatory
body, administrative agency, or governmental body of the State of New York,
the State of Delaware or the United States of America having jurisdiction
over the Company under Applicable Laws; and (iv) the term "Applicable
Orders" means those judgments, orders or decrees, if any, of any
Governmental Authorities specifically identified to such counsel by the
Company to be applicable to the Company.