Exhibit 10.4
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ORIGINATOR PURCHASE AGREEMENT
Dated as of September 21, 2004
Among
The parties listed on Schedule 1 hereto
as Sellers,
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and
RITE AID HDQTRS. FUNDING, INC.,
as Purchaser and as Collection Agent
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TABLE OF CONTENTS
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PRELIMINARY STATEMENTS............................................................................................1
ARTICLE I DEFINITIONS.....................................................................................1
SECTION 1.01. Certain Defined Terms.....................................................................1
SECTION 1.02. Other Terms..............................................................................14
ARTICLE II AMOUNTS AND TERMS OF PURCHASES.................................................................14
SECTION 2.01. Facility.................................................................................14
SECTION 2.03. Collections..............................................................................15
SECTION 2.04. Settlement Procedures....................................................................16
SECTION 2.05. Payments and Computations, Etc...........................................................17
ARTICLE III CONDITIONS OF PURCHASES........................................................................17
SECTION 3.01. Conditions Precedent to Initial Purchase from the Sellers................................17
SECTION 3.02. Conditions Precedent to All Purchases....................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................................................19
SECTION 4.01. Representations and Warranties of the Sellers............................................19
ARTICLE V COVENANTS .....................................................................................22
SECTION 5.01. Covenants of the Sellers.................................................................22
SECTION 5.02. Grant of Security Interest...............................................................27
ARTICLE VI ADMINISTRATION AND COLLECTION..................................................................27
SECTION 6.01. Designation of Collection Agent..........................................................27
SECTION 6.02. Duties of Collection Agent...............................................................27
SECTION 6.03. Collection Agent Fee.....................................................................28
SECTION 6.04. Certain Rights of the Purchaser..........................................................29
SECTION 6.05. Rights and Remedies. ....................................................................29
SECTION 6.06. Transfer of Records to Purchaser.........................................................30
ARTICLE VII EVENTS OF TERMINATION...............................................................................31
SECTION 7.01. Events of Termination....................................................................31
ARTICLE VIII INDEMNIFICATION....................................................................................33
SECTION 8.01. Indemnities by the Sellers...............................................................33
ARTICLE IX MISCELLANEOUS..................................................................................35
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SECTION 9.01. Amendments, Etc..........................................................................35
SECTION 9.02. Notices, Etc.............................................................................35
SECTION 9.03. Binding Effect; Assignability............................................................35
SECTION 9.04. Costs, Expenses and Taxes................................................................36
SECTION 9.05. [Intentionally Omitted]..................................................................36
SECTION 9.06. Confidentiality..........................................................................36
SECTION 9.07. GOVERNING LAW............................................................................37
SECTION 9.08. Third Party Beneficiary..................................................................37
SECTION 9.09. Execution in Counterparts................................................................37
SCHEDULES
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SCHEDULE 1 List of Sellers
SCHEDULE 2 Months
SCHEDULE 3 Material Litigation
SCHEDULE 4 Trade Names
EXHIBITS
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EXHIBIT A Credit and Collection Policy
EXHIBIT B Deposit Banks, Lock Boxes and Deposit Accounts/Account Banks and
Governmental Entity Receivables Accounts
EXHIBIT C Form of Promissory Note for Deferred Purchase Price
EXHIBIT D Addresses
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ORIGINATOR PURCHASE AGREEMENT
Dated as of September 21, 2004
Each of the parties listed on Schedule 1 hereto (each, a
"Seller" and collectively, the "Sellers"), and Rite Aid Hdqtrs. Funding, Inc., a
Delaware corporation, as the Collection Agent (the "Collection Agent") and as
the purchaser (the "Purchaser"), agree as follows:
PRELIMINARY STATEMENTS.
(1) Certain terms which are capitalized and used throughout
this Agreement (in addition to those defined above) are defined in Article I of
this Agreement.
(2) The Sellers have Receivables (or interests therein) that
they wish to sell to the Purchaser, and the Purchaser is prepared to purchase
such Receivables (or interests therein) on the terms set forth in this
Originator Purchase Agreement (this "Agreement").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Account Bank" has the meaning given to such term in the
definition of Governmental Entity Receivables Agreement.
"Adverse Claim" means a lien, security interest, or other
charge or encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such
Person.
"Alternate Base Rate" means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall be at
all times equal to the highest of:
(a) the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time as
Citibank, N.A.'s base rate; and
(b) 1/2 of one percent above the Federal Funds Rate.
"Borrower" means Rite Aid Funding II, a Cayman Islands company
formerly known as Cayman Resources (22) Ltd. incorporated August 11,
2004 with registration number 138722.
"Business Day" means any day on which banks are not authorized
or required to close in New York City.
"Capital Lease" means any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which, in accordance with GAAP, should be capitalized on the
lessee's balance sheet.
"Capital Lease Obligation" of any Person means the obligations
of such Person to pay rent or other amounts under any Capital Lease,
which obligations should be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering former and
active members of the uniformed services and certain of their
dependents, financed and administered by the United States Departments
of Defense, Health and Human Services and Transportation and
established pursuant to 10 U.S.C. ▇▇.▇▇. 1071-1106, and all regulations
promulgated thereunder including without limitation (a) all federal
statutes (whether set forth in 10 U.S.C. ▇▇.▇▇. 1071-1106 or elsewhere)
affecting CHAMPUS and (b) all rules, regulations (including 32 CFR
199), manuals, orders and administrative, reimbursement and other
guidelines of all Governmental Entities (including, without limitation,
the Department of Health and Human Services, the Department of Defense,
the Department of Transportation, the Assistant Secretary of Defense
(Health Affairs) and the Office of CHAMPUS, or any Person or entity
succeeding to the functions of any of the foregoing) promulgated
pursuant to or in connection with any of the foregoing (whether or not
having the force of law) in each case, as amended, supplemented or
otherwise modified from time to time.
"CMS" means Centers for Medicare & Medicaid Services of the
Department of Health and Human Services, and any successor agency.
"Collection Agent" means at any time the Person then
authorized pursuant to Section 6.01 to service, administer and collect
Purchased Assets.
"Collection Agent Fee" has the meaning specified in Section
6.03.
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"Collections" means, (a) with respect to any Receivable, all
cash collections and other cash proceeds of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect
to such Receivable, and all funds deemed to have been received by the
applicable Seller or any other Person as a Collection pursuant to
Section 2.04, and (b) with respect to any Participation Interest, all
cash collections and other cash proceeds of the Government Receivable
underlying such Participation Interest, including, without limitation,
all cash proceeds of Related Security with respect to such
Participation Interest, and all funds deemed to have been received by
the applicable Seller or any other Person as a Collection pursuant to
Section 2.04.
"Contract" means an agreement between a Seller and a Person,
or between a PBM and a Contract Payor, pursuant to or under which such
Person or Contract Payor shall be obligated to pay for pharmaceutical
merchandise sold by such Seller or its Affiliates from time to time.
"Contract Payor" means a Person who is required under its
agreement with a PBM to make payments to such PBM who, in turn, pays
such amounts to a Seller on such Person's behalf.
"Credit and Collection Policy" means those receivables credit
and collection policies and practices of each of the Sellers in effect
on the date of this Agreement applicable to the Receivables and
described in Exhibit A hereto, as modified in compliance with this
Agreement.
"Debt" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title
retention agreements relating to property acquired by such Person, (d)
all obligations of such Person in respect of the deferred purchase
price of property or services (excluding current accounts payable
incurred in the ordinary course of business), (e) all Debt of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Adverse Claim on
property owned or acquired by such Person, whether or not the Debt
secured thereby has been assumed, (f) all Guarantees by such Person of
Debt of others, (g) all Capital Lease Obligations of such Person, (h)
all obligations, contingent or otherwise, of such Person as an account
party in respect of letters of credit and letters of guaranty and (i)
all obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances. The Debt of any Person shall include the Debt of
any other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship
with such entity, except to the extent of the terms of such Debt
provide that such Person is not liable therefor.
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"Defaulted Participation Interest" means a Participation
Interest in a Government Receivable which is a Defaulted Receivable.
"Defaulted Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for 120 or more days from the original date of service
relating to such Receivable;
(ii) as to which the Obligor thereof or any other
Person obligated thereon or owning any Related Security in
respect thereof has taken any action, or suffered any event to
occur, of the type described in Section 7.01(g);
(iii) which, consistent with the applicable Seller's
Credit and Collection Policy, would be written off as
uncollectible; or
(iv) as to which the applicable Seller has (or
consistent with such Seller's Credit and Collection Policy
should have) established a specific reserve for non-payment.
"Deferred Purchase Price" means the portion of the Purchase
Price of Purchased Assets purchased on any Purchase Date exceeding the
amount of the Purchase Price under Section 2.02 to be paid in cash.
"Deposit Account" means an account maintained at a Deposit
Bank into which (i) Collections in the form of checks and other items
are deposited that have been sent to one or more related Lock Boxes by
Obligors (other than the Contract Payors paying a PBM) and/or (ii)
Collections in the form of electronic funds transfers and other items
are paid directly by Obligors (other than the Contract Payors paying a
PBM) and (iii) which is subject to a Deposit Account Agreement.
"Deposit Account Agreement" means an agreement among a Seller,
the Purchaser (or its assignees or designees) and any Deposit Bank in
form and substance satisfactory to the Purchaser (or its assignees or
designees).
"Deposit Bank" means any of the banks holding one or more
Deposit Accounts.
"Designated Obligor" means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a Designated
Obligor upon three Business Days' notice by the Purchaser (or its
assignees or designees) to the applicable Seller.
"Determination Date" means the seventh Business Day after the
end of each Month, provided that if an Event of Termination has
occurred and is continuing, the Sellers or the Purchaser may designate
more frequent Determination Dates.
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"Diluted Participation Interest" means a Participation
Interest in a Government Receivable which is a Diluted Receivable.
"Diluted Receivable" means that portion (and only that
portion) of any Receivable which is either (a) reduced or canceled as a
result of (i) any defective, rejected or returned merchandise or
services or any failure by a Seller to deliver any merchandise or
provide any services or otherwise to perform under the underlying
Contract, (ii) any change in the terms of or cancellation of, a
Contract or any cash discount, discount for quick payment or other
adjustment by a Seller which reduces the amount payable by the Obligor
on the related Receivable (except any such change or cancellation
resulting from or relating to the financial inability to pay or
insolvency of the Obligor of such Receivable) or (iii) any set-off by
an Obligor in respect of any claim by such Obligor as to amounts owed
by it on the related Receivable (whether such claim arises out of the
same or a related transaction or an unrelated transaction) or (b)
subject to any specific dispute, offset, counterclaim or defense
whatsoever (except the discharge in bankruptcy of the Obligor thereof);
provided that Diluted Receivables are calculated assuming that all
chargebacks are resolved in the Obligor's favor.
"Discount" means, in respect of each Purchase, 2.00% of the
Outstanding Balance of the Receivables that are the subject of such
Purchase; provided, however, the foregoing Discount may be revised
prospectively by request of either the Sellers or the Purchaser to
reflect changes in recent experience with respect to write-offs, timing
and cost of Collections and cost of funds, provided that such revision
is consented to by each of the Sellers and the Purchaser (it being
understood that each party agrees to duly consider such request but
shall have no obligation to give such consent).
"Eligible Receivable" means a Receivable:
(i) the Obligor of which is a United States resident,
is not an Affiliate of the Parent, and is not a Governmental
Entity, except to the extent payment of such Receivable is
governed under the Social Security Act (42 U.S.C. ss. 1395, et
seq.), including payments under Medicaid and CHAMPUS or
regulated by CMS;
(ii) the Obligor of which, at the time of the
transfer of such Receivable under this Agreement, is a
Designated Obligor;
(iii) which, at the time of the transfer thereof to
the Purchaser under this Agreement, is not a Defaulted
Receivable;
(iv) the Obligor of which, at the time of the
transfer of such Receivable under this Agreement, is not the
Obligor of any Defaulted Receivables which in
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the aggregate constitute 50% or more of the aggregate
Outstanding Balance of all Receivables of such Obligor;
(v) which has been billed and, according to the
Contract related thereto, is required to be paid in full
within 60 days of the original billing date therefor;
(vi) which is an obligation representing all or part
of the sales price of merchandise, insurance or services
within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended, and the nature of which is
such that its purchase with the proceeds of notes would
constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(vii) which is an "account" or a "payment intangible"
within the meaning of Article 9 of the UCC of the applicable
jurisdictions;
(viii) which is denominated and payable only in
United States dollars in the United States;
(ix) which arises under a Contract which, together
with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the
Obligor of such Receivable and is not subject to any Adverse
Claim or any dispute, offset, counterclaim or defense
whatsoever (except the potential discharge in bankruptcy of
such Obligor and except with respect to adjudication fees
charged by any relevant PBM) and is not settled on a net
basis;
(x) which, together with the Contract related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury,
consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no
party to the Contract related thereto is in violation of any
such law, rule or regulation in any material respect;
(xi) which arises under a Contract (other than a
Contract with respect to which the related Obligor is a
Governmental Entity) which (A) does not contain an enforceable
provision requiring the Obligor under such Contract to consent
to the transfer, sale or assignment of the Obligor's payment
obligation by the applicable Seller, and (B) if such Contract
is between a PBM and a Contract Payor, does not contain any
enforceable provision prohibiting the transfer, sale or
assignment of such Contract Payor's payment obligation to the
applicable Seller;
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(xii) which was generated in the ordinary course of
the applicable Seller's business;
(xiii) which, at the time of the transfer of such
Receivable under this Agreement, has not been extended,
rewritten or otherwise modified from the original terms
thereof;
(xiv) the transfer, sale or assignment of which in
accordance with the Transaction Documents does not contravene
any applicable law, rule or regulation;
(xv) which (A) satisfies all applicable requirements
of the Credit and Collection Policy and (B) complies with such
other criteria and requirements (other than those relating to
the collectibility of such Receivable) as the Purchaser or its
assignees may from time to time reasonably specify to the
applicable Seller(s) upon 30 days' notice;
(xvi) as to which, at or prior to the later of the
date of this Agreement and the date such Receivable is
created, the Purchaser or its assignees has not notified the
applicable Seller that such Receivable (or class of
Receivables) is no longer reasonably acceptable for purchase
hereunder;
(xvii) as to which the applicable Seller has
satisfied and fully performed all obligations required to be
fulfilled by it;
(xviii) as to which the applicable Seller has, or has
the right to use, valid provider identification numbers and
licenses to generate valid Receivables and all information set
forth in the ▇▇▇▇ and supporting claim documents with respect
to such Receivable is true, complete and correct;
(xix) as to which the applicable Seller has, or has
the right to use, valid provider identification numbers and
licenses to generate reports with respect to such Receivable,
and all cost reports required by the applicable state agency
or other CMS-designated agents or agents of such state agency;
(xx) which does not arise from a sale by the
applicable Seller from a store located in Hawaii, Illinois,
Minnesota, Montana or New Mexico, unless the applicable Seller
shall have furnished the Purchaser with an opinion of local
counsel, or other evidence satisfactory to the Purchaser, to
the effect that the transfer, sale and assignment of
Receivables and Participation Interests in accordance with
this Agreement from a store located in such state does not
violate any provision of the law of such state; and
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(xxi) which is not a Medicare Receivable.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Event of Termination" has the meaning specified in Section
7.01.
"Facility Termination Date" means the earliest of (i) the
"Facility Termination Date" (as such term is defined in the Financing
Agreement), (ii) the date determined pursuant to Section 7.01 and (iii)
the date which the Parent designates by at least 2 Business Days prior
notice to the Purchaser and its assignees (including the Program Agent
under the Financing Agreement).
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average (rounded upwards, if necessary, to the next 1/100 of
1%) of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business
Day, the average (rounded upwards, if necessary, to the next 1/100 of
1%) of the quotations for such day on such transactions received by
Citibank, N.A. from three Federal funds brokers of recognized standing
selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer, vice president of financial
accounting or controller of the relevant Person.
"Financing Agreement" means that certain Receivables Financing
Agreement, dated as of the date hereof, among the Borrower, CAFCO, LLC,
Jupiter Securitization Corporation and Blue Ridge Asset Funding
Corporation, each as an investor, Citibank, N.A., Bank One, NA and
Wachovia Bank, National Association, each as a bank, Citicorp North
America, Inc., as program agent, Citicorp North America, Inc., Bank
One, NA and Wachovia Bank, National Association, each as an investor
agent, the other investors, banks and investor agents party thereto
from time to time, Rite Aid Hdqtrs. Funding, Inc., as the collection
agent, the parties thereto named as Originators, and JPMorgan Chase
Bank as trustee, as amended or restated from time to time.
"GAAP" means generally accepted accounting principles in the
United States.
"General Trial Balance" for any Seller on any date means the
applicable Seller's (or the Collection Agent's) accounts receivable
trial balance (whether in the form of a computer printout, magnetic
tape or diskette) on such date, listing Obligors (other than
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Contract Payors) and the Receivables respectively owed by such Obligors
on such date together with the aged Outstanding Balances of such
Receivables, in form and substance satisfactory to the Purchaser.
"Government Receivable" means any Receivable with respect to
which the Obligor is a Governmental Entity.
"Governmental Entity" means the United States of America, any
state, any political subdivision of a state and any agency or
instrumentality of the United States of America or any state or
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government. Payments from Governmental Entities shall be
deemed to include payments governed under the Social Security Act (42
U.S.C. ss. 1395, et seq.), including payments under Medicare, Medicaid
and CHAMPUS, and payments administered or regulated by CMS.
"Governmental Entity Receivables Account Notice" means a
notice contained in a Governmental Entity Receivables Agreement
pursuant to which an Affiliate of the Parent gives revocable standing
instructions to the Account Bank to sweep funds on a daily basis from
the Governmental Entity Receivables Account to another designated
account approved by the Purchaser and its assigns.
"Governmental Entity Receivables Account" has the meaning
given to such term in the definition of Governmental Entity Receivables
Agreement.
"Governmental Entity Receivables Agreement" means an agreement
between a bank (an "Account Bank") and one or more Sellers or
Affiliates of the Parent with respect to one or more accounts (each, a
"Governmental Entity Receivables Account") or associated Lock-Boxes
into which Collections on account of Receivables of Governmental
Entities are deposited or remitted and which is subject to a
Governmental Entity Receivables Account Notice.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Debt or other obligation
of any Person (the "primary obligor") in any manner, whether directly
or indirectly, and including any obligation of the guarantor, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security for
the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Debt or other
obligation of the payment thereof, (c) to maintain working capital,
equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Debt or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Debt or
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obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of
business.
"HQ" means Rite Aid Hdqtrs. Funding, Inc., a Delaware
corporation.
"Incipient Event of Termination" means an event that but for
notice or lapse of time or both would constitute an Event of
Termination.
"Indemnified Amounts" has the meaning specified in Section
8.01.
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of September 22, 2004 by and among Citicorp North
America, Inc. (as program agent under the Financing Agreement), the
Borrower, Rite Aid Funding I (formerly known as Cayman Resources (21)
Ltd. with registration number 138720), the Purchaser, the Sellers, and
Citicorp North America, Inc. and JPMorgan Chase Bank, as senior
collateral agents, as the same may be amended, modified or restated
from time to time.
"Lock-Box" means a post office box either (a) administered by
a Deposit Bank for the purpose of receiving Collections, which is the
subject of a Deposit Account Agreement, or (b) which receives
Collections of Government Receivables and is associated with a
Government Entity Receivables Account that is subject to a Governmental
Entity Receivables Agreement.
"Material Adverse Effect" means a material adverse effect on
(i) the collectibility of the Receivables, (ii) the ability of the
Purchaser or any Seller to perform any of its respective material
obligations under the Transaction Documents to which it is a party,
(iii) the legality, validity or enforceability of the Transaction
Documents (including, without limitation, the validity, enforceability
or priority of the ownership interests and security interests granted
hereunder) or the rights of or benefits available to the Purchaser
under the Transaction Documents, or (iv) the business, assets,
operations, condition (financial or otherwise), or prospects of the
Parent and its subsidiaries, taken as a whole.
"Medicaid" means the medical assistance program established by
Title XIX of the Social Security Act (42 U.S.C. Secs. 1396 et seq.) and
any statutes succeeding thereto.
"Medicare" means the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42
U.S.C. Secs. 1395 et seq.) and any statutes succeeding thereto.
"Month" means a fiscal month of the Parent as set forth on
Schedule 2 hereto, as such schedule shall be updated from time to time
in accordance with the terms hereof.
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"Obligor" means a Person obligated to make payments to a
Seller pursuant to a Contract; provided, however, if a PBM acts as
agent for Contract Payors and is obligated, pursuant to a Contract, to
turn over to a Seller payments made to it by such Contract Payors, then
the term "Obligor" shall include both such PBM and such Contract
Payors.
"Outstanding Balance" means at any time (i) with respect to
any Receivable, the then outstanding principal balance thereof and (ii)
with respect to any Participation Interest, the then outstanding
principal balance of the underlying Receivable. Any sales or use tax
billed in connection with a Receivable is not included in the
Outstanding Balance.
"Parent" means Rite Aid Corporation, a Delaware corporation.
"Participated Receivable" means any Receivable which is the
subject of a Purchased Participation Interest.
"Participation Interest" means, with respect to any Seller, a
100% undivided beneficial interest in such Seller's right, title and
interest, whether now owned or hereafter arising and wherever located,
in, to and under (i) each Government Receivable owned by such Seller,
(ii) all Related Security and Collections with respect to such
Government Receivable and (iii) all proceeds of such Government
Receivable, Related Security, and Collections.
"PBM" means a pharmaceutical benefits manager which has
entered into an agreement with a Seller to make payments as agent for
various insurers and other Persons, on account of pharmaceutical goods
sold or services rendered by such Seller.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a Governmental Entity.
"Purchase" means a purchase by the Purchaser of Receivables
and/or Participation Interests from a Seller pursuant to Article II.
"Purchase Date" means each day on which a Purchase is made
pursuant to Article II.
"Purchase Price" for any Purchase means an amount equal to the
Outstanding Balance of the Receivables that are the subject of such
Purchase as set forth in the Seller's General Trial Balance, minus the
Discount for such Purchase.
"Purchased Asset" means any Purchased Receivable or Purchased
Participation Interest.
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"Purchased Participation Interest" means any Participation
Interest which is purchased or purported to be purchased by the
Purchaser pursuant to Article II.
"Purchased Receivable" means any Receivable (other than a
Government Receivable) which is purchased or purported to be purchased
by the Purchaser pursuant to Article II.
"RAD" means Rite Aid of Delaware, Inc., a Delaware
corporation.
"Receivable" means the indebtedness or obligation of any
Obligor resulting from the provision or sale of pharmaceutical
merchandise by a Seller (or an Affiliate on behalf of such Seller)
under a Contract (whether constituting an account, instrument, chattel
paper, payment intangible or general intangible), and includes the
right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto.
"Related Security" means (a) with respect to any Receivable:
(i) all of the applicable Seller's interest in
merchandise, if any, (including returned merchandise) relating
to any sale giving rise to such Receivable;
(ii) all security interests or liens and property
subject thereto from time to time purporting to secure payment
of such Receivable, whether pursuant to the Contract related
to such Receivable or otherwise, together with all financing
statements filed against an Obligor describing any collateral
securing such Receivable;
(iii) all guaranties, insurance and other agreements
or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or
otherwise; and
(iv) the Contract and all other books, records and
other information (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software
and related property and rights, subject to the rights of any
licensors and to applicable law) relating to such Receivable
and the related Obligor,
and (b) with respect to any Participation Interest, the Related
Security with respect to the Government Receivable that is the subject
of such Participation Interest.
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"RFA Final Payment Date" means the later of the "Facility
Termination Date" (as such term is defined in the Financing Agreement)
and the date on which all Principal, Yield, fees and other obligations
under the Financing Agreement are paid in full.
"Secondary Purchase Agreement" means the purchase agreement,
dated as of the date hereof, among the Purchaser, as seller, Rite Aid
Funding I, as purchaser, and HQ, as collection agent, as amended or
restated from time to time.
"Secured Obligations" has the meaning given to such term in
Section 5.02 hereof.
"Seller Collateral" has the meaning given to such term in
Section 5.02 hereof.
"Seller Report" means a report, in form and substance
satisfactory to the Purchaser, furnished by the Collection Agent to the
Purchaser pursuant to Section 6.02(b).
"Settlement Date" means a Distribution Date (as such term is
defined in the Financing Agreement); provided, however, that following
the occurrence of an Event of Termination, Settlement Dates shall occur
on such days as are selected from time to time by the Purchaser or its
assignees in a written notice to the Collection Agent.
"Tangible Net Worth" means at any time the total of all assets
appearing on a balance sheet prepared in accordance with generally
accepted accounting principles for the Purchaser and its subsidiaries
on a consolidated basis, after deducting therefrom (without duplication
of deductions):
(i) any write-up in the book carrying value of any
asset resulting from a revaluation thereof subsequent to
February 28, 2004;
(ii) all reserves, including but not limited to
reserves for liabilities, fixed or contingent, deferred income
taxes, obsolescence, depletion, insurance, and inventory
valuation, which are not deducted from assets;
(iii) the amount, if any, at which shares of treasury
stock of the Purchaser or a subsidiary appear on the asset
side of such balance sheet;
(iv) all Debt of the Purchaser and its subsidiaries
(after eliminating intercompany items); and
(v) the book value of all assets which would be
treated as intangibles under generally accepted accounting
principles, including, without limitation, good will,
trademarks, trade names, patents, copyrights and licenses,
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"Transaction Document" means any of this Agreement, the
Deposit Account Agreements, the Governmental Entity Receivables
Agreements, all amendments to any of the foregoing and all other
agreements and documents delivered and/or related hereto or thereto.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
ARTICLE II
AMOUNTS AND TERMS OF PURCHASES
SECTION 2.01. Facility. On the terms and conditions
hereinafter set forth and without recourse to the Sellers (except to the extent
specifically provided herein), each Seller shall sell to the Purchaser (i) all
of its right, title and interest in, under and to all Receivables (other than
Government Receivables) originated by it from time to time, and (ii)
Participation Interests in all Government Receivables originated by it from time
to time, and the Purchaser shall purchase from such Seller all such Receivables
(other than Government Receivables) and all such Participation Interests in
Government Receivables of such Seller from time to time, in each case during the
period from the date hereof to the Facility Termination Date.
SECTION 2.02. Making Purchases.
(a) Initial Purchase. The Sellers shall give the Purchaser at
least one Business Day's notice of their request for the initial Purchase, which
request shall specify the date of such Purchase (which shall be a Business Day)
and the proposed Purchase Price for such Purchase. The Purchaser shall promptly
notify the Sellers whether it has determined to make such Purchase. On the date
of such Purchase, the Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article III, pay the Purchase Price for such Purchase in
the manner provided in Section 2.02(d). Effective upon such payment, each Seller
hereby sells, conveys, transfers and assigns to the Purchaser (i) all
Receivables (other than Government Receivables) originated by it in existence on
the date of the initial Purchase and (ii) all Participation Interests in all
Government Receivables originated by it in existence on the date of the initial
Purchase.
(b) Subsequent Purchases. On each Business Day following the
initial Purchase with respect to each Seller, unless either party shall notify
the other party to the contrary, such Seller shall sell to the Purchaser and the
Purchaser shall purchase from such
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Seller, upon satisfaction of the applicable conditions set forth in Article III,
(i) all Receivables (other than Government Receivables) originated by such
Seller, and (ii) Participation Interests in all Government Receivables
originated by such Seller, in each case which have not previously been sold to
the Purchaser. The Purchaser shall pay the Purchase Price for such Purchase in
the manner provided in Section 2.02(d). Effective on each Purchase Date, each
Seller hereby sells, conveys, transfers and assigns to the Purchaser (i) all
Receivables (other than Government Receivables) originated by it and not
previously sold, conveyed, transferred or assigned to the Purchaser and (ii) all
Participation Interests in all Government Receivables originated by it and not
previously sold, conveyed, transferred or assigned to the Purchaser
(c) Special Provisions Relating to Sales of Participation
Interests. Following each sale of a Participation Interest in a Government
Receivable, each Seller hereby agrees to hold such Government Receivable and any
Related Security, Collections and proceeds with respect thereto for the benefit
of the Purchaser; provided that such Seller shall take no action in
contravention of any law, rule or regulation applicable to such Government
Receivable. It is understood and agreed that sales of Participation Interests in
Government Receivables shall not include any right to collect the proceeds of
any Government Receivable directly from the applicable Governmental Entity,
except insofar as a court of competent jurisdiction shall order such
Governmental Entity to make such payments directly to the Purchaser or its
assigns.
(d) Payment of Purchase Price. The Purchase Price for the
initial Purchase shall be paid on the Purchase Date therefor and the Purchase
Price for each subsequent Purchase shall be paid on the next Settlement Date
(without giving effect to the proviso in the definition thereof) after the
Purchase Date therefor, in each case, by means of any one or a combination of
the following: (i) a deposit in same day funds to the applicable Seller's
account designated by such Seller, or (ii) an increase in the Deferred Purchase
Price payable to the applicable Seller. The allocation of the Purchase Price as
among such methods of payment shall be subject in each instance to the approval
of the Purchaser and the applicable Seller; provided, however, that the Deferred
Purchase Price may not be increased to the extent that, after giving effect to
such increase, the Tangible Net Worth would be less than 1.00% of the
Outstanding Balance of all Purchased Assets. The obligations of the Purchaser in
respect of the Deferred Purchase Price shall be evidenced by the Purchaser's
subordinated promissory note in the form of Exhibit C hereto payable to RAD, as
agent for the Sellers. Each Seller hereby appoints RAD as its agent for the
purpose of collecting and remitting to it amounts payable to it pursuant to such
note.
(e) Ownership of Receivables, Participation Interests and
Related Security. On each Purchase Date, after giving effect to the Purchase on
such date, the Purchaser shall own (i) all Receivables (other than Government
Receivables) originated by the Sellers as of such date (including Receivables
which have been previously sold to the Purchaser hereunder), and (ii)
Participation Interests in all Government Receivables originated by the Sellers
as of such date (including Participation Interests in Government Receivables
which have been previously sold to the Purchaser hereunder). The Purchase of any
Receivable or Participation Interest shall include all Related Security with
respect to such Receivable or Participation Interest.
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SECTION 2.03. Collections. (a) Unless otherwise agreed, the
Collection Agent shall, on each Settlement Date, deposit into an account of the
Purchaser or the Purchaser's assignee all Collections of Purchased Assets then
held by the Collection Agent.
(b) In the event that a Seller believes that Collections which
are not Collections of Purchased Assets have been deposited into an account of
the Purchaser or the Purchaser's assignee, such Seller shall notify the
Collection Agent who shall so advise the Purchaser and, on the Business Day
following such identification, the Purchaser shall remit, or shall cause to be
remitted, all Collections so deposited which are identified, to the Purchaser's
satisfaction, to be Collections of Receivables which are not either Purchased
Receivables or Participated Receivables to the applicable Seller.
(c) On each Settlement Date, the Purchaser shall pay to the
applicable Seller accrued interest on the Deferred Purchase Price and the
Purchaser may, at its option, prepay in whole or in part the principal amount of
the Deferred Purchase Price; provided that each such payment shall be made
solely from (i) Collections of Purchased Assets after all other amounts then due
from the Purchaser under the Secondary Purchase Agreement and from the Borrower
under the Financing Agreement have been paid in full and all amounts then
required to be set aside by the Purchaser under the Secondary Purchase Agreement
and by the Borrower or the Collection Agent under the Financing Agreement have
been so set aside or (ii) excess cash flow from operations of the Purchaser
which is not required to be applied to the payment of other obligations of the
Purchaser under the Secondary Purchase Agreement; and provided further, that no
such payment shall be made at any time when an Event of Termination shall have
occurred and be continuing. At such time following the Facility Termination Date
when all Principal, Yield and other amounts owed by the Purchaser under the
Secondary Purchase Agreement and by the Borrower under the Financing Agreement
shall have been paid in full, the Purchaser shall apply, on each Settlement
Date, all Collections of Purchased Assets received by the Purchaser pursuant to
Section 2.03(a) (and not previously distributed) first to the payment of accrued
interest on the Deferred Purchase Price, and then to the reduction of the
principal amount of the Deferred Purchase Price.
SECTION 2.04. Settlement Procedures. (a) If on any day any
Purchased Asset becomes (in whole or in part) a Diluted Receivable or a Diluted
Participation Interest (as the case may be), the Seller which originated such
Purchased Asset shall be deemed to have received on such day a Collection of
such Purchased Asset in the amount of such Diluted Receivable or Diluted
Participation Interest (as the case may be). If such Seller is not the
Collection Agent, such Seller shall pay to the Collection Agent on or prior to
the next Settlement Date all amounts deemed to have been received pursuant to
this subsection.
(b) Upon discovery by a Seller or the Purchaser of a breach of
any of the representations and warranties made by any Seller in Section 4.01(j)
with respect to any Purchased Asset, such party shall give prompt written notice
thereof to the Purchaser, the Collection Agent, and the applicable Seller, as
soon as practicable and in any event within three
16
Business Days following such discovery. The applicable Seller shall, upon not
less than two Business Days' notice from the Purchaser or its assignee or
designee, repurchase such Purchased Asset on the next succeeding Settlement Date
for a repurchase price equal to the Outstanding Balance of such Purchased Asset.
Each repurchase of a Purchased Asset shall include the Related Security with
respect to such Purchased Asset. The proceeds of any such repurchase shall be
deemed to be a Collection in respect of such Purchased Asset. If the applicable
Seller is not the Collection Agent, such Seller shall pay to the Collection
Agent on or prior to the next Settlement Date the repurchase price required to
be paid pursuant to this subsection.
(c) Except as stated in subsection (a) or (b) of this Section
2.04 or as otherwise required by law or the underlying Contract, all Collections
from an Obligor of any Purchased Receivable or Participated Receivable shall be
applied to the Receivables of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, unless such Obligor
designates its payment for application to specific Receivables.
SECTION 2.05. Payments and Computations, Etc. (a) All amounts
to be paid or deposited by a Seller or the Collection Agent hereunder shall be
paid or deposited no later than 12:00 noon (New York City time) on the day when
due in same day funds to an account or accounts designated by the Purchaser from
time to time, which accounts, during the existence of the Financing Agreement,
shall be those set forth in the Financing Agreement.
(b) Each Seller shall, to the extent permitted by law, pay to
the Purchaser interest on any amount not paid or deposited by such Seller
(whether as Collection Agent or otherwise) when due hereunder at an interest
rate per annum equal to 2% per annum above the Alternate Base Rate, payable on
demand.
(c) All computations of interest and all computations of fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase from
the Sellers. The initial Purchase of Receivables and/or Participation Interests
from the Sellers hereunder is subject to the conditions precedent that the
Purchaser shall have received on or before the date of such Purchase the
following, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Purchaser:
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(a) Certified copies of the resolutions of the Board of
Directors of each of the Sellers approving this Agreement and certified
copies of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement. One
such certificate will be acceptable for any number of such Persons.
(b) A certificate of the Secretary or Assistant Secretary of
each of the Sellers certifying the names and true signatures of the
officers of such Seller authorized to sign this Agreement and the other
documents to be delivered by it hereunder. One such certificate will be
acceptable for any number of such Persons.
(c) Copies of proper financing statements, duly filed on or
before the date of the initial Purchase, naming each Seller as the
seller/debtor and the Purchaser as the purchaser/secured party, or
other similar instruments or documents, as the Purchaser may deem
necessary or desirable under the UCC of all appropriate jurisdictions
or other applicable law to perfect the Purchaser's ownership of and
security interest in the Purchased Assets and Related Security and
Collections with respect thereto.
(d) Copies of proper financing statements, if any, necessary
to release all security interests and other rights of any Person in the
Purchased Assets, Contracts or Related Security previously granted by
any Seller, except those security interests subject to the
Intercreditor Agreement.
(e) Completed requests for information, dated on or before the
date of such initial Purchase, listing all effective financing
statements filed in the jurisdictions referred to in subsection (c)
above that name any Seller as debtor, together with copies of such
other financing statements (none of which shall cover any Purchased
Assets, Contracts or Related Security except those evidencing security
interests subject to the Intercreditor Agreement).
(f) A favorable opinion of (i) Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP, counsel for the Sellers, in form and substance satisfactory
to the Purchaser, (ii) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ relating to various states'
local perfection issues and (iii) Parent's general counsel, in each
case, as to such matters as the Purchaser may reasonably request, and
(g) Executed copies of (i) Deposit Account Agreements with
each Deposit Bank and (ii) Governmental Entity Receivables Agreements
with each Account Bank.
SECTION 3.02. Conditions Precedent to All Purchases. Each
Purchase (including the initial Purchase) hereunder shall be subject to the
further conditions precedent that:
(a) with respect to any such Purchase, on or prior to the date
of such Purchase, the applicable Seller shall have delivered to the
Purchaser, if requested by the Purchaser,
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(i) such Seller's General Trial Balance (which if in magnetic tape or
diskette format shall be compatible with the Purchaser's computer
equipment) as of a date not more than 31 days prior to the date of such
Purchase, and (ii) such additional information concerning the
Receivables and Participation Interests to be purchased as may
reasonably be requested by the Purchaser;
(b) with respect to any such Purchase, on or prior to the date
of such Purchase, the Collection Agent shall have delivered to the
Purchaser, in form and substance satisfactory to the Purchaser, a
completed Seller Report for the most recently ended reporting period
for which information is required pursuant to Section 6.02(b) and
containing such additional information as may reasonably be requested
by the Purchaser;
(c) the applicable Seller shall have marked its master data
processing records and, at the request of the Purchaser, each Contract
giving rise to Purchased Assets and all other relevant records
evidencing the Receivables and Participation Interests which are the
subject of such Purchase with a legend, acceptable to the Purchaser,
stating that such Receivables and Participation Interests, together
with the Related Security and Collections with respect thereto, have
been sold in accordance with this Agreement; and
(d) on the date of such Purchase the following statements
shall be true (and the applicable Seller, by accepting the Purchase
Price for such Purchase, shall be deemed to have certified that):
(i) The representations and warranties made by such
Seller in Section 4.01 are correct on and as of the date of
such Purchase as though made on and as of such date,
(ii) No event has occurred and is continuing, or
would result from such Purchase, that constitutes an Event of
Termination or an Incipient Event of Termination and
(iii) The Purchaser shall not have delivered to the
Sellers a notice that the Purchaser shall not make any further
Purchases hereunder; and
(e) the Purchaser shall have received such other approvals,
opinions or documents as the Purchaser may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Sellers.
Each Seller represents and warrants as to itself as follows (except that the
representation and warranty in subsection (f) is made solely by the Parent):
(a) Such Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of it jurisdiction of
incorporation (as listed in Schedule 1 hereto as amended from time to
time), and is duly qualified to do business, and is in good standing,
in every jurisdiction where the nature of its business requires it to
be so qualified, except where the failure to do so could not reasonably
be expected to result in a Material Adverse Effect.
(b) The execution, delivery and performance by such Seller of
this Agreement and the other documents to be delivered by it hereunder,
including such Seller's sale of Receivables and Participation Interests
hereunder and such Seller's use of the proceeds of Purchases, (i) are
within such Seller's corporate powers, (ii) have been duly authorized
by all necessary corporate action, (iii) do not contravene (1) such
Seller's charter or by-laws, (2) any law, rule or regulation applicable
to such Seller, (3) any contractual restriction binding on or affecting
such Seller or its property or (4) any order, writ, judgment, award,
injunction or decree binding on or affecting such Seller or its
property, and (iv) do not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with
respect to any of its properties (except for the transfer of such
Seller's interest in the Purchased Assets pursuant to this Agreement).
This Agreement has been duly executed and delivered by such Seller.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by such
Seller of this Agreement or any other document to be delivered by it
hereunder, except for the filing of UCC financing statements referred
to herein.
(d) Each of the Transaction Documents to which it is a party
constitutes the legal, valid and binding obligation of such Seller
enforceable against such Seller in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally and general equitable
principles (whether considered in a proceeding at law or in equity).
(e) Purchases made pursuant to this Agreement will constitute
a valid sale, transfer, and assignment of the Purchased Assets to the
Purchaser, enforceable against
20
creditors of, and purchasers from, such Seller. Such Seller shall have
no remaining property interest in any Purchased Asset.
(f) The consolidated balance sheet of the Parent and its
consolidated sub sidiaries as at February 28, 2004, and the related
statements of income, stockholders equity and cash flows of the Parent
and its consolidated subsidiaries for the fiscal year then ended,
reported on by Deloitte & Touche LLP, copies of which have been
furnished to the Purchaser, fairly present the financial condition and
results of operations and cash flows of the Parent and its consolidated
subsidiaries as of and for the fiscal year ended on such date, in
accordance with GAAP. Since February 28, 2004 there has been no
material adverse change in the business, assets, operations,
properties, condition (financial or otherwise), or prospects of the
Parent and its subsidiaries, taken as a whole.
(g) Except as set forth in Schedule 3 hereto (or as otherwise
disclosed by the Parent in its publicly available SEC filings), there
is no pending or threatened action, investigation or proceeding
affecting such Seller or any of its subsidiaries before any court,
governmental agency or arbitrator which if determined adversely to any
of them, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(h) No proceeds of any Purchase will be used to acquire any
equity security of a class which is registered pursuant to Section 12
of the Securities Exchange Act of 1934.
(i) No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
(j) Each Receivable (including, without limitation, each
Participated Receivable) originated by such Seller and characterized in
any Seller Report as an Eligible Receivable is, as of the date of such
Seller Report (or if applicable, as of a date certain specified in such
report) an Eligible Receivable. Each Purchased Asset, together with the
Related Security, is owned (immediately prior to its sale hereunder) by
the applicable Seller free and clear of any Adverse Claim (other than
any Adverse Claim arising solely as the result of any action taken by
the Purchaser). When the Purchaser makes a Purchase it shall acquire
valid and perfected first priority ownership of each Purchased Asset
and the Related Security and Collections with respect thereto free and
clear of any Adverse Claim (other than any Adverse Claim arising solely
as the result of any action taken by the Purchaser), and no effective
financing statement or other instrument similar in effect covering any
Purchased Asset, any interest therein, the Related Security or
Collections with respect thereto is on file in any recording office
except such as may be filed in favor of Purchaser in accordance with
this Agreement or in connection with any Adverse Claim arising solely
as the result of any action taken by the Purchaser or those which
relate to security interests that are subject to the Intercreditor
Agreement.
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(k) Each Seller Report (if prepared by such Seller, or to the
extent that information contained therein is supplied by such Seller),
information, exhibit, financial statement, document, book, record or
report furnished or to be furnished at any time (whether before or
after the date of this Agreement) by such Seller to the Purchaser in
connection with this Agreement is or will be accurate in all material
respects as of its date or (except as otherwise disclosed to the
Purchaser at such time) as of the date so furnished (or, if applicable,
as of a date certain specified in such report), and no such document
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make
the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(l) The principal place of business and chief executive office
of such Seller and the office where such Seller keeps its records
concerning the Purchased Assets are located at the address or addresses
referred to in Section 5.01(b).
(m) The names and addresses of all the Deposit Banks and
Account Banks, together with the post office boxes and account numbers
of the Lock-Boxes, Deposit Accounts at such Deposit Banks, and
Governmental Entity Receivables Accounts at such Account Banks are
specified in Exhibit B (as the same may be updated from time to time
pursuant to Section 5.01(g)). The Lock-Boxes, Deposit Accounts and
Governmental Entity Receivables Accounts are the only post office boxes
and bank accounts into which Collections of Receivables and
Participation Interests are deposited or remitted.
(n) Except as set forth under the name of such Seller in
Schedule 4, such Seller is not known by and does not use any tradename
or doing-business-as name.
(o) With respect to any programs used by such Seller in the
servicing of the Receivables and Participation Interests, no
sublicensing agreements are necessary in connection with the
designation of a new Collection Agent pursuant to Section 6.01 so that
such new Collection Agent shall have the benefit of such programs (it
being understood that, however, the Collection Agent, if other than HQ,
shall be required to be bound by a confidentiality agreement reasonably
acceptable to HQ (on behalf of itself and each of the Sellers)).
(p) The transfers of Purchased Assets by such Seller to the
Purchaser pursuant to this Agreement, and all other transactions
between such Seller and the Purchaser, have been and will be made in
good faith and without intent to hinder, delay or defraud creditors of
such Seller.
(q) Such Seller has timely filed or caused to be filed all
required income tax and sales tax returns and reports and all other
material tax returns and reports required to have been filed and has
paid or caused to be paid all material taxes due pursuant to such
returns or pursuant to any assessment received by such Seller, except
where the payment
22
of any such taxes is being contested in good faith by appropriate
proceedings and for which such Seller has set aside on its books
adequate reserves. The charges, accruals and reserves on the books of
such Seller in respect of such taxes or charges imposed by all
Governmental Entities are, in the opinion of such Seller, adequate for
the payment thereof.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Sellers. Each Seller covenants
as to itself from the date hereof until the first day following the Facility
Termination Date on which all of the Purchased Assets are either collected in
full or become Defaulted Receivables or Defaulted Participation Interests (as
the case may be):
(a) Compliance with Laws, Etc. Such Seller will comply in all
material respects with all applicable laws, rules, regulations and
orders and preserve and maintain its corporate existence, rights,
franchises, qualifications and privileges except to the extent that the
failure so to comply with such laws, rules and regulations or the
failure so to preserve and maintain such rights, franchises,
qualifications, and privileges could not reasonably be expected to
result in a Material Adverse Effect.
(b) Offices, Records, Name and Organization. Such Seller will
keep its principal place of business and chief executive office and the
office where it keeps its records concerning the Purchased Assets at
the address of such Seller set forth on Exhibit D hereto or, upon 30
days' prior written notice to the Purchaser and its assignees, at any
other locations within the United States. No Seller will change its
name or its jurisdiction of organization, unless (i) such Seller shall
have provided the Purchaser and its assignees with at least 30 days'
prior written notice thereof and (ii) no later than the effective date
of such change, all actions required by Section 5.01(j) shall have been
taken and completed. Such Seller also will maintain and implement
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Purchased Assets and related
Contracts in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Purchased Assets (including, without limitation, records adequate to
permit the daily identification of each new Purchased Asset and all
Collections of and adjustments to each existing Purchased Asset). Such
Seller shall make a notation in its books and records, including its
computer files, to indicate which Receivables have been sold by it to
the Purchaser hereunder, and which Receivables have been the subject of
a sale of Participation Interests in such Receivable.
23
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. Such Seller will, at its expense, timely and fully
perform and comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts related to
the Purchased Receivables and Participated Receivables, and timely and
fully comply in all material respects with the Credit and Collection
Policy in regard to each Purchased Receivable, each Participated
Receivable and the related Contract.
(d) Sales, Liens, Etc. Except for the sales of Purchased
Assets contemplated herein, such Seller will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Adverse Claim upon or with respect to, any
Purchased Asset, Receivable, Related Security, related Contract or
Collections, or upon or with respect to any account to which any
Collections of any Purchased Asset are sent, or assign any right to
receive income in respect thereof.
(e) Extension or Amendment of Purchased Assets. Except as
provided in Section 6.02(c), such Seller will not extend, amend or
otherwise modify the terms of any Purchased Receivable or Participated
Receivable, or amend, modify or waive any term or condition of any
Contract (to which it is a party) related thereto.
(f) Change in Business or Credit and Collection Policy. Such
Seller will not make any change in the character of its business or in
the Credit and Collection Policy that could, in either case, reasonably
be expected to result in a Material Adverse Effect.
(g) Change in Payment Instructions to Obligors. Such Seller
will not add or terminate any post office box, bank, or bank account as
a Lock-Box, Deposit Bank, Deposit Account, Governmental Entity
Receivables Account or Account Bank from those listed in Exhibit B to
this Agreement, or make any change in its instructions to Obligors
regarding payments to be made to any such box or account, unless the
Purchaser shall have received notice of such addition, termination or
change (including an updated Exhibit B) and a fully executed Deposit
Account Agreement or Governmental Entity Receivables Agreement with
each new Deposit Bank or Account Bank, as the case may be, with respect
to each new Lock-Box, Deposit Account, or Governmental Entity
Receivables Account.
(h) Deposits to Lock-Boxes, Deposit Accounts and Governmental
Entity Receivables Accounts. Such Seller will instruct all of its
Obligors that are Governmental Entities (other than Contract Payers) to
remit all their payments in respect of Participated Receivables to
Governmental Entity Receivables Accounts or Lock-Boxes associated
therewith. Such Seller will instruct all of its Obligors that are not
Governmental Entities (other than Contract Payors) to remit all their
payments in respect of Purchased Receivables to Deposit Accounts or
Lock-Boxes associated therewith. If a Seller shall receive any
Collections directly, it shall immediately (and in any event within one
Business Day) deposit the same to a Deposit Account or Governmental
Entity
24
Receivables Account, as the case may be. No Seller will deposit or
otherwise credit, or cause or permit to be so deposited or credited, to
any Lock-Box, Deposit Account or Governmental Entity Receivables
Account cash or cash proceeds other than Collections of Purchased
Receivables and Participated Receivables.
(i) Audits. Such Seller will, from time to time during regular
business hours as requested by the Purchaser or its assigns, permit the
Purchaser, or its agents, represen- tatives or assigns, (i) to examine
and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the
possession or under the control of such Seller relating to Purchased
Assets and the Related Security, including, without limitation, the
related Contracts, and (ii) to visit the offices and properties of such
Seller for the purpose of examining such materials described in clause
(i) above, and to discuss matters relating to Purchased Assets and the
Related Security or such Seller's performance hereunder or under the
Contracts with any of the officers or employees of such Seller having
knowledge of such matters.
(j) Further Assurances. (i) Such Seller agrees from time to
time, at its expense, promptly to execute and deliver all further
instruments and documents, and to take all further actions, that may be
necessary or desirable, or that the Purchaser or its assignees may
reasonably request, to perfect, protect or more fully evidence the sale
of Purchased Assets under this Agreement, or to enable the Purchaser or
its assignees to exercise and enforce its respective rights and
remedies under this Agreement. Without limiting the foregoing, such
Seller will, upon the request of the Purchaser or its assignees, (A)
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments and documents, that may
be necessary or desirable to perfect, protect or evidence such
Purchased Assets; and (B) deliver to the Purchaser copies of all
Contracts (to which it is a party) relating to the Purchased Assets and
all records relating to such Contracts and the Purchased Assets,
whether in hard copy or in magnetic tape or diskette format (which if
in magnetic tape or diskette format shall be compatible with the
Purchaser's computer equipment).
(ii) Such Seller authorizes the Purchaser or its
assignees to file financing or continuation statements, and amendments
thereto and assignments thereof, relating to the Purchased Assets and
the Related Security, the related Contracts and the Collections with
respect thereto.
(iii) Such Seller shall perform its obligations under
the Contracts related to the Purchased Receivables and Participated
Receivables to the same extent as if the Purchased Receivables and
Participated Receivables had not been sold or transferred.
(k) Reporting Requirements. Parent will provide to the
Purchaser the following:
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(i) as soon as available and in any event within 50
days (or such earlier date that is 5 days after the then-current filing
deadline for the Parent's Quarterly Report on Form 10-Q) after the end
of each of the first three quarters of each fiscal year of Parent,
balance sheets of Parent and its consolidated subsidiaries as of the
end of such quarter and statements of income and cash flows for the
then elapsed portion of such fiscal year of the Parent and its
consolidated subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, certified
by a Financial Officer of the Parent;
(ii) as soon as available and in any event within 105
days (or such earlier date that is 10 days after the then-current
filing deadline for the Parent's Annual Report on Form 10-K) after the
end of each fiscal year of the Parent, the audited consolidated balance
sheet of the Parent and its consolidated subsidiaries and related
statements of income and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Deloitte & Touche LLP or other
independent public accountants of recognized national standing (without
a "going concern" or like qualification or exception and without any
material qualification or exception as to the scope of the audit) to
the effect that such consolidated financial statements present fairly
in all material respects the financial position, results of operations
and cash flows of the Parent and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP;
(iii) as soon as possible and in any event within
five days after the occurrence of each Event of Termination or
Incipient Event of Termination, a statement of a Financial Officer of
the Parent setting forth details of such Event of Termination or
Incipient Event of Termination and the action that Parent or the
applicable Seller has taken and proposes to take with respect thereto;
(iv) at least 30 days prior to any change in a
Seller's name or state of incorporation, a notice setting forth the new
name or state of incorporation and the effective date thereof;
(v) at least 60 days prior to the end of the last
fiscal year of the Parent referred to in Schedule 2, a new Schedule 2,
setting forth the Months for the upcoming fiscal year or years; and
(vi) such other information respecting the Purchased
Assets or the condition or operations, financial or otherwise, of any
Seller as the Purchaser may from time to time reasonably request, to
the extent such disclosure is permitted under applicable law, rule or
regulation.
Reports and financial statements required to be delivered pursuant to
clauses (i) and (ii) of this Section 5.01(k) shall be deemed to have
been delivered on the date on which the
26
Parent posts such reports, or reports containing such financial
statements, on the Parent's website on the internet at
▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇.▇▇▇ or when such reports, or reports containing such
financial statements, are posted on the SEC's website at ▇▇▇.▇▇▇.▇▇▇.
(l) Additional Information. If additional information is
requested by the Obligor as to a ▇▇▇▇ or supporting claim documents,
such Seller has or will promptly provide the same, and if any error has
been made with respect to such information, such Seller will promptly
correct the same and, if necessary, rebill such Receivable.
SECTION 5.02. Grant of Security Interest. Each of the Sellers
and the Purchaser intend that the transfer of each Purchased Receivable and
Participation Interest hereunder from the Sellers to the Purchaser be treated as
a sale of all of the applicable Seller's right, title and interest in, to and
under such Purchased Receivable and Participation Interest (as the case may be)
and that, immediately after giving effect to the transfer, such Seller has no
further interest (legal or equitable) in any Purchased Receivable or
Participation Interest. Each Seller and the Purchaser shall record each Purchase
as a sale or purchase, as the case may be, on its books and records, and reflect
each Purchase in its financial statements and tax returns as a sale or purchase,
as the case may be. In the event that, contrary to the mutual intent of the
Sellers and the Purchaser, any Purchase of Purchased Receivables and/or
Participation Interests hereunder is not characterized as a sale but rather as a
collateral transfer for security (or the transactions contemplated hereby are
characterized as a financing transaction), such Purchase shall be deemed to be a
secured financing, secured by a security interest in all of the related Seller's
right, title and interest now or hereafter existing and hereafter arising in, to
and under (i) all Receivables now existing and hereafter arising, (ii) all
Participation Interests, (iii) all Related Security, (iv) all Collections with
respect to the items in clauses (i) through (iii), and (v) all proceeds of the
foregoing (collectively, the "Seller Collateral"), provided that no security
interest is granted in, and the Seller Collateral shall not include any,
Post-Event Receivables (as such term is defined in the Intercreditor Agreement).
In furtherance of the foregoing, each Seller hereby grants, to the Purchaser a
security interest in all of such Seller's right, title and interest now or
hereafter existing in, to and under the Seller Collateral to secure the
repayment of all amounts due and owing by such Seller to the Purchaser hereunder
with accrued interest thereon, if applicable, whether now or hereafter existing,
due or to become due, direct or indirect, or absolute or contingent (such
amounts the "Secured Obligations").
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The servicing,
administration and collection of the Purchased Assets shall be conducted by such
Person (the "Collection Agent") so designated hereunder from time to time. Until
the RFA Final Payment Date, HQ (or such other Person as may be designated from
time to time under the Financing Agreement) is
27
hereby designated as, and hereby agrees to perform the duties and obligations
of, the Collection Agent pursuant to the terms hereof. Thereafter, the Purchaser
may designate as Collection Agent any other Person to succeed HQ or any
successor Collection Agent, if such Person shall consent and agree to the terms
hereof. The Collection Agent may, with the prior consent of the Purchaser,
subcontract with any other Person for the servicing, administration or
collection of Purchased Assets. Any such subcontract shall not affect the
Collection Agent's liability for performance of its duties and obligations
pursuant to the terms hereof, and any such subcontract shall terminate upon
designation of a successor Collection Agent.
SECTION 6.02. Duties of Collection Agent. (a) The Collection
Agent shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Purchased Asset from time to time, all in accordance
in all material respects with applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance with the Credit and Collection
Policy. The Purchaser hereby appoints the Collection Agent, from time to time
designated pursuant to Section 6.01, as agent to enforce its ownership and other
rights in the Purchased Assets, the Related Security and the Collections with
respect thereto. In performing its duties as Collection Agent, the Collection
Agent (if other than the Purchaser) shall exercise the same care and apply the
same policies as it would exercise and apply if it owned the Purchased Assets
and shall act in the best interests of the Purchaser and its assignees.
(b) On or before each Determination Date, the Collection Agent
shall prepare and forward to the Purchaser (i) a Seller Report, relating to all
then outstanding Purchased Assets, and the Related Security and Collections with
respect thereto, in each case, as of the close of business of the Collection
Agent on the last day of the immediately preceding Month, and (ii) if requested
by the Purchaser, a listing by Obligor (other than Contract Payors) of all
Purchased Assets, together with an aging report of such Purchased Assets.
(c) If no Event of Termination or Incipient Event of
Termination shall have occurred and be continuing, HQ, while it is the
Collection Agent, may, in accordance with the Credit and Collection Policy,
extend the maturity or adjust the Outstanding Balance of any Purchased
Receivable or Participated Receivable as it deems appropriate to maximize
Collections thereof, or otherwise amend or modify other terms of any Purchased
Receivable or Participated Receivable.
(d) Each Seller shall deliver to the Collection Agent, and the
Collection Agent shall hold in trust for such Seller and the Purchaser in
accordance with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks) which evidence
or relate to Purchased Assets.
(e) The Collection Agent shall as soon as practicable
following receipt turn over to the applicable Seller any cash collections or
other cash proceeds received with respect to Receivables not constituting
Purchased Receivables or Participated Receivables.
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(f) The Collection Agent also shall perform the other
obligations of the "Collection Agent" set forth in this Agreement with respect
to the Purchased Assets.
SECTION 6.03. Collection Agent Fee. The Purchaser shall pay to
the Collection Agent, so long as it is acting as the Collection Agent hereunder,
a periodic collection fee (the "Collection Agent Fee") of 1.00% per annum on the
average daily aggregate Outstanding Balance of the Purchased Assets, payable in
arrears on each Settlement Date or such other day during each Month as the
Purchaser and the Collection Agent shall agree.
SECTION 6.04. Certain Rights of the Purchaser. (a) The
Purchaser may, at any time during the existence of an Event of Termination or
Incipient Event of Termination, give notice of ownership and/or direct the
Obligors of Purchased Assets and any Person obligated on any Related Security,
or any of them, that payment of all amounts payable under any Purchased Asset
shall be made directly to the Purchaser or its assignees. Each Seller hereby
transfers to the Purchaser (and its assigns and designees) the exclusive
ownership and control of the Lock-Boxes and Deposit Accounts maintained by such
Seller for the purpose of receiving Collections (other than Collections from
Governmental Entities).
(b) Each Seller shall, at any time during the existence of an
Event of Termination or Incipient Event of Termination upon the Purchaser's
request and at such Seller's expense, give notice of the Purchaser's ownership
to each Obligor of Purchased Assets and, to the extent permitted under
applicable law, direct that payments of all amounts payable under the Purchased
Receivables and Participated Receivables be made directly to the Purchaser or
its assignees.
(c) At the Purchaser's request and at the applicable Seller's
expense, each Seller and the Collection Agent shall (A) assemble all of the
documents, instruments and other records (including, without limitation,
computer tapes and disks) that evidence or relate to the Purchased Assets, and
the related Contracts and Related Security, or that are otherwise necessary or
desirable to collect the Purchased Receivables and Participated Receivables, and
shall make the same available to the Purchaser at a place selected by the
Purchaser or its designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections of
Purchased Assets in a manner acceptable to the Purchaser and, promptly upon
receipt, remit all such cash, checks and instruments, duly indorsed or with duly
executed instruments of transfer, to the Purchaser or its designee. The
Purchaser shall also have the right to make copies of all such documents,
instruments and other records at any time.
(d) Each Seller authorizes the Purchaser to take any and all
steps in the applicable Seller's name and on behalf of such Seller that are
necessary or desirable, in the determination of the Purchaser, to collect
amounts due under the Purchased Receivables and Participated Receivables,
including, without limitation, endorsing such Seller's name on checks and other
instruments representing Collections of Purchased Assets and enforcing the
Purchased Receivables and Participated Receivables and the Related Security and
related Contracts.
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SECTION 6.05. Rights and Remedies. (a) If any Seller or the
Collection Agent fails to perform any of its obligations under this Agreement,
the Purchaser may (but shall not be required to) (after notice to such Seller or
Collection Agent and such failure to perform, if capable of being cured, is not
cured within 10 days after such notice is sent) itself perform, or cause
performance of, such obligation, and, if a Seller (as Collection Agent or
otherwise) fails to so perform, the costs and expenses of the Purchaser incurred
in connection therewith shall be payable by such non-performing Seller as
provided in Section 8.01 or Section 9.04 as applicable.
(b) Each Seller shall perform all of its obligations under the
Contracts related to the Purchased Receivables and Participated Receivables to
the same extent as if such Seller had not sold Receivables or Participation
Interests hereunder and the exercise by the Purchaser of its rights hereunder
shall not relieve such Seller from such obligations or its obligations with
respect to the Purchased Receivables and Participated Receivables. The Purchaser
shall not have any obligation or liability with respect to any Purchased
Receivables and Participated Receivables or related Contracts, nor shall the
Purchaser be obligated to perform any of the obligations of the applicable
Seller thereunder.
(c) Each Seller shall cooperate with the Collection Agent in
collecting amounts due from Obligors in respect of the Purchased Receivables and
Participated Receivables.
(d) Each Seller hereby grants to Collection Agent an
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of such Seller all steps necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by such Seller or transmitted or received by Purchaser
(whether or not from such Seller) in connection with any Purchased Asset.
SECTION 6.06. Transfer of Records to Purchaser. Each Purchase
of Receivables and Participation Interests hereunder shall include the transfer
to the Purchaser of all of the applicable Seller's right and title to and
interest in the records relating to such Receivables or Participation Interests
(as the case may be) and, subject to the rights of any licensors and applicable
law, shall include an irrevocable non-exclusive license to the use of the
applicable Seller's computer software system to access and create such records.
Such license shall be without royalty or payment of any kind, is coupled with an
interest, and shall be irrevocable until all of the Purchased Assets are either
collected in full or become Defaulted Receivables or Defaulted Participation
Interests (as the case may be).
Each Seller shall take such action requested by the Purchaser,
from time to time hereafter, that may be necessary or appropriate to ensure that
the Purchaser has an enforceable ownership interest in the records relating to
the Purchased Assets and rights (whether by ownership, license or sublicense) to
the use of such Seller's computer software system to access and create such
records, subject to the rights of any licensors and applicable law.
30
In recognition of the applicable Seller's need to have access
to the records transferred to the Purchaser hereunder, the Purchaser hereby
grants to such Seller an irrevocable license to access such records in
connection with any activity arising in the ordinary course of such Seller's
business or in performance of its duties as Collection Agent, provided that (i)
such Seller shall not disrupt or otherwise interfere with the Purchaser's use of
and access to such records during such license period and (ii) such Seller
consents to the assignment and delivery of the records (including any
information contained therein relating to such Seller or its operations) to any
assignees or transferees of the Purchaser provided they agree to hold such
records confidential.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur and be continuing:
(a) The Collection Agent (if other than the Purchaser) (i)
shall fail to perform or observe any term, covenant or agreement under
this Agreement (other than as referred to in clause (ii) or (iii) of
this subsection (a)) and such failure, if capable of being cured, shall
remain unremedied for ten days or (ii) shall fail to make when due any
payment or deposit to be made by it under this Agreement or (iii) shall
fail to deliver any Seller Report when required and such failure shall
remain unremedied for one Business Day (provided that the grace period
in this clause (iii) may not be utilized more than once in any Month);
or
(b) Any Seller shall fail to make any payment required under
Section 2.04(a) or 2.04(b); or
(c) Any representation or warranty (unless such representation
or warranty relates solely to one or more specific Receivables
incorrectly characterized as Eligible Receivables and the applicable
Seller shall have made any required deemed Collection payment pursuant
to Section 2.04 with respect to such Receivables) made or deemed made
by any Seller (or any of its officers) under or in connection with this
Agreement or any information or report delivered by any Seller pursuant
to this Agreement shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered; or
(d) Any Seller shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed and any such failure shall remain unremedied
for 10 days after written notice thereof shall have been given to such
Seller by the Purchaser or its assignees, provided that failure to
31
perform or observe any covenant contained in Sections 5.01(b), 5.01(d),
5.01(g), and 5.01(h) shall not be entitled to the benefit of such
10-day period; or
(e) Any Seller or the Collection Agent (if other than the
Purchaser) shall fail to pay any principal of or premium or interest on
any of its Debt which is outstanding in a principal amount of at least
$25,000,000 in the aggregate when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; or
(f) Any Purchase of Receivables or Participation Interests
hereunder, the Related Security and the Collections with respect
thereto shall for any reason cease to constitute valid and perfected
ownership of such Receivables, Participation Interests, Related
Security and Collections free and clear of any Adverse Claim; or
(g) Any Seller or the Collection Agent (if other than the
Purchaser) shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Seller or the
Collection Agent (if other than the Purchaser) seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any of the
actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or any Seller shall take
any corporate action to authorize any of the actions set forth above in
this subsection (g); or
(h) an Event of Termination shall have occurred under the
Financing Agreement; or
32
(i) There shall have occurred any event which may materially
adversely affect the collectibility of the Purchased Receivables or
Participated Receivables or the ability of any Seller to collect
Purchased Receivables or Participated Receivables or otherwise perform
its respective obligations under this Agreement;
then, and in any such event, the Purchaser may in its sole discretion without
regard to Section 9.08, by notice to the Parent and the Sellers take either or
both of the following actions: (x) declare the Facility Termination Date to have
occurred (in which case the Facility Termination Date shall be deemed to have
occurred), and all Purchases hereunder shall cease immediately and (y) following
the RFA Final Payment Date, without limiting any right under this Agreement to
replace the Collection Agent, designate another Person to succeed HQ (or any
successor Collection Agent) as Collection Agent; provided, that, automatically
upon the occurrence of any event (without any requirement for the passage of
time or the giving of notice) described in paragraph (g) of this Section 7.01,
the Facility Termination Date shall occur, HQ (if it is then serving as the
Collection Agent) shall cease to be the Collection Agent, and the Purchaser (or,
prior to the RFA Final Payment Date, the Person designated under the Financing
Agreement) shall become the Collection Agent. Upon any such declaration or
designation or upon such automatic termination, the Purchaser shall have, in
addition to the rights and remedies under this Agreement, all other rights and
remedies with respect to the Receivables provided after default under the UCC
and under other applicable law, which rights and remedies shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Sellers. Without limiting any
other rights which the Purchaser may have hereunder or under applicable law,
each Seller hereby agrees to indemnify the Purchaser and its assigns and
transferees (each, an "Indemnified Party"), from and against any and all
damages, claims, losses, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts"), awarded against or incurred
by any Indemnified Party arising out of or as a result of this Agreement or the
purchase of any Purchased Assets or in respect of any Purchased Asset,
Participated Receivable or any Contract, including, without limitation, arising
out of or as a result of:
(i) the characterization in any Seller Report or other
statement made by such Seller of any Purchased Receivable or
Participated Receivable as an Eligible Receivable which is not an
Eligible Receivable as of the date on which such information was
certified;
33
(ii) any representation or warranty or statement made or
deemed made by such Seller (or any of its officers) under or in
connection with this Agreement, which shall have been incorrect in any
material respect when made;
(iii) the failure by such Seller to comply with any applicable
law, rule or regulation with respect to any Purchased Asset,
Participated Receivable or the related Contract; or the failure of any
Purchased Asset, Participated Receivable or the related Contract to
conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Purchaser absolute ownership
of the Purchased Receivables and Participation Interests that are, or
that purport to be, the subject of a Purchase under this Agreement and
the Related Security and Collections in respect thereof, free and clear
of any Adverse Claim;
(v) the failure of such Seller to have filed, or any delay in
filing, financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable laws
with respect to any Purchased Receivables or Participation Interests
that are, or that purport to be, the subject of a Purchase under this
Agreement and the Related Security and Collections in respect thereof,
whether at the time of any Purchase or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable that is, or that purports to be, the subject of (A) a
Purchase under this Agreement, or (B) a Participation Interest
Purchased under this Agreement from such Seller (including, without
limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the merchandise or services related to
such Receivable or the furnishing or failure to furnish such
merchandise or services or relating to collection activities with
respect to such Receivable (if such collection activities were
performed by such Seller acting as Collection Agent);
(vii) any failure of such Seller to perform its duties or
obligations in accordance with the provisions hereof or to perform its
duties or obligations under any Contract related to a Purchased
Receivable or Participated Receivable;
(viii) any products liability or other claim arising out of or
in connection with merchandise, insurance or services which are the
subject of any Contract related to a Purchased Receivable or
Participated Receivable originated by such Seller;
(ix) the commingling of Collections of Purchased Assets by
such Seller (or a designee of such Seller), as Collection Agent or
otherwise, at any time with other funds of any Seller or an Affiliate
of any Seller;
34
(x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases by such Seller or
the ownership by such Seller of Receivables, Participation Interests
(and the Government Receivables with respect thereto) the Related
Security, or Collections with respect thereto or in respect of any
Receivable, Participation Interests (and the Government Receivables
with respect thereto) Related Security or Contract;
(xi) any failure of such Seller to comply with its covenants
contained in this Agreement;
(xii) any claim brought by any Person other than an
Indemnified Party arising from any activity such Seller or any designee
of such Seller in servicing, administering or collecting any Purchased
Asset or Participated Receivable;
(xiii) any Purchased Asset becoming (in whole or in part) a
Diluted Receivable or a Diluted Participation Interest;
(xiv) in the case of a Contract between a Seller and a PBM,
where such PBM acts as an agent for Contract Payors rather than as a
principal, the inability of the Purchaser to enforce any Receivable
arising under such contract directly (by contract or by operation of
law) against such Contract Payor, except to the extent such Contract
Payor is a Governmental Entity and such enforcement rights are limited
by the 1972 Amendments to the Social Security Act; or
(xv) the inability of the Purchaser to exercise its rights
under this Agreement to review any Contract which contains a
confidentiality provision that purports to restrict its ability to do
so, or any litigation or proceeding relating to any such
confidentiality provision.
It is expressly agreed and understood by the parties hereto (i) that the
foregoing indemnification is not intended to, and shall not, constitute a
guarantee of the collectibility or payment of the Purchased Assets and (ii) that
nothing in this Section 8.01 shall require any Seller to indemnify any Person
(A) for Purchased Receivables and Participation Interests which are not
collected, not paid or uncollectible on account of the insolvency, bankruptcy,
or financial inability to pay of the applicable Obligor, (B) for damages,
losses, claims or liabilities or related costs or expenses to the extent found
in a final non-appealable judgment of a court of competent jurisdiction to have
resulted from such Person's gross negligence or willful misconduct, or (C) for
any income taxes or franchise taxes measured by income incurred by such Person
arising out of or as a result of this Agreement or in respect of any Purchased
Asset, Participated Receivable or any Contract.
ARTICLE IX
35
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or consent to any departure by a Seller therefrom
shall be effective unless in a writing signed by the Purchaser and, in the case
of any amendment, also signed by the Sellers, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of the Purchaser to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 9.02. Notices, Etc. All notices and other
communications hereunder shall, unless otherwise stated herein, be in writing
and shall be delivered by hand or overnight courier service, mailed by certified
or registered mail or sent by facsimile, to each party hereto, at its address
set forth on Exhibit D hereto or at such other address as shall be designated by
such party in a written notice to the other parties hereto. Notwithstanding
anything herein to the contrary, delivery of a single notice to the Parent shall
constitute delivery of a notice to each and every one of the Sellers. All
notices and communications given to any party hereto shall be deemed to have
been given on the date of receipt.
SECTION 9.03. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the Sellers, the
Purchaser and their respective successors and assigns; provided, however, that
no Seller may assign its rights or obligations hereunder or any interest herein
without the prior written consent of the Purchaser. In connection with any sale
or assignment by the Purchaser of all or a portion of the Purchased Assets, the
buyer or assignee, as the case may be, shall, to the extent of its purchase or
assignment, have all rights of the Purchaser under this Agreement (as if such
buyer or assignee, as the case may be, were the Purchaser hereunder) except to
the extent specifically provided in the agreement between the Purchaser and such
buyer or assignee, as the case may be.
(b) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until such time, after the Facility Termination Date,
when all of the Purchased Receivables and Participated Receivables are either
collected in full or become Defaulted Receivables; provided, however, that
rights and remedies with respect to any breach of any representation and
warranty made by a Seller pursuant to Article IV and the provisions of Article
VIII and Sections 9.04, 9.05 and 9.06 shall be continuing and shall survive any
termination of this Agreement.
SECTION 9.04. Costs, Expenses and Taxes. (a) In addition to
the rights of indemnification granted to the Purchaser pursuant to Article VIII
hereof, the Sellers agree to pay on demand, on a joint and several basis, all
costs and expenses in connection with the preparation, execution and delivery of
this Agreement and the other documents and agreements to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket
36
expenses of counsel for the Purchaser with respect thereto and with respect to
advising the Purchaser as to its rights and remedies under this Agreement, and
the Sellers agree to pay, on a joint and several basis, all costs and expenses,
if any (including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement and the other documents to be delivered hereunder
excluding, however, any costs of enforcement or collection of Purchased Assets
which are not paid on account of the insolvency, bankruptcy or financial
inability to pay of the applicable Obligor.
(b) In addition, the Sellers agree to pay, on a joint and
several basis, any and all stamp and other taxes and fees payable in connection
with the execution, delivery, filing and recording of this Agreement or the
other documents or agreements to be delivered hereunder, and the Sellers agree,
on a joint and several basis, to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 9.05. [Intentionally Omitted]
SECTION 9.06. Confidentiality. Unless otherwise required by
applicable law, each party hereto agrees to maintain the confidentiality of this
Agreement in communications with third parties and otherwise; provided that this
Agreement may be disclosed to (i) third parties to the extent such disclosure is
made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the other party hereto, and (ii) such party's legal
counsel and auditors and the Purchaser's assignees, if they agree in each case
to hold it confidential.
SECTION 9.07. GOVERNING LAW. THIS AGREEMENT SHALL, IN
ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT
WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, EXCEPT TO
THE EXTENT THAT, PURSUANT TO THE UCC OF THE STATE OF NEW YORK, THE PERFECTION
AND THE EFFECT OF PERFECTION OR NON- PERFECTION OF THE PURCHASER'S OWNERSHIP OF
OR SECURITY INTEREST IN THE RECEIVABLES ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 9.08. Third Party Beneficiary. Each of the parties
hereto hereby acknowledges that the Purchaser may assign all or any portion of
its rights under this Agreement and that such assignees may (except as otherwise
agreed to by such assignees) further assign their rights under this Agreement,
and each of the Sellers hereby consents to any such assignments. All such
assignees, including parties to the Financing Agreement in the case of
assignment to such parties, shall be third party beneficiaries of, and shall be
entitled to enforce the Purchaser's
37
rights and remedies under, this Agreement to the same extent as if they were
parties thereto, except to the extent specifically limited under the terms of
their assignment.
SECTION 9.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
38
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
SELLERS: RITE AID CORPORATION
RITE AID OF CONNECTICUT, INC.
RITE AID OF DELAWARE, INC.
RITE AID OF GEORGIA, INC.
RITE AID OF INDIANA, INC.
RITE AID OF KENTUCKY, INC.
RITE AID OF MAINE, INC.
RITE AID OF MARYLAND, INC.
RITE AID OF MICHIGAN, INC.
RITE AID OF NEW HAMPSHIRE, INC.
RITE AID OF NEW JERSEY, INC.
RITE AID OF NEW YORK, INC.
RITE AID OF OHIO, INC.
RITE AID OF PENNSYLVANIA, INC.
RITE AID OF TENNESSEE, INC.
RITE AID OF VERMONT, INC.
RITE AID OF VIRGINIA, INC.
RITE AID OF WASHINGTON, D.C., INC.
RITE AID OF WEST VIRGINIA, INC.
KEYSTONE CENTERS, INC.
THE LANE DRUG COMPANY
RITE AID DRUG PALACE, INC.
THRIFTY PAYLESS, INC.
HARCO, INC.
PERRY DRUG STORES, INC.
APEX DRUG STORES, INC.
PDS-1 MICHIGAN, INC.
RDS DETROIT, INC.
K & B ALABAMA CORPORATION
K & B LOUISIANA CORPORATION
K & B MISSISSIPPI CORPORATION
K & B TENNESSEE CORPORATION
By: _____________________________________
Title: __________________________________
Signature Page to Originator Purchase Agreement
-----------------------------------------------
PURCHASER: RITE AID HDQTRS. FUNDING, INC.
By: _____________________________________
Title: __________________________________
COLLECTION AGENT: RITE AID HDQTRS. FUNDING, INC.
By: _____________________________________
Title: __________________________________
Signature Page to Originator Purchase Agreement
-----------------------------------------------
PARENT: RITE AID CORPORATION
By: _____________________________________
Title: __________________________________
Signature Page to Originator Purchase Agreement
-----------------------------------------------
SCHEDULE 1
LIST OF SELLERS
Rite Aid Corporation, a Delaware corporation
Rite Aid of Connecticut, Inc., a Connecticut corporation
Rite Aid of Delaware, Inc., a Delaware corporation
Rite Aid of Georgia, Inc., a Georgia corporation
Rite Aid of Indiana, Inc., an Indiana corporation
Rite Aid of Kentucky, Inc., a Kentucky corporation
Rite Aid of Maine, Inc., a Maine corporation
Rite Aid of Maryland, Inc., a Maryland corporation
Rite Aid of Michigan, Inc., a Michigan corporation
Rite Aid of New Hampshire, Inc., a New Hampshire corporation
Rite Aid of New Jersey, Inc., a New Jersey corporation
Rite Aid of New York, Inc., a New York corporation
Rite Aid of Ohio, Inc., an Ohio corporation
Rite Aid of Pennsylvania, Inc., a Pennsylvania corporation
Rite Aid of Tennessee, Inc., a Tennessee corporation
Rite Aid of Vermont, Inc., a Vermont corporation
Rite Aid of Virginia, Inc., a Virginia corporation
Rite Aid of Washington, D.C., Inc., a District of Columbia corporation
Rite Aid of West Virginia, Inc., a West Virginia corporation
Keystone Centers, Inc., a Pennsylvania corporation
The Lane Drug Company, an Ohio corporation
Rite Aid Drug Palace, Inc., a Delaware corporation
Thrifty PayLess, Inc., a California corporation
Harco, Inc., an Alabama corporation
Perry Drug Stores, Inc., a Michigan corporation
Apex Drug Stores, Inc., a Michigan corporation
PDS-1 Michigan, Inc., a Michigan corporation
RDS Detroit, Inc., a Michigan corporation
K & B Alabama Corporation, an Alabama corporation
K & B Louisiana Corporation, a Louisiana corporation
K & B Mississippi Corporation, a Mississippi corporation
K & B Tennessee Corporation, a Tennessee corporation
Sch 1-1
SCHEDULE 2
MONTHS
Fiscal Year 2004
----------------
Period Start End # of Wks
------ ----- --- --------
1 3/2/2003 3/29/2003 4
2 3/30/2003 4/26/2003 4
3 4/27/2003 5/31/2003 5
4 6/1/2003 6/28/2003 4
5 6/29/2003 7/26/2003 4
6 7/27/2003 8/30/2003 5
7 8/31/2003 9/27/2003 4
8 9/28/2003 10/25/2003 4
9 10/26/2003 11/29/2003 5
10 11/30/2003 12/27/2003 4
11 12/28/2003 1/24/2004 4
12 1/25/2004 2/28/2004 5
Sch 2-1
SCHEDULE 2
MONTHS
Fiscal Year 2005 (leap year)
----------------------------
Period Start End # of Wks
------ ----- --- --------
1 2/29/2004 3/27/2004 4
2 3/28/2004 4/24/2004 4
3 4/25/2004 5/29/2004 5
4 5/30/2004 6/26/2004 4
5 6/27/2004 7/24/2004 4
6 7/25/2004 8/28/2004 5
7 8/29/2004 9/25/2004 4
8 9/26/2004 10/23/2004 4
9 10/24/2004 11/27/2004 5
10 11/28/2004 12/25/2004 4
11 12/26/2004 1/22/2005 4
12 1/23/2005 2/26/2005 5
Sch 2-2
SCHEDULE 2
MONTHS
Fiscal Year 2006 (53 weeks)
---------------------------
Period Start End # of Wks
------ ----- --- --------
1 2/27/2005 3/26/2005 4
2 3/27/2005 4/23/2005 4
3 4/24/2005 5/28/2005 5
4 5/29/2005 6/25/2005 4
5 6/26/2005 7/23/2005 4
6 7/24/2005 8/27/2005 5
7 8/28/2005 9/24/2005 4
8 9/25/2005 10/22/2005 4
9 10/23/2005 11/26/2005 5
10 11/27/2005 12/31/2005 5
11 1/1/2006 1/28/2006 4
12 1/29/2006 3/4/2006 5
Sch 2-3
SCHEDULE 2
MONTHS
Fiscal Year 2007
----------------
Period Start End # of Wks
------ ----- --- --------
1 3/5/2006 4/1/2006 4
2 4/2/2006 4/29/2006 4
3 4/30/2006 6/3/2006 5
4 6/4/2006 7/1/2006 4
5 7/2/2006 7/29/2006 4
6 7/30/2006 9/2/2006 5
7 9/3/2006 9/30/2006 4
8 10/1/2006 10/28/2006 4
9 10/29/2006 12/2/2006 5
10 12/3/2006 12/30/2006 4
11 12/31/2006 1/27/2007 4
12 1/28/2007 3/3/2007 5
Sch 2-4
SCHEDULE 2
MONTHS
Fiscal Year 2008 (leap year)
----------------------------
Period Start End # of Wks
------ ----- --- --------
1 3/4/2007 3/31/2007 4
2 4/1/2007 4/28/2007 4
3 4/29/2007 6/2/2007 5
4 6/3/2007 6/30/2007 4
5 7/1/2007 7/28/2007 4
6 7/29/2007 9/1/2007 5
7 9/2/2007 9/29/2007 4
8 9/30/2007 10/27/2007 4
9 10/28/2007 12/1/2007 5
10 12/2/2007 12/29/2007 4
11 12/30/2007 1/26/2008 4
12 1/27/2008 3/1/2008 5
Sch 2-5
SCHEDULE 2
MONTHS
Fiscal Year 2009
----------------
Period Start End # of Wks
------ ----- --- --------
1 3/2/2008 3/29/2008 4
2 3/30/2008 4/26/2008 4
3 4/27/2008 5/31/2008 5
4 6/1/2008 6/28/2008 4
5 6/29/2008 7/26/2008 4
6 7/27/2008 8/30/2008 5
7 8/31/2008 9/27/2008 4
8 9/28/2008 10/25/2008 4
9 10/26/2008 11/29/2008 5
10 11/30/2008 12/27/2008 4
11 12/28/2008 1/24/2009 4
12 1/25/2009 2/28/2009 5
Sch 2-6
SCHEDULE 3
MATERIAL LITIGATION
I. INVESTIGATIONS AND LITIGATION MATTERS.
1. US Attorney Eastern District PA investigation regarding PBM
matters. Investigation pending.
2. There are currently pending federal governmental
investigations, both civil and criminal, by the United States
Attorney, involving various matters related to prior
management's business practices. We are cooperating fully with
the United States Attorney. We have begun settlement
discussions with the United States Attorney for the Middle
District of Pennsylvania. The United States Attorney has
proposed that the government would not institute any criminal
proceeding against us if we enter into a consent judgment
providing for a civil penalty payable over a period of years.
The amount of the civil penalty has not been agreed to and
there can be no assurance that a settlement will be reached or
that the amount of such penalty will not have a material
adverse effect on our financial condition and results of
operations. We have recorded an accrual of $20.0 million in
fiscal year 2003 in connection with the resolution for these
matters; however, we may incur charges in excess of that
amount and we are unable to estimate the possible range of
loss. We will continue to evaluate our estimate and to the
extent that additional information arises or our strategy
changes, we will adjust our accrual accordingly.
These investigations and settlement discussions are ongoing and we
cannot predict their outcomes. If we were convicted of any crime, certain
licenses and government contracts such as Medicaid plan reimbursement agreements
that are material to our operations may be revoked, which would have a material
adverse effect on our results of operations, financial condition or cash flows.
In addition, substantial penalties, damages or other monetary remedies assessed
against us, including a settlement, could also have a material adverse effect on
our results of operations, financial condition or cash flows.
II. OTHER LITIGATION MATTERS
We, together with a significant number of major U.S. retailers, have
been sued by the Lemelson Foundation in a complaint which alleges that portions
of the technology included in
Sch 3-1
our point-of-sale system infringe upon a patent held by the plaintiffs. The
amount of damages sought is unspecified and may be material. We cannot predict
the outcome of this litigation or whether it could result in a material adverse
effect on our results of operations, financial conditions or cash flows
(Lemelson Medical, Education & Research Foundation Limited Partnership v. Rite
Aid Corporation et al.; Case ▇▇▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇, ▇.▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
of Arizona).
We are subject from time to time to lawsuits arising in the ordinary
course of business. In the opinion of our management, these matters are
adequately covered by insurance or, if not so covered, are without merit or are
of such nature or involve amounts that would not have a material adverse effect
on our financial condition, results of operations or cash flows if decided
adversely.
Sch 3-2
SCHEDULE 4
TRADE NAMES
In addition to names scheduled below, the Sellers set forth on Schedule 1 hereto
use the following Trade Names: Rite Aid; Rite Aid Pharmacy; and Rite Aid Drug
Stores.
ALL OTHER NAMES INCLUDING TRADE NAMES, ASSUMED
SELLER NAMES OR OTHER APPELLATIONS
---------------------------------------------------------------------------------------------------------------
Apex Drug Stores, Inc. Rite-Aid Discount Pharmacy (8/10/95-12/31/00)
Rite-Aid Discount Pharmacy (11/02/00-12/31/05)
---------------------------------------------------------------------------------------------------------------
Harco, Inc. d/b/a Harco Drug Inc.
---------------------------------------------------------------------------------------------------------------
K & B Tennessee Corporation Rite Aid (2/09/98)
---------------------------------------------------------------------------------------------------------------
PDS-1 Michigan, Inc. Rite-Aid Discount Pharmacy (8/10/95-12/31/00)
Rite-Aid Discount Pharmacy (11/02/00-12/31/05)
---------------------------------------------------------------------------------------------------------------
Perry Drug Stores, Inc. Jack's Bargain Basement (10/21/93-12/31/98)
Rite-Aid Discount Pharmacy (8/10/95-12/31/00)
Rite-Aid Discount Pharmacy (11/02/00-12/31/05)
---------------------------------------------------------------------------------------------------------------
RDS Detroit, Inc. Rite-Aid Discount Pharmacy (8/10/95-12/31/00)
Rite-Aid Discount Pharmacy (11/02/00-12/31/05)
---------------------------------------------------------------------------------------------------------------
Rite Aid of Indiana, Inc. Rite Price (9/15/92)
---------------------------------------------------------------------------------------------------------------
Rite Aid of Maine, Inc. ▇▇▇▇▇'▇ Pharmacy (7/18/85 - 3/26/99)
▇▇▇▇▇▇▇ Avenue Pharmacy (10/15/85)
Ham's Drug Store (10/15/85)
---------------------------------------------------------------------------------------------------------------
Rite Aid of Michigan, Inc. Rite Aid Beverage Center (8/12/99-12/31/04)
Rite Aid 1025 (10/27/00-12/31/05)
Rite Aid 2731 (10/27/00-12/31/05)
Rite-Aid Discount Pharmacy (11/02/00-12/31/05)
---------------------------------------------------------------------------------------------------------------
Sch 4-1
EXHIBIT A
CREDIT AND COLLECTION POLICY
RITE AID CORPORATION
THIRD PARTY CREDIT AND COLLECTION POLICY
September 2004
CREDIT POLICY
It is our credit policy to only conduct business with Payors of acceptable
credit risk.
The Managed Care Department is our relationship leader with the PBMs, insurers
and government agencies (collectively referred to as Payors). The activities of
the Managed Care Department are many but include initially assessing the credit
worthiness of the Payors and monitoring activities and developments related to
the credit worthiness of the Payors. The Managed Care Department makes the final
decision regarding credit worthiness of a Payor. For specific, very significant
Payor opportunities, the Managed Care Department will make a recommendation to
and obtain the approval of the Executive Committee regarding the credit
worthiness of a Payor.
The Third Party Administration and Third Party Finance departments support the
efforts of the Managed Care Department and are also responsible for supporting
this credit policy.
The majority of our largest Payor contracts have the Payor as Obligor to us. For
such entities, we initially rely on their reputation and financial condition in
assessing credit worthiness. For those contracts with Payors as
Agent/Administrator, the clients of the Payor are the Obligor to us. We also
initially assess the reputation and financial condition of the
Agent/Administrator but we rely on the Payor to assess the credit worthiness of
the clients of the Payor who are the Obligor to us.
For the contracts with Payors as Agent/Administrator there is a distinction
between recent and certain legacy contracts. For recent contracts with a
Agent/Administrator Payor, we attempt to include language to mitigate exposure
to non-payment by Payor clients whereby the Payor plays an active role in
minimizing the credit risk.
The majority of our largest Payor contracts are with publicly traded companies,
e.g., MEDCO, Caremark PCS, Express Scripts, Wellpoint, Anthem, Aetna, Cigna,
Prescription Solutions, aka Pacificare. These companies have publicly available
financial information which we reference in determining credit worthiness.
Another large group of Payor contracts are with large insurance
A-1
companies (e.g., Aetna, Cigna) and Blue Cross/ Blue Shield companies (e.g.,
Michigan, Alabama) who are subject to state regulatory requirements and
oversight regarding their financial condition. The Blue Cross/Blue Shield
Association are also subject to the capital requirements for maintenance of
their BCBS licensure status. We rely on the regulatory requirements and
oversight efforts as a basis for credit worthiness of the insurance companies
and Blue Cross/Blue Shield companies.
On an on-going basis, there are no further credit worthiness assessments unless
the Payor does not comply with our collection policy or we become aware of
information that raises concern about credit worthiness.
COLLECTION POLICY
It is our collection policy to only conduct business with Payors that meet the
agreed-to payment terms.
The Third Party Finance Department closely monitors payment practices. The
Managed Care Department is notified by Third Party Finance of increases in Days
Sales Outstanding or any aberrant payment patterns with Payors. Most Payors are
on a biweekly payment cycle and timing issues are identified immediately. In
addition, receivable amounts are aged from date of service and past due amounts
are readily identified. The Managed Care Department takes immediate action to
address issues with the Payor to understand and correct the situation and either
arranges for current payment or instructs Third Party Administration to disable
claims processing for the Payor.
Once an account balance is deemed to be uncollectible, it is written off in
accordance with our accounting policies and procedures.
A-2
EXHIBIT B
DEPOSIT BANKS, LOCK BOXES AND DEPOSIT ACCOUNTS
--------------------------------------------------------------------------------
DEPOSIT BANK NAME AND ADDRESS LOCK BOX (POST OFFICE DEPOSIT ACCOUNT
BOX) NUMBER NUMBER
--------------------------------------------------------------------------------
Mellon Bank, Pittsburgh 360321 -
--------------------------------------------------------------------------------
Mellon Bank - 069-3636
--------------------------------------------------------------------------------
ACCOUNT BANKS AND GOVERNMENTAL ENTITY RECEIVABLES ACCOUNTS
--------------------------------------------------------------------------------
ACCOUNT BANK NAME AND ADDRESS LOCK BOX (POST OFFICE GOVERNMENTAL
BOX) NUMBER ENTITY RECEIVABLES
ACCOUNT NUMBER
--------------------------------------------------------------------------------
Mellon Bank, Philadelphia 007020 -
--------------------------------------------------------------------------------
Mellon Bank, Pittsburgh 371115 -
--------------------------------------------------------------------------------
Mellon Bank - 103-7294
--------------------------------------------------------------------------------
B-1
EXHIBIT C
FORM OF
DEFERRED PURCHASE PRICE NOTE
New York, New York
_____________, 2004
FOR VALUE RECEIVED, RITE AID HDQTRS. FUNDING, INC., a Delaware
corporation (the "Purchaser"), hereby promises to pay to RITE AID OF DELAWARE,
INC. ("RAD"), as agent for the Sellers (as defined below), the principal amount
of this Note, determined as described below, together with interest thereon at a
rate per annum equal at all times to the sum of 0.25% plus the Applicable Margin
(as defined in the Financing Agreement) in effect from time to time plus the
Eurodollar Rate (as defined in the Financing Agreement) for periods of one
month, in each case in lawful money of the United States of America. Capitalized
terms used herein but not defined herein shall have the meanings assigned to
such terms in the Originator Purchase Agreement dated as of September 21, 2004
among the "Sellers" (as defined therein) parties thereto, the Purchaser, and
Rite Aid Hdqtrs. Funding, Inc., as collection agent (such agreement, as it may
from time to time be amended, restated or otherwise modified in accordance with
its terms, the "Originator Purchase Agreement"). This Note is the note referred
to in Section 2.02(d) of the Originator Purchase Agreement.
The aggregate principal amount of this Note at any time shall
be equal to the difference between (a) the sum of the aggregate principal amount
of this Note on the date of the issuance hereof and each addition to the
principal amount of this Note pursuant to the terms of Section 2.02 of the
Originator Purchase Agreement minus (b) the aggregate amount of all payments
made in respect of the principal amount of this Note, in each case, as recorded
on the schedule annexed to and constituting a part of this Note, but failure to
so record shall not affect the obligations of the Purchaser to the Sellers.
The entire principal amount of this Note shall be due and
payable one year and one day after the Facility Termination Date or such later
date as may be agreed in writing by the Sellers and the Purchaser. The principal
amount of this Note may, at the option of the Purchaser, be prepaid in whole at
any time or in part from time to time, subject to the provisions of the
Originator Purchase Agreement. Interest on this Note shall be paid in arrears on
each Settlement Date, at maturity and thereafter on demand. All payments
hereunder shall be made by wire transfer of immediately available funds to such
account of RAD as RAD may designate in writing.
Notwithstanding any other provisions contained in this Note,
in no event shall the rate of interest payable by the Purchaser under this Note
exceed the highest rate of interest permissible under applicable law.
The obligations of the Purchaser under this Deferred Purchase
Price Note are subordinated in right of payment, to the extent set forth in
Section 2.03(c) of the Originator Purchase Agreement, to the prior payment in
full of certain obligations of the Purchaser and the Borrower.
Notwithstanding any provision to the contrary in this Deferred
Purchase Price Note or elsewhere, other than with respect to payments
specifically permitted by Section 2.03(c) of the Originator Purchase Agreement,
no demand for any payment may be made hereunder, no payment shall be due with
respect hereto and the Seller shall have no claim for any payment hereunder
prior to the occurrence of the Facility Termination Date and the RFA Final
Payment Date.
In the event that, notwithstanding the foregoing provision
limiting such payment, RAD or any Seller shall receive any payment or
distribution on this Deferred Purchase Price Note which is not specifically
permitted by Section 2.03(c) of the Originator Purchase Agreement, such payment
shall be received and held in trust by RAD or such Seller for the benefit of the
entities to whom the obligations are owed under the Secondary Purchase Agreement
and the Financing Agreement and shall be promptly paid over to such entities.
The Purchaser hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever.
Neither this Note, nor any right of RAD or the Sellers to
receive payments hereunder, shall, without the prior written consent of the
Purchaser and (so long as the Financing Agreement remains in effect or any
amounts remain outstanding thereunder) the Program Agent under the Financing
Agreement, be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
RITE AID HDQTRS. FUNDING, INC.
By:
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Title:
C-2
SCHEDULE TO DEFERRED PURCHASE PRICE NOTE
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Addition to Principal Amount of Principal Unpaid Principal Notation Made
Date Amount Paid or Prepaid Balance By
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C-3
EXHIBIT D
ADDRESSES
PURCHASER: Rite Aid Hdqtrs. Funding, Inc.
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COLLECTION AGENT: Rite Aid Hdqtrs. Funding, Inc.
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PARENT: Rite Aid Corporation
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D-1
SELLERS: Rite Aid Corporation
Rite Aid of Connecticut, Inc.
Rite Aid of Delaware, Inc.
Rite Aid of Georgia, Inc.
Rite Aid of Indiana, Inc.
Rite Aid of Kentucky, Inc.
Rite Aid of Maine, Inc.
Rite Aid of Maryland, Inc.
Rite Aid of Michigan, Inc.
Rite Aid of New Hampshire, Inc.
Rite Aid of New Jersey, Inc.
Rite Aid of New York, Inc.
Rite Aid of Ohio, Inc.
Rite Aid of Pennsylvania, Inc.
Rite Aid of Tennessee, Inc.
Rite Aid of Vermont, Inc.
Rite Aid of Virginia, Inc.
Rite Aid of Washington, D.C., Inc.
Rite Aid of West Virginia, Inc.
Keystone Centers, Inc.
The Lane Drug Company
Rite Aid Drug Palace, Inc.
Thrifty PayLess, Inc.
Harco, Inc.
Perry Drug Stores, Inc.
Apex Drug Stores, Inc.
PDS-1 Michigan, Inc.
RDS Detroit, Inc.
K & B Alabama Corporation
K & B Louisiana Corporation
K & B Mississippi Corporation
K & B Tennessee Corporation
each at
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D-2