SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
RITE AID CORPORATION
(Name of issuer)
COMMON STOCK, $1.00 PAR VALUE
(Title of class of securities)
767754104
(CUSIP number)
Anthony N. Palizzi, Esq.
Executive Vice President
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(810) 643-1000
(Name, address and telephone number of person
authorized to receive notices and communications)
with copies to:
David J. Friedman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
DECEMBER 12, 1996
(Date of event which requires
filing of this statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box ( ).
SCHEDULE 13D
CUSIP NO. 133255-10-9
(1) NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Kmart Corporation
38-0729500
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (see instructions)
(a) ( )
(b) (X)
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
N/A
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
( )
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Michigan
(7) SOLE VOTING POWER
6,904,764
(8) SHARED VOTING POWER
NUMBER OF SHARES BENEFICIALLY None
OWNED BY EACH REPORTING PERSON (9) SOLE DISPOSITIVE POWER
WITH
6,904,764
(10) SHARED DISPOSITIVE POWER
None
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,904,764 Shares
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (see instructions) ( )
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.63%
(14) TYPE OF REPORTING PERSON (see instructions)
CO
Item 1. Security and Issuer.
The class of equity securities to which this
Schedule 13D relates is the common stock of Rite Aid
Corporation, a Delaware corporation ("Rite Aid"), par
value $1.00 per share (the "Rite Aid Common Stock"). The
principal executive offices of Rite Aid are located at 30
Hunter Lane, Camp Hill, Pennsylvania 17011.
Item 2. Identity and Background.
This statement is being filed by Kmart
Corporation, a Michigan corporation ("Kmart"). Kmart is
principally engaged in general merchandise retailing
through the operation of a chain of discount stores
located throughout the United States and abroad. Kmart's
principal place of business is located at 3100 West Big
Beaver Road, Troy, Michigan 48084.
Neither Kmart nor (to Kmart's knowledge) any
executive officer, director or controlling person of Kmart
(a) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), during the
last five years or (b) has been a party, during the last
five years, to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a
result of same proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with
respect to such laws.
Kmart may be deemed to beneficially own
6,904,764 shares, or 5.63% of the outstanding Rite Aid
Common Stock. Such stock was acquired by Kmart pursuant
to an Agreement and Plan of Merger, dated as of October
13, 1996 (the "Merger Agreement"), by and between Rite Aid
and Thrifty Payless Holdings, Inc., a Delaware corporation
("Thrifty"). Pursuant to the Merger Agreement, on
December 12, 1996, Thrifty merged with and into Rite Aid
(the "Merger") and each of the outstanding shares of
common stock of Thrifty (the "Thrifty Common Stock") was
converted into the right to receive 0.65 shares of Rite
Aid Common Stock.
Schedule I attached hereto and incorporated
herein by reference sets forth, with respect to each
executive officer and director of Kmart, the following
information: (a) name; (b) residence or business address;
and (c) present principal occupation or employment and the
name of any corporation or other organization in which
such employment is conducted. Each person listed on
Schedule I, unless otherwise indicated, is a United States
citizen.
Item 3. Source and Amount of Funds or Other
Consideration.
Kmart acquired the Rite Aid Common Stock
pursuant to the Merger as described more fully in Item 2
above.
Item 4. Purpose of Transaction.
Kmart acquired the Rite Aid Common Stock in
connection with the Merger as described in Item 2 above.
Kmart holds the Rite Aid Common Stock as an
investment. Depending on market and other conditions,
Kmart intends to consider disposing from time to time, in
the open market or in privately negotiated transactions,
of some or all of the Rite Aid Common Stock acquired in
the Merger. In anticipation of a possible disposition of
the Rite Aid Common Stock, Kmart has requested that Rite
Aid register with the SEC all of the Rite Aid Common Stock
owned by it. Such request is discussed more fully in Item
6 below. Kmart's ability to acquire additional shares of
Rite Aid Common Stock is restricted, as more fully
described in Item 6 below.
Other than as described above, Kmart has no
present plans or proposals which relate to or would result
in any transaction, change or event specified in clauses
(a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
The aggregate amount of Rite Aid Common Stock
beneficially owned by Kmart to which this Schedule 13D
relates is 6,904,764 shares, representing in the aggregate
5.63% of the 122,604,120 shares of Rite Aid Common Stock
estimated by Kmart to be outstanding following the Merger.
The number estimated to be outstanding was derived from
the 83,928,120 shares of Rite Aid Common Stock reported in
the Joint Proxy Statement of Rite Aid and Thrifty, dated
November 12, 1996, to be outstanding as of November 12,
1996 and the approximately 38,676,000 shares of Rite Aid
Common Stock issued in the Merger as reported in the Joint
Proxy Statement.
Kmart has the sole power to vote and dispose of
the Rite Aid Common Stock owned by it, subject to certain
limitations contained in the Stockholder Agreement and the
Pledge Agreement (as defined in Item 6) and discussed more
fully in Item 6 below.
Other than Kmart's receipt of shares in the
Merger, as discussed above, no other transactions relating
to the Rite Aid Common Stock have been effected by Kmart
during the sixty days preceding this filing.
To the knowledge of Kmart, none of its
respective officers and directors beneficially owns any
Rite Aid Common Stock, except for certain shares which may
be held in discretionary accounts and over which such
officers and directors do not have investment power.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the
Issuer.
Under the terms of the Stockholder Agreement,
Kmart has agreed to certain limitations on its right to
vote and dispose of the Rite Aid Common Stock owned or
held by it and on its right to acquire additional Rite Aid
Common Stock.
Pursuant to Subsection 4(a) of the Stockholder
Agreement, Kmart has agreed to vote or consent (or cause
to be voted or consented), for a period of four years
following the consummation of the Merger, all Rite Aid
Common Stock (howsoever acquired) then held of record or
beneficially owned by it, in accordance with the
recommendation of Rite Aid's Board of Directors. Such
obligation is to be exercised subject to certain rights
granted to other parties under the Trust Agreement, dated
as of June 17, 1996, among Kmart, its Subsidiaries party
thereto (collectively, the "Obligers"), and First Trust of
New York, N.A. and Ward A. Spooner (together, the
"Trustees") and certain related documents, including the
Securities Pledge Agreement, dated as of June 17, 1996,
among certain of the Obligors, including Kmart (the
"Pledgors") and the Trustees (such Trust Agreement, such
Securities Pledge Agreement and such related documents
together, the "Pledge Agreement"). Under the Pledge
Agreement, the Pledgors pledged to the Trustees a security
interest in a number of securities (the "Pledged
Securities"), including the Rite Aid Common Stock, in
order to secure the payment to the Trustees of certain
obligations. The Pledge Agreement generally provides
that, as long as no acceleration provisions have been
activated, the Pledgors have the right to receive
distributions in respect of the Pledged Securities and to
vote such securities, except that no vote can be cast, nor
any consent, waiver or ratification given or action taken
which would materially impair the value of such Pledged
Securities or be otherwise inconsistent with, or violative
of, the provisions of the Pledge Agreement.
Pursuant to Subsection 4(c) of the Stockholder
Agreement and unless otherwise requested by Rite Aid,
Kmart has agreed, for a period of four years beginning
October 13, 1996, to refrain from, and to cause its
affiliates to refrain from, (i) entering into any business
combination, acquisition or other such transaction
relating to Rite Aid or its subsidiaries, (ii) entering
into any restructuring, recapitalization or similar
transaction with respect to Rite Aid or any of its
subsidiaries, or (iii) making any demand, request or
proposal to amend, waive or terminate the Stockholder
Agreement; and during such period Kmart has further agreed
not to, and to cause its affiliates not to, (1) acquire in
excess of 1% of the outstanding Rite Aid Common Stock or
other voting securities of Rite Aid, aside from stock
acquired pursuant to the Merger, (2) participate in a
proxy solicitation with respect to any Rite Aid voting
securities or participate in, or otherwise seek to
influence, any election contest with respect to Rite Aid,
(3) join any group which seeks to acquire beneficial
ownership of voting securities of Rite Aid, affect control
of Rite Aid, or circumvent any provision of the
Stockholder Agreement, (4) otherwise act to influence the
Board, management, or policies of Rite Aid, or (5) make
any communication designed to compel Rite Aid to make a
public announcement with respect to any of the foregoing
provisions of Subsection 4(c).
Appendix A to the Stockholder Agreement governs
registration rights relating to the Rite Aid Common Stock
acquired by Kmart pursuant to the Merger. Section 4 of
Appendix A governs demand registration rights of the Rite
Aid Common Stock, pursuant to which Kmart has requested,
in a letter dated December 16, 1996 (the "Registration
Request"), that Rite Aid register with the SEC all of the
6,904,764 shares of Rite Aid Common Stock acquired by
Kmart pursuant to the Merger. In accordance with the
requirements contained in Section 4, the Registration
Request further specified that the registration be in the
form of a Shelf Registration using a Registration
Statement on Form S-3. Rite Aid's obligations under
Section 4 are subject to certain enumerated limitations
not applicable to the Registration Request. In addition
to the demand rights, Kmart was also granted piggyback
rights, as more fully described in Appendix A.
The foregoing summaries of the Stockholder
Agreement and Appendix A thereto, the Pledge Agreement and
the Registration Request do not purport to be complete
descriptions of those documents, and are qualified by
reference to the actual documents which are filed as
exhibits hereto.
Except as described above or otherwise disclosed
herein, Kmart is not a party to any contract, arrangement,
understanding or relationship (legal or otherwise) with
respect to the Rite Aid Common Stock or other securities
of Rite Aid.
Item 7. Material to be Filed as Exhibits.
1. Stockholder Agreement, dated as of October 13,
1996, by and between Rite Aid, Kmart and joined in by
certain Individual Stockholders (incorporated by reference
to Exhibit 2.3 to Rite-Aid's Form S-4 filed October 24,
1996 (File No. 33-314759)).
2. Trust Agreement, dated as of June 17, 1996,
among Kmart, the Subsidiaries of Kmart parties thereto and
the Trustees (incorporated by reference to Exhibit F to
the Credit Agreement filed as an exhibit to Kmart's
Current Report on Form 8-K filed July 18, 1996 (File No.
001-00327)).
3. Securities Pledge Agreement, dated as of June
17, 1996, among Kmart, certain of the Subsidiaries of
Kmart parties thereto and the Trustees.
4. Letter to Rite Aid from Kmart, dated December
16, 1996, requesting that Rite Aid register with the SEC
on Form S-3 all shares of Rite Aid Common Stock acquired
by Kmart pursuant to the Merger.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
Dated: December 20, 1996
KMART CORPORATION
By: /s/ Michael J. Viola
____________________
NAME: Michael J. Viola
TITLE: Vice President and
Treasurer
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
KMART CORPORATION
Unless otherwise indicated, the business address of
directors and executive officers is 3100 West Big Beaver
Road, Troy, New York 48084 and all directors and executive
officers are citizens of the United States of America. An
asterisk indicates that a person is a director.
Name and Principal Occupation
Address Or Employment
James B. Adamson* Chairman and Chief
Flagstar Companies, Inc. Executive Officer,
203 East Main Street Flagstar Companies, Inc.
Spartanburg, SC 29319
Lilyan H. Affinito* Director, Caterpillar,
870 United Nations Plaza Inc., Chrysler Corp.,
Apt. #16-B Jostens Inc., Lillian
New York, NY 10017 Vernon Corp., New England
Telephone Company and New
York Telephone Company
(subsidiaries of NYNEX
Corp.) and Tambrands,
Inc.
Stephen F. Bollenbach* President and Chief
Hilton Hotels Corporation Executive Officer, Hilton
9336 Civic Center Drive Hotels Corp.
Beverly Hills, CA 90210
Lawrence E. Carlson Vice President, Real
Estate Market Strategy
Joseph A. Califano, Jr.* Chairman and President,
National Center on Addiction National Center on
and Substance Abuse at Addiction and Substance
Columbia University Abuse at Columbia
152 West 57th St. University
12th Floor
New York, NY 10019
Dennis V. Carter Vice President, Food,
Super Kmart Centers
James P. Churilla Vice President, Real
Estate Finance
William N. Anderson Senior Vice President and
General Merchandise
Manager-Hardlines
Richard G. Cline* Chairman, Hawthorn
Hawthorn Investors, Inc. Investors, Inc.
201 Naperville Road
Wheaton, IL 60187
Joseph J. Collins Senior Vice President,
Logistics and Vendor
Administration
Warren Cooper Executive Vice President,
Human Resources and
Administration
Larry C. Davis Vice President,
Advertising
Willie D. Davis* President, All Pro
All Pro Broadcasting Broadcasting, Inc.
161 North LaBrea Avenue
Inglewood, CA 90301
Enrique C. Falla* Vice President, The Dow
600 Grape Tree Drive Chemical Company
Apt. #4BS
Key Biscayne, FL 33149
Joseph P. Flannery* Chairman of the Board,
Uniroyal Holding, Inc. President and Chief
70 Great Hill Road Executive Officer,
Naugatuck, CT 06770 Uniroyal Holding, Inc.
Warren Flick* President and Chief
Operating Officer, U.S.
Kmart Stores
Ronald J. Floto Executive Vice President
and President, Super
Kmart Centers
Andrew A. Giancamilli Senior Vice President,
General Merchandise
Manager-Consumables and
Commodities
G. William Gryson, Jr. Vice President, Special
Projects
David R. Fielding Vice President and
Merchandise Controller
Larry J. Foster Vice President, Field
Human Resources
Floyd Hall* Chairman of the Board,
President and Chief
Executive Officer
Paul J. Hueber Senior Vice President,
Store Operations
Shawn M. Kahle Vice President, Corporate
Affairs
Cecil B. Kearse Vice President,
Merchandise Presentation
and Communication
Donald W. Keeble Executive Vice President,
Store Operations
Robert D. Kennedy* Retired Chairman of the
Union Carbide Corporation Board and Chief Executive
Section E-4 Officer, Union Carbide
39 Old Ridgebury Road Corp.
Danbury, CT 06817
Nancie W. LaDuke Vice President and
Secretary
Michael T. Macik Vice President,
Headquarters and
Distribution Center Human
Resources
David R. Marsico Vice President, Super
Kmart Centers
Harold Meeth III Vice President, Design
and Construction
Douglas M. Meissmer Vice President, Central
Region
J. Richard Munro* Chairman of the Executive
Time Warner Inc. Committee of Time Warner
300 First Stamford Place Inc.
Stamford, CT 06902
Donald E. Norman Senior Vice President,
Chief Information Officer
Ernest L. Heether Senior Vice President,
Merchandise Planning and
Replenishment
Lorrence T. Kellar Vice President, Real
Estate
Jerry J. Kuske Vice President and
General Merchandise
Manager-Health and Beauty
Care/Pharmacy
William C. Najdecki Vice President,
Controller
Robin B. Smith* President and Chief
Publishers Clearing House Executive Officer,
382 Channel Drive Publishers Clearing House
Port Washington, NY 11050
Anthony N. Palizzi Executive Vice President,
General Counsel
Peter J. Palmer Vice President, Labor
Relations and Assistant
General Counsel
Marvin P. Rich Executive Vice President,
Strategic Planning,
Finance and
Administration
William D. Underwood Senior Vice President,
Global Sourcing
John S. Valenti Vice President, Southern
Region
Michael J. Viola Vice President and
Treasurer
Thomas W. Watkins Senior Vice President,
International and Off-
Shore Retailing
William P. Weber* Vice Chairman, Texas
Texas Instruments Instruments Incorp-
Corporation orated
13510 North Central
Expressway, MS236
Dallas, TX 75243
James O. Welch, Jr.* Director, TECO Energy,
200 Deforest Avenue Inc. and Vanguard Group
East Hanover, NJ 07936 of Investment Companies
Martin E. Welch III Senior Vice President and
Chief Financial Officer
Stephen M. Ross Senior Vice President,
General Merchandise
Manager-Softunes
E. Anthony Vaal Vice President, Far East
Operations
EXECUTION COPY
SECURITIES PLEDGE AGREEMENT
SECURITIES PLEDGE AGREEMENT, dated as of June 17, 1996,
made by each of the undersigned corporations (each, a "Pledgor"
and, collectively, the "Pledgors"), in favor of First Trust of
New York, National Association, a National Banking Association,
and Ward A. Spooner, not individually but solely as Trustees
under the Trust Agreement, dated as of June 17, 1996, as amended
(the "Trust Agreement"), among the Pledgors and the Trustees.
1. Defined Terms. (a) The capitalized terms used
herein which are defined in, or by reference in, the Trust
Agreement referred to above shall have the meanings specified
therein.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Securities Pledge
Agreement shall refer to this Securities Pledge Agreement as a
whole and not to any particular provision of this Securities
Pledge Agreement.
2. Pledge. (a) To secure the due and punctual
payment of all Senior Secured Obligations, howsoever created,
arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or due or to become due, in
accordance with the terms thereof and to secure the due and
punctual performance of all of the obligations of each of the
Obligors contained in the Security Documents, the Senior Secured
Instruments and the Trust Agreement, each Pledgor hereby pledges
to the Trustees, and hereby grants to the Trustees a security
interest in, all of such Pledgor's right, title and interest in
and to the following:
(i) the shares of capital stock set forth on
Schedule A hereto and other shares of capital stock pledged
hereunder from time to time hereafter pursuant to Section
3(d) hereof (all such shares being herein collectively
called the "Pledged Stock");
(ii) all Investment Securities;
(iii) all Cash Equivalents (including, without
limitation, any Permitted Book-Entry Securities) and funds
held or on deposit from time to time in the Securities
Accounts; and
(iv) all Proceeds, except as provided for in Section 4
hereof, of any and all of the foregoing items described in
clauses (i) through (iii) above.
The items described in clauses (i) through (iv) above are herein
collectively called the "Pledged Securities".
(b) Each Pledgor hereby delivers to the Corporate
Trustee the stock certificates representing the Pledged Stock
pledged by it as set forth on Schedule A hereto, together with
related undated stock powers duly executed in blank. Each
Pledgor agrees to deliver to the Corporate Trustee related
undated stock powers or bond powers, as appropriate, duly
executed in blank for the Pledged Securities pledged by it
hereunder from time to time hereafter.
3. After-Acquired Pledged Securities. (a) If, after
the date hereof, any Pledgor shall become entitled to receive or
shall receive any Investment Securities, such Pledgor agrees to
accept the same as the Trustees' agent and to hold the same in
trust on behalf of and for the benefit of the Trustees and to
deliver the same (except for Instruments which such Pledgor is
not required to deliver under subsection 7.10 of the Kmart Credit
Agreement and Investment Securities not required to be delivered
pursuant to subsection 7.11(d) of the Kmart Credit Agreement)
forthwith to the Corporate Trustee in the exact form received,
with the appropriate undated powers as provided in Section 2(b)
hereof, to be held by the Corporate Trustee as Pledged
Securities, subject to the terms of this Securities Pledge
Agreement, as additional collateral security for the Senior
Secured Obligations.
(b) If, while this Securities Pledge Agreement is in
effect, any Pledgor shall become entitled to receive or shall
receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital, or issued in connection with any reorganization), or any
instrument, certificate or other writing representing or
constituting an option or right to acquire securities, whether as
an addition to, in substitution of, or in exchange for, any
shares of any Pledged Stock, or otherwise (other than shares of
stock or instruments or other property of third parties delivered
to such Pledgor as collateral for the obligations of such third
parties), such Pledgor agrees to accept the same as the Trustees'
agent and to hold the same in trust on behalf of and for the
benefit of the Trustees and to deliver the same forthwith to the
Corporate Trustee in the exact form received, with appropriate
undated powers as provided in Section 2(b) hereof, to be held by
the Corporate Trustee as Pledged Securities, subject to the terms
of this Securities Pledge Agreement, as additional collateral
security for the Senior Secured Obligations, and the same shall
constitute "Pledged Stock" for all purposes of this Securities
Pledge Agreement.
(c) If, while this Securities Pledge Agreement is in
effect, any Pledgor shall become entitled to receive any note,
bond, debenture, instrument, stock certificate or any instrument,
certificate or other writing representing or constituting an
option or right to acquire securities (other than any of the
foregoing constituting property of third parties which is
delivered to such Pledgor as collateral for the obligations of
such third parties), whether as an addition to, in substitution
of, or in exchange for any Investment Securities, or in payment
of the principal of any Investment Securities, such Pledgor
agrees to accept the same on behalf of and for the benefit of the
Trustees and to deliver the same (except for Instruments which
such Pledgor is not required to deliver under subsection 7.10 of
the Kmart Credit Agreement and Investment Securities not required
to be delivered pursuant to subsection 7.11(d) of the Kmart
Credit Agreement) forthwith to the Corporate Trustee in the exact
form received, with appropriate undated powers as provided in
Section 2(b) hereof, to be held by the Corporate Trustee as
Pledged Securities, subject to the terms of this Securities
Pledge Agreement, as additional collateral security for the
Senior Secured Obligations, and the same shall constitute
"Investment Securities" for all purposes of this Securities
Pledge Agreement.
(d) If, after the Effective Date, any Pledgor shall
desire to pledge the shares of a Subsidiary which have not
previously been pledged hereunder, such Pledgor shall pledge such
shares to the Trustees and shall deliver to the Corporate Trustee
stock certificates representing all of such shares of capital
stock of such Subsidiary, together with appropriate undated
powers as provided in Section 2(b) hereof, to be held by the
Corporate Trustee as Pledged Securities, subject to the terms of
this Securities Pledge Agreement, as additional collateral
security for the Senior Secured Obligations.
(e) Notwithstanding anything to the contrary herein,
no Pledgor shall be required to pledge Temporary Cash Equivalent
Investments or stock or other equity securities issued by any
Person if the stock of such Person does not constitute Pledged
Stock on the Effective Date (except to the extent required by the
Kmart Credit Agreement) or if, in respect of a Foreign Subsidiary
or Foreign Holding Company (as such terms are defined in the
Kmart Credit Agreement), the aggregate portion of stock of such
Person that is Pledged Stock would exceed 65% of the outstanding
Capital Stock of such Person.
4. Cash Dividends; Exercise of Rights. (a) Unless a
Notice of Acceleration is in effect, each Pledgor shall be
entitled, except as provided in Section 6 hereof and in Section 9
hereof, to receive all distributions (including, without
limitation, dividends and interest payments), in respect of the
Pledged Securities and to vote the Pledged Securities and to
exercise any and all rights and options included in the Pledged
Securities and to give consents, waivers and ratifications in
respect of the Pledged Securities; provided, however, that no
vote shall be cast or consent, waiver or ratification given or
action taken which would materially impair the value of the
Pledged Securities or be inconsistent with or violate any
provision of this Securities Pledge Agreement or the Trust
Agreement.
(b) In order to permit each Pledgor to exercise the
powers of voting and/or consent retained by such Pledgor under
Section 4(a) hereof and to receive such payments as such Pledgor
is entitled to receive and retain under said Section, the
Trustees shall, if necessary, upon the written request of such
Pledgor, from time to time execute and deliver to such Pledgor
appropriate proxies and dividend or payment orders. The Trustees
shall have no responsibilities for the manner in which any such
proxy is exercised or any duty to see to the application of any
such payments. In order to permit the Trustees to receive all
distributions to which they are entitled under Section 3 hereof
and Section 6 hereof, each Pledgor shall, if necessary, from time
to time execute and deliver to the Corporate Trustee, upon its
request, appropriate dividend or payment orders. If any Pledgor
shall not have executed and delivered any such dividend or
payment order within three Business Days after it receives a
written request from the Corporate Trustee to do so, the
Corporate Trustee may execute the same on behalf of such Pledgor.
Each Pledgor hereby appoints the Corporate Trustee as its agent
and attorney to act for it as provided in the next preceding
sentence.
5. Rights of the Trustee and the Senior Creditors.
While a Notice of Acceleration is in effect, without notice to
any Pledgor, the Trustees may transfer or register or have
registered in the name of the Corporate Trustee or the Corporate
Trustees' nominee any and all of the Pledged Securities which are
in registerable form. If a Notice of Acceleration is in effect,
the Corporate Trustee or its nominee may thereafter, after
delivery of notice to the relevant Pledgor, exercise all voting
and corporate rights at any meeting of any corporation or other
entity issuing any of the Pledged Securities and any and all
rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any shares of the Pledged
Securities as if it were the absolute owner thereof, including,
without limitation, the rights to exchange at its discretion any
and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other readjustment of any
corporation or other entity issuing any of such shares or upon
the exercise by any such issuer or the Corporate Trustee or any
right, privilege or option pertaining to any of the Pledged
Securities, and in connection therewith, to deposit and deliver
any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as it may determine, all without
liability except to account for property actually received by it,
but the Trustees shall have no duty to exercise and neither the
Administrative Agent nor any Senior Creditor
shall have any duty to request the exercise of any of the
aforesaid rights, privileges or options, and neither the Trustees
nor the Administrative Agent nor any Senior Creditor shall be
responsible for any failure to do so or delay in so doing.
6. Remedies, Rights Upon Acceleration of Senior
Secured Obligations. (a) If a Notice of Acceleration is in
effect:
(i) The Trustees may at any time, without further
notice to any Pledgor, notify Persons whose obligations to
any Pledgor have been assigned hereunder that such
obligations have been assigned to the Trustees and that
payments thereunder or in respect thereof shall be made
directly to the Corporate Trustee. If requested by the
Trustees, the relevant Pledgor will (at such Pledgor's own
expense) so notify such Persons. The Trustees may in their
own names or in the name of others communicate with such
Persons.
(ii) All payments received by any Pledgor under or in
connection with any of the Pledged Securities shall be held
by such Pledgor in trust for the Trustees, shall be
segregated from other funds of such Pledgor and shall,
forthwith upon receipt by such Pledgor, be turned over to
the Corporate Trustee, in the same form as received by such
Pledgor (duly indorsed to the Trustees, if required) for
deposit in the Collateral Account.
(iii) Any and all such payments so received by the
Trustees (whether from any Pledgor or otherwise) shall be
deposited by the Trustees in the Collateral Account and
shall be held by the Trustees as part of the Trust Estate.
Any Proceeds which are Pledged Securities, when collected,
whether consisting of checks, notes, drafts, bills of
exchange, money orders, or commercial paper of any kind
whatsoever shall be held or deposited in the Collateral
Account and held as part of the Trust Estate subject to
withdrawal and distribution by the Corporate Trustee as
provided in the Trust Agreement.
(b) If a Notice of Acceleration is in effect, the
Trustees may exercise, in addition to all other rights and
remedies granted to them in this Securities Pledge Agreement, all
rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, each Pledgor expressly
agrees that in any such event the Trustees, without demand of
performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or
private sale) to or upon any Pledgor or any other Person (all and
each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate
and realize upon the Pledged Securities, or any part thereof,
and/or may forthwith sell, assign, give option or options to
purchase, or sell or otherwise dispose of and deliver said
Pledged Securities (or contract to do so), or any part thereof,
in one or more parcels at public or private sale or sales, at any
exchange, broker's board or at any of the Corporate Trustee's
offices or elsewhere at such prices as they may deem best, for
cash or on credit or for future delivery without assumption of
any credit risk. The Trustees or any Senior Creditor shall have
the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Pledged Securities so sold,
free of any right or equity of redemption in any Pledgor, which
right or equity is hereby expressly waived and released. The
Trustees shall deposit the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale in the
Collateral Account pursuant to subsection 3.1 of the Trust
Agreement. To the extent permitted by applicable law, each
Pledgor waives all claims, damages and demands against the
Trustees, the Administrative Agent or any Senior Creditor arising
out of the repossession, retention or sale of the Pledged
Securities. Each Pledgor agrees that the Trustees need not give
any notice of any sale on a recognized public market or give more
than 10 Business Days' notice (which notification shall be deemed
given when mailed, postage prepaid, addressed to such Pledgor at
its address determined pursuant to Section 10 hereof) of the time
and place of any other public sale or of the time after which a
private sale may take place and that such notice is reasonable
notification of such matters.
7. Registration Rights. (a) If the Trustees shall
determine to exercise their right to sell any or all of the
Pledged Securities pursuant to Section 6 hereof, and if in the
opinion of counsel for the Corporate Trustee it is necessary, or
if in the reasonable opinion of the Corporate Trustee under
applicable law it is advisable, to have the Pledged Securities or
that portion thereof to be sold, registered under the provisions
of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), each
relevant Pledgor will use its best efforts to cause the issuers
of the Pledged Securities contemplated to be sold, to execute and
deliver, and cause the directors and officers of each thereof to
execute and deliver, all at such Pledgor's expense, all such
instruments and documents, and to do or cause to be done all such
other acts and things as may be necessary or, in the opinion of
the Corporate Trustee, advisable to register the Pledged
Securities or that portion thereof to be sold, under the
provisions of the Securities Act and to cause the registration
statement relating thereto to become effective and to remain
effective for such period as the Corporate Trustee may deem
appropriate to facilitate the sale or other disposition of such
Pledged Securities from the date of the first public offering of
the Pledged Securities or that portion thereof to be sold, and to
make all amendments thereto and/or to the related prospectus
which, in the opinion of the Corporate Trustee, are necessary or
advisable, all in conformity with the requirements of the
Securities Act. Each relevant Pledgor agrees to use its best
efforts to cause each such issuer to comply with the provisions
of the securities or "Blue Sky" laws of any jurisdiction which
the Corporate Trustee shall designate and to cause each such
issuer to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited)
which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Each Pledgor recognizes that the Trustees may be
unable to effect a public sale of any or all the Pledged
Securities by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws, but may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers who will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall not for such reason alone be deemed to have been made
in a commercially unreasonable manner. Neither the Trustees nor
the Senior Creditors shall be under any obligation to delay a
sale of any of the Pledged Securities for the period of time
necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act, or
under applicable state securities laws, even if the issuer would
agree to do so.
(c) Each Pledgor further agrees to use its best
efforts to do or cause to be done all such other acts and things
as may be necessary to make such sale or resales of any portion
or all of the Pledged Securities valid and binding and in
compliance with any and all applicable laws, regulations, orders,
writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or resales, all
at such Pledgor's expense.
(d) If the Trustees determine to exercise their right
to sell all or any of the Pledged Securities, upon written
request, each Pledgor shall from time to time furnish to the
Corporate Trustee all such information as the Corporate Trustee
may request in order to determine the Pledged Securities which
may be sold by such Pledgor as exempt transactions under the
Securities Act.
(e) At the request of the Corporate Trustee, each
Pledgor agrees to indemnify and hold harmless, and each relevant
Pledgor agrees to use its best efforts to cause the issuer or
issuers whose stock or securities are to be sold pursuant to
Section 6 hereof to agree to indemnify and hold harmless, the
Trustees, the Administrative Agent and each Senior Creditor (and
any Person controlling any thereof) from and against any loss,
liability, claim, damage and reasonable expense (and reasonable
counsel fees incurred in connection therewith) under the
Securities Act or otherwise insofar as such loss, liability,
claim, damage or expense arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in any registration statement, prospectus or offering
memorandum or in any preliminary prospectus or preliminary
offering memorandum or any amendment or supplement to any
thereof, or arises out of or is based upon any omission or
alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not
misleading, such indemnification to remain operative regardless
of any investigation made by or on behalf of the Trustees, the
Administrative Agent or any Senior Creditor (or any Person
controlling any thereof); provided that such Pledgor and any such
issuer shall not be liable in any case to the extent that any
such loss, liability, claim, damage or expense arises out of or
is based on an untrue statement or alleged untrue statement or an
omission or an alleged omission made by, or in reliance upon and
in conformity with written information furnished by, the
Trustees, the Administrative Agent, any Senior Creditor or any
other Person not under the control of such Pledgor.
8. Possession of Pledged Securities. Subject to the
specific requirements of subsection 3(a) and (c) hereof with
respect to Instruments, Section 9 hereof with respect to Cash
Equivalents and Section 5 of the Trust Agreement, the Corporate
Trustee shall hold in its possession all Pledged Securities
pledged, assigned or transferred hereunder and from time to time
constituting a portion of the Collateral, except for any
documents or instruments which from time to time are certified by
the relevant Pledgor to be required for recordation or for the
purpose of enforcing or realizing upon any right or value thereby
represented or for the purpose of substituting new Pledged
Securities evidencing Pledged Securities then in possession of
the Corporate Trustee or as may be required in the administration
of a Pledgor's business in the ordinary course (subject to such
requirements as the Trustees or any custodian shall reasonably
request) and except as otherwise permitted by the Kmart Credit
Agreement or the Trust Agreement. The Corporate Trustee may,
from time to time, in its sole discretion, appoint one or more
agents or nominees (which in no case shall be a Pledgor or an
affiliate, employee or agent of a Pledgor) to hold physical
custody, for the account of the Corporate Trustee, of any or all
Pledged Securities.
9. Cash Equivalents. (a) On or before the Effective
Date and at any time thereafter, the Corporate Trustee shall
establish, in the Trustees' name, one or more accounts
(individually, a "Securities Account") which may be maintained
with the Corporate Trustee or any agent thereof in accordance
with Section 9(e) hereof. So long as no Notice of Acceleration
is in effect and except as otherwise permitted by the Kmart
Credit Agreement or the Trust Agreement, all Pledged Securities
which are Cash Equivalents shall be held by the Corporate Trustee
or a custodian or other agent of the Corporate Trustee in a
Securities Account subject to release upon request by the
relevant Pledgor strictly in accordance with Section 9(c) hereof.
Upon receipt of a Notice of Acceleration and thereafter so long
as such Notice of Acceleration is in effect, the Corporate
Trustee shall, at the direction of the Administrative Agent,
transfer or cause to be transferred for deposit in the Collateral
Account all Cash Equivalents and all funds in the Securities
Accounts.
(b) Unless a Notice of Acceleration is in effect, the
purchase, sale or presentation for payment of Cash Equivalents in
the Securities Accounts, the receipt by any Pledgor of the
proceeds of the sale or collection thereof and any interest paid
thereon and the release upon request by any Pledgor of funds or
Cash Equivalents on deposit therein shall all occur as provided
below in this Section 9(b) and Section 9(c) hereof. To initiate
the purchase of Cash Equivalents with funds from time to time on
deposit in the Securities Accounts under the control of the
Corporate Trustee or a custodian or other agent of the Corporate
Trustee, the relevant Pledgor will instruct the Corporate Trustee
or such custodian or agent, as the case may be, as to the
particulars of such purchase. The Corporate Trustee or such
custodian or agent will make arrangements (either directly or
through one or more agents) for the purchase of such Cash
Equivalents, including the payment of the purchase price thereof
in accordance with such instructions. Except as otherwise
permitted by the Kmart Credit Agreement, all Cash Equivalents
(other than Permitted Book-Entry Securities) purchased by the
Corporate Trustee or such custodian or agent, as the case may be,
as aforesaid (and all securities (other than Permitted Book-Entry
Securities) subject to, together with all confirmations relating
to, repurchase agreements) will be delivered to (or, in the case
of eurodollar deposits, made in the name of) the Corporate
Trustee or such custodian or agent and, subject to the following
sentence, held in the Securities Accounts. To initiate the sale
or presentation for payment of Cash Equivalents, the relevant
Pledgor will instruct the Corporate Trustee or such custodian or
agent as to the particulars of such sale or presentation,
whereupon the Corporate Trustee or such custodian or agent will
make arrangements (either directly or through the appropriate
agents) for the sale or presentation of such Cash Equivalents in
accordance with such instructions. Funds received by the
Corporate Trustee or such custodian or agent on the sale or
collection of Cash Equivalents (including interest payable in
respect thereof) which are not released pursuant to a request by
a Pledgor in accordance with Section 9(c) hereof shall be
reinvested by the Corporate Trustee or such custodian or agent in
Cash Equivalents in accordance with the instructions of the
relevant Pledgor. While a Notice of Acceleration is in effect,
no Pledgor shall have the right to give instructions to the
Corporate Trustee or such custodian or agent pursuant to this
Section 9(b). Instructions to the Corporate Trustee or such
custodian or agent pursuant to this Section 9(b) may be given in
writing, by facsimile, by computer transmission or orally
(confirmed in writing).
(c) So long as no Notice of Acceleration is in effect,
each Pledgor may obtain the release to it or its order of funds
in any Securities Account on the following terms and conditions:
(i) Each request by such Pledgor for a release of such
funds shall be made to the Corporate Trustee or applicable
custodian or agent and the Corporate Trustee or such
custodian or agent shall immediately cause such funds to be
delivered to the Pledgor.
(ii) Such Pledgor covenants and agrees that it will not
use any funds as to which it requests release for any
purpose prohibited under the terms of the Kmart Credit
Agreement.
(iii) The Trustees shall have no duty to monitor or
investigate the use of proceeds released to such Pledgor
pursuant to this Section 9(c).
(d) Any written or oral request or instructions by any
Pledgor pursuant to clause (i) of this Section 9(c) or pursuant
to Section 9(b) hereof shall be full authority for and direction
to the Corporate Trustee or applicable custodian or agent of the
Corporate Trustee to make the requested release or investment, as
the case may be, and the Corporate Trustee or applicable
custodian or agent of the Corporate Trustee shall promptly do so.
The Trustees and their custodians and agents in so doing shall
have no liability to any Person.
(e) The Corporate Trustee shall from time to time
appoint, as its agent or agents, one or more Persons (which in no
case shall be a Pledgor or an affiliate, employee or agent of a
Pledgor) designated by a Pledgor and reasonably acceptable to the
Corporate Trustee, located in New York (or such other
jurisdictions within the United States as may be designated by a
Pledgor) with whom a Securities Account shall be established and
maintained. Prior to establishing such a Securities Account, the
Person so appointed shall deliver to the Corporate Trustee a
writing acknowledging that (i) in opening such Securities
Accounts and holding Cash Equivalents therein, such Person is
acting as agent of the Corporate Trustee and will conduct
transactions in Cash Equivalents in such account in the name of
the Corporate Trustee (with any confirmations of such
transactions sent by such Person to reflect that fact), and (ii)
such Person shall in no event deliver any Cash Equivalents held
in such Securities Account to any Pledgor or any affiliate,
employee or agent of any Pledgor. The provisions of clause (ii)
of this Section 9(e) shall also apply to any Securities Account
maintained with the Corporate Trustee.
(f) Upon the sale or disposition of any Cash
Equivalents pursuant to this Section 9, the Trustees' security
interest therein (but not in the Proceeds arising from such sale
or disposition) shall, without any further action on the part of
the Trustees, be released.
10. Notices. All notices or other communications
hereunder shall be given in the manner and to the addresses
determined under subsection 7.1 of the Trust Agreement. Where
customary and appropriate, communications hereunder relating to
the Securities Account may be made by computer transmission.
11. Severability. Any provision of this Securities
Pledge Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
12. No Waiver; Cumulative Remedies. Neither the
Trustees nor the Senior Creditors shall by any act, delay,
omission or otherwise be deemed to have waived any of its or
their rights or remedies hereunder and no waiver shall be valid
unless in writing, signed by the Trustees, and then only to the
extent therein set forth. A waiver by the Trustees of any right
or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Trustees or the Senior
Creditors would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of
the Trustees, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder
provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies
provided by law.
13. Waivers; Amendments; Conflicts. None of the terms
and provisions of this Securities Pledge Agreement may be waived,
altered, modified or amended except by an instrument in writing
executed by the parties hereto in accordance with subsection 7.3
of the Trust Agreement. In case of any conflict between the
terms of this Securities Pledge Agreement and the Trust
Agreement, the terms of the Trust Agreement shall control.
14. Limitation by Law; Limitation by Contract. (a)
All rights, remedies and powers provided by this Securities
Pledge Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of
law, and all the provisions of this Securities Pledge Agreement
are intended to be subject to all applicable mandatory provisions
of law which may be controlling and (subject to Section 11
hereof) to be limited to the extent necessary so that they will
not render this Securities Pledge Agreement invalid,
unenforceable in whole or in part or not entitled to be recorded,
registered, or filed under the provisions of any applicable law.
In addition, and without limiting the generality of the
foregoing, (x) if any applicable law restricts the pledging or
granting of a security interest in any property or asset of a
Pledgor unless one or more consents have been obtained or one or
more conditions have been satisfied, then such property or asset
shall not be subject to a security interest hereunder and shall
not constitute Pledged Securities unless such consents have been
obtained and such conditions have been satisfied, and (y) if any
applicable law restricts the sale, assignment or other transfer
of any interest of a Pledgor in any Pledged Securities unless one
or more consents have been obtained or one or more conditions
have been satisfied, then no such sale, assignment or other
transfer of such interest shall be made hereunder or in
connection herewith unless such consents have been obtained and
such conditions have been satisfied.
(b) The security interest granted hereunder shall not
extend to any property or asset of any Pledgor to the extent, and
only for so long as, such property is subject to another lien or
security interest which restricts the granting of additional
liens or security interests on such property and such property
shall not constitute Pledged Securities; provided that (i) such
lien or security interest is permitted pursuant to subsection
8.4(f), (g), (i), (j) or (l) of the Kmart Credit Agreement and
(ii) the restriction on the granting of additional liens or
security interests extends only to the property subject to such
lien or security interest and the proceeds thereof.
(c) If any contract expressly prohibits the granting
of a security interest in such contract without consent, then
unless such consent has been obtained, such contract shall not be
subject to a security interest hereunder and shall not constitute
Pledged Securities.
15. Successors and Assigns. This Securities Pledge
Agreement shall be binding upon and inure to the benefit of the
parties hereto and shall inure to the benefit of the Senior
Creditors and their respective successors and assigns and nothing
herein or in the Trust Agreement or any other Security Document
is intended or shall be construed to give any other Person any
right, remedy or claim under, to or in respect of this Securities
Pledge Agreement, the Trust Agreement, any other Security
Document or any Collateral.
16. Termination of Securities Pledge Agreement. This
Securities Pledge Agreement, and all of the obligations of each
Pledgor hereunder, shall terminate simultaneously with the
reversion of the Trust Estate to the Obligors in accordance with
subsection 7.10(a) of the Trust Agreement.
17. Right to Sell. It is agreed that, to the extent
permitted by subsections 5.1 and 7.10 of the Trust Agreement with
respect to Pledged Securities generally or Section 9 hereof with
regard to Cash Equivalents, each Pledgor shall have the right to
sell or otherwise dispose of, free and clear of the security
interest created hereby, any of the Pledged Securities.
18. Applicable Law. This Securities Pledge Agreement
shall be governed by, and be construed and interpreted in
accordance with, the law of the State of New York, except as
required by mandatory provisions of law.
19. VTA. VTA, Inc., a Delaware corporation, shall be
party to this Securities Pledge Agreement solely for the purpose
of pledging the items referred to in subsection 7.10(d) of the
Kmart Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Pledge Agreement to be executed and delivered (by
their duly authorized officers in the case of corporate parties)
as of the date first set forth above.
KMART CORPORATION
By: ____________________________
Name:
Title:
BUILDERS SQUARE, INC.
By: ____________________________
Name: Calvin B. Massmann
Title: Senior Vice President and
Chief Financial Officer
KMART APPAREL SERVICE OF ATLANTA CORP.
By: ____________________________
Name:
Title:
KMART APPAREL SERVICE OF DES PLAINES CORP.
By: ____________________________
Name:
Title:
K-MART APPAREL OF PUERTO RICO CORP.
By: ____________________________
Name:
Title:
KMART HOLDINGS, INC.
By: ____________________________
Name:
Title:
KMART PROPERTIES, INC.
By: ____________________________
Name: Gerald T. Tschura
Title: Vice President
PMB, INC.
By: ____________________________
Name:
Title:
SOURCING AND TECHNICAL SERVICES, INC.
By: ____________________________
Name:
Title:
KMART OVERSEAS CORPORATION
By: ____________________________
Name:
Title:
JAF, INC.
By: ____________________________
Name:
Title:
VTA, INC.
By: ____________________________
Name:
Title:
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Corporate Trustee
By: ___________________________
Name:
Title:
___________________________________
WARD A. SPOONER, as Individual
Trustee
Schedule A To
Securities Pledge Agreement
Pledged Shares
Kmart Corporation
December 16, 1996
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attn: Martin L. Grass
Chief Executive Officer
Dear Mr. Grass:
Reference is hereby made to the Agreement, dated as of
October 13, 1996, by and between Rite Aid Corporation, a
Delaware corporation ("Parent"), Kmart Corporation, a
Michigan corporation ("Kmart"), and joined in by the
Individual Stockholders for the purpose set forth in
Section 11 therein (the "Stockholder Agreement"). All
capitalized terms used herein shall have the meanings
assigned to such terms in the Stockholder Agreement,
unless otherwise defined herein.
In accordance with Section 4 of Appendix A to the
Stockholder Agreement, Kmart hereby requests that Parent
effect the registration with the SEC under and in
accordance with the Securities Act of all Registrable
Securities to be received by Kmart pursuant to the Merger
in exchange for the 10,622,714 shares of Company Common
Stock owned by Kmart. (Based upon the Exchange Ratio as
defined in the Merger Agreement, such shares of Company
Common Stock owned by Kmart would be converted into
6,904,764 shares of Parent Common Stock.) In furtherance
thereof, Kmart hereby requests that the registration be
in the form of a Shelf Registration using a Registration
Statement on Form S-3, that such Registration Statement
be effective as of the Effective Time or as soon
thereafter as practicable and that such Registration
Statement be kept effective until the earlier of (i) 360
days (or longer period in the event of a Registration
Hold Period, as contemplated by the Stockholder
Agreement) and (ii) such time as all Registrable
Securities covered by such Registration Statement have
ceased to be Registrable Securities. The plan of
distribution set forth in the Registration Statement
shall be as provided in Exhibit A hereto.
If Parent requires any additional information from Kmart
for inclusion in the Registration Statement, please
notify our attorneys at the address set forth in Section
10(e) of the Stockholder Agreement.
Sincerely,
Martin E. Welch III
Senior Vice President
and Chief Financial Officer
cc: Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Attn: Robert A. Profusak
EXHIBIT A
PLAN OF DISTRIBUTION
The Selling Stockholder [Kmart] or its pledgees,
donees, transferees or other successors in interest may
offer the Shares [Registrable Securities] from time to
time depending on market conditions and other factors, in
one or more transactions on the New York Stock Exchange
or other national securities exchanges on which the
Shares are traded, in the over-the-counter market or
otherwise, at market prices prevailing at the time of
sale, at negotiated prices or at fixed prices. The
Shares may be offered in any manner permitted by law,
including through underwriters, brokers, dealers or
agents, and directly to one or more purchasers. Sales of
the Shares may involve (a) sales to underwriters who will
acquire Shares for their own account and resell them in
one or more transactions at fixed prices or at varying
prices determined at time of sale, (b) a block
transaction in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate
the transaction, (c) purchases by a broker or dealer as
principal and resale by such broker or dealer for its
account, (d) an exchange distribution in accordance with
the rules of any such exchange, and (e) ordinary
brokerage transactions and transactions in which a broker
solicits purchasers. Brokers and dealers may receive
compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholder
and/or purchasers of Shares for whom they may act as
agent (which compensation may be in excess of customary
commissions). The Selling Stockholder and any broker or
dealer that participates in the distribution of Shares
may be deemed to be underwriters and any commissions
received by them and any profit on the resale of Shares
positioned by a broker or dealer may be deemed to be
underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "Securities
Act"). In the event the Selling Stockholder engages an
underwriter in connection with the sale of the Shares, to
the extent required, a Prospectus Supplement will be
distributed, which will set forth the number of Shares
being offered and the terms of the offering, including
the names of the underwriters, any discounts, commissions
and other items constituting compensation to
underwriters, dealers or agents, the public offering
price and any discounts, commissions or concessions
allowed or reallowed or paid by underwriters to dealers.
In addition, the Selling Stockholder may from time
to time sell Shares in transactions under Rule 144
promulgated under the Securities Act.
Pursuant to the Stockholder Agreement, dated as of
October 13, 1996 (the "Stockholder Agreement"), by and
between the Company [Parent] and the Selling Stockholder,
the Company will pay all registration expenses in
connection with all registrations of the Shares upon the
written request of the Selling Stockholder, and the
Selling Stockholder will pay (a) any fees or
disbursements of counsel to the Selling Stockholder and
(b) all underwriting discounts and commissions and
transfer taxes, if any, and other fees, costs and
expenses of the Selling Stockholder relating to the sale
or disposition of the Selling Stockholder's Shares
pursuant to the registration statement. The Selling
Stockholder and the Company have agreed to indemnify each
other against certain civil liabilities, including
certain liabilities under the Securities Act.
