PERRY DRUG STORES INC, SC 14D1, 1994-12-29

PERRY DRUG STORES INC
SC 14D1, 1994-12-29
DRUG STORES AND PROPRIETARY STORES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------

PERRY DRUG STORES, INC.
------------------------
(NAME OF SUBJECT COMPANY)

LAKE ACQUISITION CORPORATION
RITE AID CORPORATION
------------------------
(BIDDERS)

COMMON STOCK, $.05 PAR VALUE
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(TITLE OF CLASS OF SECURITIES)

714611 10 0
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(CUSIP NUMBER OF CLASS OF SECURITIES)

FRANKLIN C. BROWN, ESQ.
EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL COUNSEL
RITE AID CORPORATION
30 HUNTER LANE
CAMP HILL, PA 17011
TELEPHONE: (717) 761-2633
------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)

With a copy to:
NANCY A. LIEBERMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NY 10022
TELEPHONE: (212) 735-3000
------------------------

CALCULATION OF FILING FEE

TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$134,017,752 $26,803.55

* Estimated for purpose of calculating the filing fee only. The calculation

assumes the purchase of 11,842,382 shares of common stock, $.05 par value (the
'Shares') (which represents 12,027,382 Shares outstanding less 185,000 Shares
owned by the Bidders), and 341,050 Shares reserved for issuance upon exercise
of options, at a price per Share of $11.00 in cash. Such number of Shares
represents all the Shares outstanding as of December 23, 1994, and assumes the
exercise of all existing options to acquire Shares from the Company.

**The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by Lake Acquisition Corporation for
such number of Shares.

/ / Check box if any part of the fee is offset as provided Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.

AMOUNT PREVIOUSLY PAID: NOT APPLICABLE FILING PARTY: NOT APPLICABLE
FORM OR REGISTRATION NO.: NOT APPLICABLE DATE FILED: NOT APPLICABLE

PAGE 1 OF PAGES
EXHIBIT INDEX IS LOCATED ON PAGE 8
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CUSIP NO. 714611 10 0 14D-1
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS

LAKE ACQUISITION CORPORATION (I.R.S. Identification Number to be
applied for.)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS

AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f). / /

N/A
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6 CITIZENSHIP OR PLACE OF ORGANIZATION

State of Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,115,284*
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /

N/A
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)

9.27%*
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10 TYPE OF REPORTING PERSON

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* On December 23, 1994, Rite Aid Corporation, a Delaware corporation ('Parent'),
and Lake Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ('Purchaser'), entered into Shareholders Agreements (the
'Shareholders Agreements') with a Mr. Jack Robinson and Mrs. Aviva Robinson
(collectively, the 'Selling Shareholders'), shareholders of Perry Drug Stores,
Inc. (the 'Company'), pursuant to which the Selling Shareholders agreed, among
other things, to tender an aggregate of 1,115,284 shares of common stock, $.05
par value per share (the 'Shares'), of the Company owned by them (representing
approximately 9.02% of the Shares outstanding calculated on a fully diluted
basis excluding shares reserved for issuance upon conversion of the
Convertible Debentures (as defined herein)) into Purchaser's offer to purchase
all of the outstanding Shares. Upon certain circumstances, Parent also has the
right to acquire from the Selling Shareholders all of their Shares. The
Shareholders Agreements are described more fully in Section 11 of the Offer to
Purchase, dated December 29, 1994.

2
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CUSIP NO. 714611 10 0 14D-1
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS

RITE AID CORPORATION (23-1614034)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP

(a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS

BK, WC, 00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f). / /

N/A
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6 CITIZENSHIP OR PLACE OF ORGANIZATION

State of Delaware
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,300,284*
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /

N/A
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)

10.81%*
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10 TYPE OF REPORTING PERSON

CO
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<PAGE>
TENDER OFFER

This Tender Offer Statement on Schedule 14D-1 is filed by Lake Acquisition
Corporation, a Delaware corporation ('Purchaser'), and Rite Aid Corporation, a
Delaware corporation and the owner of all of the outstanding capital stock of
Purchaser ('Parent'), relating to the offer by Purchaser to purchase all
outstanding shares of common stock, $.05 par value (the 'Shares'), of Perry Drug
Stores, Inc. (the 'Company'), at $11.00 per Share, net to the seller in cash, on
the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 29, 1994 (the 'Offer to Purchase'), and in the related Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively (which, as amended from time to time, together constitute the
'Offer').

ITEM 1. SECURITY AND SUBJECT COMPANY.

(a) The name of the subject company is Perry Drug Stores, Inc., a Michigan
corporation (the 'Company'). The address of the Company's principal executive
offices is 5400 Perry Drive, P.O. Box 436021, Pontiac, MI 48343-6021.

(b) The information set forth on the cover page under 'Introduction' in the
Offer to Purchase is incorporated herein by reference.

ITEM 2. IDENTITY AND BACKGROUND.

(a)-(d); (g) This Statement is filed by Purchaser and Parent. The
information set forth on the cover page, under 'Introduction,' in Section 8 and
in Schedule I of the Offer to Purchase is incorporated herein by reference.

(e)-(f) During the last five years, neither Purchaser or Parent nor, to
their knowledge, any of the persons listed in Schedule I (Directors and
Executive Officers) to the Offer to Purchase, (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.

(a) None.

(b) The information set forth under 'Introduction' and in Sections 10 and
11 of the Offer to Purchase is incorporated herein by reference.

ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a)-(c) The information set forth under 'Introduction' and in Section 9 of
the Offer to Purchase is incorporated herein by reference.

ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.

(a)-(e) The information set forth under 'Introduction' and Sections 10 and
11 of the Offer to Purchase is incorporated herein by reference.

(f)-(g) The information set forth in Section 13 of the Offer to Purchase is
incorporated herein by reference.

ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a)-(b) The information set forth under 'Introduction' and in Schedule II
of the Offer to Purchase is incorporated herein by reference.

ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.

The information set forth under 'Introduction' and in Section 11 of the
Offer to Purchase is incorporated herein by reference.

4
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ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth under 'Introduction' and in Section 16 of the
Offer to Purchase is incorporated herein by reference.

ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.

The information set forth in Section 8 of the Offer to Purchase is
incorporated herein by reference.

ITEM 10. ADDITIONAL INFORMATION.

(a) The information set forth under 'Introduction' and in Section 11 of the
Offer to Purchase is incorporated herein by reference.

(b)-(e) The information set forth in Sections 13 and 15 of the Offer to
Purchase is incorporated herein by reference.

(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.

ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.

(a)(1) Offer to Purchase, dated December 29, 1994.

(a)(2) Letter of Transmittal.

(a)(3) Notice of Guaranteed Delivery.

(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.

(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.

(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

(a)(7) Form of Summary Advertisement, dated December 29, 1994.

(a)(8) Text of Press Release, dated December 27, 1994.

(b)(1) Form of Credit Agreement, dated as of February 7, 1994, as amended
by Amendment No. 1 dated as of February 16, 1994, by and among
Parent and Morgan Guaranty Trust Company of New York, as agent, and
the financial institutions named therein.

(c)(1) Agreement and Plan of Merger, dated as of December 23, 1994, by and
among Parent, Purchaser and the Company.

(c)(2) Shareholders Agreement, dated as of December 23, 1994, by and among
Parent, Purchaser and Mr. Jack Robinson.

(c)(3) Shareholders Agreement, dated as of December 23, 1994, by and among
Parent, Purchaser and Mrs. Aviva Robinson.

(c)(4) Consulting Agreement, dated as of December 23, 1994, by and between
Parent and Mr. Jack Robinson.

(c)(5) Confidentiality Agreement, dated December 14, 1994, by and between
Parent and the Company.

(d) None.

(e) Not applicable.

(f) None.

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SIGNATURES

After due 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 29, 1994 RITE AID CORPORATION

By: /s/ MARTIN L. GRASS
----------------------------------
Name: Martin L. Grass
Title: President and Chief Operating
Officer

6
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SIGNATURES

After due 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 29, 1994 LAKE ACQUISITION CORPORATION

By: /s/ MARTIN L. GRASS
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Name: Martin L. Grass
Title: Vice President

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EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
EXHIBIT DESCRIPTION NO.
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<S> <C> <C>
(a)(1) -- Offer to Purchase, dated December 29, 1994.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) -- Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other
Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7) -- Form of Summary Advertisement, dated December 29,
1994.
(a)(8) -- Text of Press Release, dated December 27, 1994.
(b)(1) -- Form of Credit Agreement, dated as of February 7,
1994, as amended by Amendment No. 1 dated as of
February 16, 1994, by and among Parent and Morgan
Guaranty Trust Company of New York, as agent, and
the financial institutions named therein.
(c)(1) -- Agreement and Plan of Merger, dated as of December
23, 1994, by and among Parent, Purchaser and the
Company.
(c)(2) -- Shareholders Agreement, dated as of December 23,
1994, by and among Parent, Purchaser and Mr. Jack
Robinson.
(c)(3) -- Shareholders Agreement, dated as of December 23,
1994, by and among Parent, Purchaser and Mrs.
Aviva Robinson.
(c)(4) -- Consulting Agreement, dated as of December 23,
1994 by and between Parent and Mr. Jack Robinson.
(c)(5) -- Confidentiality Agreement, dated December 14,
1994, by and between Parent and the Company.
(d) -- None.
(e) -- Not applicable.
(f) -- None.
</TABLE>

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EXHIBIT (a)(1)

Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Rights)
of
PERRY DRUG STORES, INC.
at
$11.00 NET PER SHARE IN CASH
by
LAKE ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 27, 1995,
UNLESS THE OFFER IS EXTENDED.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AND THE ASSOCIATED RIGHTS) WHICH, WHEN ADDED TO THE SHARES OWNED BY LAKE
ACQUISITION CORPORATION (THE 'PURCHASER') AND ITS AFFILIATES, CONSTITUTES AT
LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, EXCLUDING
SHARES RESERVED FOR ISSUANCE UPON CONVERSION OF THE CONVERTIBLE DEBENTURES (AS
DEFINED HEREIN). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 14.

RITE AID CORPORATION ('PARENT') AND THE PURCHASER HAVE ENTERED INTO
SHAREHOLDERS AGREEMENTS WITH MR. JACK ROBINSON, INDIVIDUALLY AND AS TRUSTEE, THE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, AND MRS. AVIVA ROBINSON,
INDIVIDUALLY AND AS TRUSTEE (TOGETHER WITH MR. ROBINSON, THE 'SELLING
SHAREHOLDERS'), PURSUANT TO WHICH, AMONG OTHER THINGS, THE SELLING SHAREHOLDERS
HAVE AGREED TO TENDER IN THE OFFER, AND HAVE GRANTED PARENT AN OPTION TO ACQUIRE
AT THE OFFER PRICE, UPON THE TERMS AND SUBJECT TO THE CONDITIONS THEREOF, ALL
SHARES OWNED BY THE SELLING SHAREHOLDERS (OR APPROXIMATELY 9.02% OF THE
COMPANY'S OUTSTANDING SHARES CALCULATED ON A FULLY DILUTED BASIS, EXCLUDING
SHARES RESERVED FOR ISSUANCE UPON CONVERSION OF THE CONVERTIBLE DEBENTURES).

THE BOARD OF DIRECTORS OF PERRY DRUG STORES, INC. UNANIMOUSLY HAS DETERMINED
THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED HEREIN) IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS OF PERRY DRUG STORES, INC., AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.

IMPORTANT

Any shareholder desiring to tender all or any portion of such shareholder's
shares of common stock, par value $.05 per share (the 'Common Stock') and the
associated Rights (as defined herein, and together with the Common Stock, the
'Shares') should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) evidencing

tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 or (ii) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such shareholder. A
shareholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such shareholder
desires to tender such Shares.

A shareholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3.

Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent at its address and telephone number set
forth on the back cover of this Offer to Purchase. A shareholder may also
contact brokers, dealers, commercial banks and trust companies for assistance
concerning the Offer.
------------------------

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.

December 29, 1994

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
INTRODUCTION......................................................... 1
THE TENDER OFFER..................................................... 3
1. Terms of the Offer............................................... 3
2. Acceptance for Payment and Payment for Shares.................... 4
3. Procedures for Tendering Shares.................................. 5
4. Withdrawal Rights................................................ 7
5. Certain Federal Income Tax Consequences.......................... 8
6. Price Range of Shares; Dividends................................. 8
7. Certain Information Concerning the Company....................... 9
8. Certain Information Concerning the Purchaser and Parent.......... 10
9. Source and Amount of Funds....................................... 12
10. Background of the Offer; Contacts with the Company............... 13
11. Purpose of the Offer; Plans for the Company; Merger Agreement;
Shareholders Agreements; Consulting Agreement; and Other
Agreements..................................................... 14
12. Dividends and Distributions...................................... 26
13. Effect of the Offer on the Market for the Shares; Exchange

Listing and Exchange Act Registration.......................... 26
14. Conditions of the Offer.......................................... 27
15. Regulatory Approvals; State Takeover Laws........................ 28
16. Fees and Expenses................................................ 30
17. Miscellaneous.................................................... 30
Schedule I--Information Concerning the Directors and Executive
Officers of Parent and the Purchaser............................... I-1
Schedule II--Transactions in Shares During the Past 60 Days by
Parent............................................................. II-1
</TABLE>

i
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To the Holders of Common Stock of Perry Drug Stores, Inc.:

INTRODUCTION

Lake Acquisition Corporation (the 'Purchaser'), a Delaware corporation and
a wholly owned subsidiary of Rite Aid Corporation, a Delaware corporation
('Parent'), hereby offers to purchase all outstanding shares of common stock,
par value $.05 per share (the 'Common Stock'), of Perry Drug Stores, Inc., a
Michigan corporation (the 'Company'), and the associated Preferred Stock
Purchase Rights (the 'Rights' and, together with the Common Stock, the 'Shares')
issued pursuant to the Rights Agreement, dated as of February 4, 1987, as
amended, between the Company and State Street Bank & Trust Company, as successor
Rights Agent (the 'Rights Agreement'), at a price of $11.00 per Share, net to
the seller in cash, without interest thereon (the 'Offer Price'), upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended from time to time, together
constitute the 'Offer'). Until the Distribution Date (as defined herein), the
Rights will be evidenced by and trade with the certificates evidencing the
Common Stock. See Section 11 for a brief description of the Rights Agreement and
its application to the Offer and the Merger (as defined herein).

Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. The Purchaser will pay all charges and expenses of Harris Trust Company
of New York, as Depositary (the 'Depositary'), and MacKenzie Partners, Inc., as
Information Agent (the 'Information Agent'), incurred in connection with the
Offer. See Section 16.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
5,999,217 SHARES, WHICH, WHEN ADDED TO THE SHARES OWNED BY PARENT, THE PURCHASER
AND ITS AFFILIATES, CONSTITUTES A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (THE 'MINIMUM CONDITION'). PARENT OWNS 185,000 SHARES (OR 1.5% OF
THE OUTSTANDING SHARES CALCULATED ON A FULLY DILUTED BASIS) WHICH IT HAS
ACQUIRED IN OPEN MARKET TRANSACTIONS. ASSUMING THE PURCHASE BY THE PURCHASER OF
THE SELLING SHAREHOLDERS' 1,115,284 SHARES, THE PURCHASER WILL NEED TO PURCHASE
AN ADDITIONAL 4,883,933 SHARES TO SATISFY THE MINIMUM CONDITION.

THE BOARD OF DIRECTORS OF THE COMPANY (THE 'BOARD') HAS, BY UNANIMOUS VOTE,
APPROVED EACH OF THE OFFER AND THE MERGER, HAS DETERMINED THAT EACH OF THE OFFER

AND THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.

The Company has advised Parent that Wasserstein Perella & Co., Inc.
('Wasserstein Perella') and Peter J. Solomon Company Limited ('PJSC') have each
delivered to the Board its opinion as to the fairness of the $11.00 per Share
cash consideration to be received by the shareholders of the Company (other than
Parent) pursuant to the Offer and the Merger. Copies of the opinions of
Wasserstein Perella and PJSC, which set forth the factors considered and the
assumptions made by Wasserstein Perella and PJSC are contained in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the 'Schedule 14D-9'),
which is being mailed to shareholders herewith.

The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 23, 1994 (the 'Merger Agreement'), by and among Parent, the
Purchaser and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the General
Corporation Law of the State of Delaware ('Delaware Law') and the Michigan
Business Corporation Act ('Michigan Law'), Purchaser will be merged with and
into the Company (the 'Merger'). Following consummation of the Merger, the
Company will continue as the surviving corporation (the 'Surviving Corporation')
and will be a wholly owned subsidiary of Parent. At the effective time of the
Merger (the 'Effective Time'), each issued and outstanding Share, including the
associated Rights, immediately prior to the Effective Time (other than Shares
held in the treasury of the Company or owned by the Purchaser, Parent or any
direct or indirect wholly owned subsidiary of Parent) will be converted into the
right to receive the Offer Price, without interest (the 'Merger Consideration').
The Merger Agreement is more fully described in Section 11.

1
<PAGE>
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Board as will give the Purchaser
representation on the Board equal to the product of the total number of
directors on the Board multiplied by the percentage that the aggregate number of
Shares then beneficially owned by the Purchaser and its affiliates following
such purchase bears to the total number of Shares then outstanding. In the
Merger Agreement, the Company has agreed to use its best efforts promptly to
cause the Purchaser's designees to be elected as directors of the Company,
including increasing the size of the Board or securing the resignations of
incumbent directors or both. Notwithstanding the foregoing, the Company has
agreed to use all reasonable efforts to assure that prior to the Effective Time
the Board shall retain at least two directors who are directors on the date of
the Merger Agreement.

The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption of
the Merger Agreement by the requisite vote of the shareholders of the Company.
See Section 11. Under the Company's Restated Articles of Incorporation and

Michigan Law, except as otherwise described below, the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and adopt
the Merger Agreement and the Merger. Consequently, if the Purchaser acquires
(pursuant to the Offer or otherwise) at least a majority of the then outstanding
Shares, the Purchaser will have sufficient voting power to approve and adopt the
Merger Agreement and the Merger without the vote of any other shareholder.

Under Michigan Law and Delaware Law, if the Purchaser acquires, pursuant to
the Offer or otherwise, at least 90% of the then outstanding Shares, the
Purchaser will be able to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger, without a vote of the
Company's shareholders. In such event, Parent, the Purchaser and the Company
have agreed to take, at the request of the Purchaser, all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the Company's
shareholders. If, however, the Purchaser does not acquire at least 90% of the
then outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's shareholders is required under Michigan Law, a significantly longer
period of time will be required to effect the Merger. See Section 11.

Immediately after the execution of the Merger Agreement, Jack A. Robinson,
Chairman and Chief Executive Officer of the Company, and Aviva Robinson, the
wife of Jack A. Robinson (collectively, the 'Selling Shareholders') each,
individually and as trustee, entered into a Shareholders Agreement, dated as of
December 23, 1994, with Parent and the Purchaser (collectively, the
'Shareholders Agreements'). The Selling Shareholders collectively own 1,115,284
Shares, or approximately 9.02% of the outstanding Shares calculated on a fully
diluted basis. Pursuant to the Shareholders Agreements, the Selling Shareholders
have agreed to validly tender pursuant to the Offer and not withdraw all Shares
which are owned of record or beneficially by them prior to the Expiration Date
(as defined herein). Pursuant to the Shareholders Agreements, Parent has the
right to acquire from the Selling Shareholders at $11.00 per Share, all of their
Shares if (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser (whether due to the failure of any of the conditions to the Offer or
otherwise), or (ii) the Merger Agreement is terminated in accordance with its
terms. Subject to certain conditions specified in the Shareholders Agreements,
such right is exercisable in whole but not in part for the 90 day period
following the first to occur of the foregoing events. The Shareholders
Agreements are more fully described in Section 11.

Parent and Jack A. Robinson, the Chairman and Chief Executive Officer of
the Company (the 'Consultant'), have entered into a consulting agreement dated
as of December 23, 1994, (the 'Consulting Agreement'), pursuant to which Parent
has agreed to pay the Consultant, in addition to certain other benefits,
consulting fees at a rate of $225,000 per year. The term of the Consulting
Agreement is 10 years from the consummation of the Offer. The Consulting
Agreement is more fully described in Section 11.

Pursuant to the Merger Agreement, the Company has agreed to amend the
Rights Agreement, as necessary (the 'Rights Amendment'), (i) to prevent the
Merger Agreement, the Shareholders Agreements or the consummation of any of the
transactions contemplated thereby, including without limitation, the Offer and
the consummation of the Offer and the Merger, from resulting in the distribution
of separate rights certificates or the occurrence of a Distribution Date (as

defined in the Rights Agreement) or being deemed a Triggering Event (as
2
<PAGE>
defined in the Rights Agreement) and (ii) to provide that neither Parent nor the
Purchaser will be deemed to be an Acquiring Person (as defined in the Rights
Agreement) by reason of the transactions expressly provided for in the Merger
Agreement and the Shareholders Agreements. The Rights Amendment will render the
Rights inoperative with respect to any acquisition of Shares by Parent, the
Purchaser or any of their affiliates pursuant to the Merger Agreement and/or the
Shareholders Agreements. Upon consummation of the Merger, all Rights will expire
and be of no further force or effect.

The Company has informed the Purchaser that, as of December 23, 1994, there
were 12,027,382 Shares issued and outstanding, 341,050 Shares are reserved for
issuance upon exercise of the outstanding options granted under the Company's
option plans or rights granted under the Company's Restricted Stock Plan and
2,758,400 Shares are reserved for issuance upon conversion of the 8 1/2%
Convertible Subordinated Debentures due 2010 which are convertible at an
effective price of $18.125 per Share (the 'Convertible Debentures'). As a
result, as of such date, the Minimum Condition would be satisfied if the
Purchaser acquired 5,999,217 Shares, given that the Purchaser already owns
185,000 Shares. For purposes of the Offer, calculation of the Company's
outstanding Shares on a fully diluted basis excludes Shares reserved for
issuance upon conversion of the Convertible Debentures.

THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

THE TENDER OFFER

1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), the Purchaser will accept for payment
and pay for all Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not withdrawn in accordance with Section 4. The term
'Expiration Date' means 12:00 Midnight, New York City time, on Friday, January
27, 1995, unless and until the Purchaser, in its sole discretion (but subject to
the terms of the Merger Agreement), shall have extended the period of time
during which the Offer is open, in which event the term 'Expiration Date' shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.

The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. If the Minimum Condition is not satisfied or any or all of
the other events set forth in Section 14 shall have occurred or shall be
determined by the Purchaser to have occurred prior to the Expiration Date, the
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Shares tendered in the Offer and terminate the Offer, and
return all tendered Shares to the tendering shareholders, (ii) except for the
Minimum Condition, waive or amend any or all conditions to the Offer, to the
extent permitted by applicable law and the provisions of the Merger Agreement,
and, subject to complying with applicable rules and regulations of the
Securities and Exchange Commission (the 'Commission'), purchase all Shares

validly tendered, or (iii) extend the Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain the Shares
which have been tendered during the period or periods for which the Offer is
extended.

The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Offer is open, including the occurrence of any of the events specified
in Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a tendering
shareholder to withdraw its Shares. See Section 4.

Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
of the Merger Agreement), at any time and from time to time, (i) to delay
acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares pending receipt of any
regulatory approval specified in Section 15 or in order to comply in whole or in
part with any other applicable law, (ii) to terminate the Offer and not accept
for payment any Shares if any of the conditions referred to in Section 14 has
not been satisfied or upon the occurrence of any of the events specified in
Section 14 and (iii) to waive any condition or otherwise amend the Offer in any
respect by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof.

3
<PAGE>
The Merger Agreement provides that, without the consent of the Company, the
Purchaser will not decrease the Offer Price, decrease the number of Shares
sought in the Offer, waive the Minimum Condition, or amend any condition of the
Offer in a manner adverse to the shareholders, except that if on the initial
scheduled Expiration Date, all conditions to the Offer shall not have been
satisfied or waived, the Offer may be extended from time to time until June 1,
1995. In addition, the Merger Agreement provides that without the consent of the
Company, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such an increase in the Offer Price.

The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act') requires the Purchaser to
pay the consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer, and (ii) the Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of the second preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 14 without extending
the period of time during which the Offer is open.

Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform

them of such changes) and without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.

If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.

Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, the Purchaser should decide to decrease the number of Shares being sought
or to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a 'business day' means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.

The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal,
and other relevant materials, will be mailed to record holders of Shares whose
names appear on the Company's shareholder list and will be furnished, for
subsequent transmittal to beneficial owners of Shares, to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing.

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will purchase, by accepting for payment, and will pay for, all Shares
validly tendered prior to the Expiration Date (and not properly withdrawn in
accordance with Section 4) promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions set forth
in Section 14. Subject to applicable rules of the Commission and the terms of
the Merger Agreement, the Purchaser expressly reserves the right, in its
discretion, to delay acceptance for payment of, or payment for, Shares pending
receipt of any regulatory approvals specified in Section 15. See Section 15.

In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the 'Share Certificates') or timely confirmation of
4
<PAGE>
a book-entry transfer (a 'Book-Entry Confirmation') of such Shares, if such

procedure is available, into the Depositary's account at The Depository Trust
Company, the Midwest Securities Trust Company or the Philadelphia Depository
Trust Company (each a 'Book-Entry Transfer Facility' and, collectively, the
'Book-Entry Transfer Facilities') pursuant to the procedures set forth in
Section 3, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, and (iii) any other documents required by the
Letter of Transmittal.

For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment. Payment for Shares accepted pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from the Purchaser and transmitting payments to such
tendering shareholders. Under no circumstances will interest on the purchase
price for Shares be paid by the Purchaser, regardless of any delay in making
such payment.

If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration, termination or withdrawal of the Offer.

If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.

Shareholders of the Company will be required to tender one Right for each
Share tendered in order to effect a valid tender of such Share. If Rights
Certificates have been distributed to holders of Shares prior to the
consummation of the Offer, Rights Certificates representing a number of Rights
equal to the number of Shares being tendered must be delivered to the Depositary
in order for such Shares to be validly tendered. If Rights Certificates have not
been distributed prior to the time Shares are accepted for payment by the
Purchaser, a tender of Shares will also constitute a tender of the associated
Rights.

The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.

3. PROCEDURES FOR TENDERING SHARES.

Valid Tender of Shares. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other required documents, must be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered Shares
must be received by the Depositary at such address or Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case prior
to the Expiration Date, or (ii) the tendering shareholder must comply with the
guaranteed delivery procedures described below.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make
5
<PAGE>
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at a Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Shares may be effected through
book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, and any other
required documents, must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase prior to the Expiration Date or the tendering shareholder must comply
with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a participant in the Security Transfer Agents Medallion Program or
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (each, an 'Eligible Institution'), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box entitled 'Special Delivery Instructions' or the box
entitled 'Special Payment Instructions' on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.

If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a

person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.

Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:

(i) the tender is made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and

(iii) in the case of a guarantee of Shares, the Share Certificates
for all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee and any other documents required by such Letter of
Transmittal, are received by the Depositary within five New York Stock
Exchange, Inc. ('NYSE') trading days after the date of execution of the
Notice of Guaranteed Delivery.

Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.

Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and (iii) any other documents required by the Letter of
Transmittal.

Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares of
any

6
<PAGE>
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.

The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, the Purchaser, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or will incur any liability for failure to
give any such notification.

Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Purchaser
as such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after December 23, 1994). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that, the
Purchaser accepts such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such shareholder with respect
to such Shares and other securities will, without further action, be revoked,
and no subsequent proxies may be given. The designees of the Purchaser will,
with respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all voting and other rights of such
shareholder as they in their sole discretion may deem proper at any annual,
special, adjourned or postponed meeting of the Company's shareholders, by
written consent or otherwise, and the Purchaser reserves the right to require
that, in order for Shares or other securities to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares the
Purchaser must be able to exercise full voting rights with respect to such
Shares.

TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH
RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY
PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.

The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering shareholder and
the Purchaser upon the terms and subject to the conditions of the Offer.

4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser

pursuant to the Offer, may also be withdrawn at any time after February 27,
1995, or at such later time as may apply if the Offer is extended.

If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering shareholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.

For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
7
<PAGE>
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.

All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.

Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.

5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for federal
income tax purposes and may also be a taxable transaction under applicable
state, local or foreign tax laws. In general, a shareholder will recognize gain
or loss for federal income tax purposes equal to the difference between the
amount of cash received in exchange for the Shares sold and such shareholder's
adjusted tax basis in such Shares. Assuming the Shares constitute capital assets
in the hands of the shareholder, such gain or loss will be capital gain or loss
and will be long term capital gain or loss if the holder has held the Shares for
more than one year at the time of the sale. Gain or loss will be calculated

separately for each block of Shares tendered pursuant to the Offer.

The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who acquired Shares pursuant to the
exercise of stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, or entities
that are otherwise subject to special tax treatment under the Internal Revenue
Code of 1986, as amended.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.

6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE and quoted under the symbol PDS. The following table sets
forth, for the quarters indicated, the high and low sales prices per Share on
the NYSE as reported by the Dow Jones News Service.

<TABLE>
<CAPTION>
MARKET PRICE
----------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED OCTOBER 31, 1993:
First Quarter............................................. $ 9 3/4 $ 7 3/4
Second Quarter............................................ 8 3/4 7 3/8
Third Quarter............................................. 7 3/4 6 1/2
Fourth Quarter............................................ 7 1/2 5 3/8
FISCAL YEAR ENDED OCTOBER 31, 1994:
First Quarter............................................. 6 3/4 5 3/4
Second Quarter............................................ 6 3/4 5 3/8
Third Quarter............................................. 6 4 1/2
Fourth Quarter............................................ 7 1/2 5 1/2
FISCAL YEAR ENDED OCTOBER 31, 1995:
First Quarter (through December 28, 1994)................. 10 7/8 6 5/8
</TABLE>

On December 23, 1994, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the reported closing
sales price of the Shares on the NYSE Composite Tape was $7 5/8 per Share. On
December 28, 1994, the last full trading day prior to the date of this Offer to
Purchase, the reported closing sales price of the Shares on the NYSE Composite
Tape was $10 3/4 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.

The Company does not pay cash dividends on the Shares. Certain agreements
pertaining to the Company's long-term indebtedness contain covenants which
restrict the Company's ability to pay dividends.

<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. Neither Parent nor
the Purchaser assumes any responsibility for the accuracy or completeness of the
information concerning the Company contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Parent or the Purchaser.

The Company is a Michigan corporation and its principal executive offices
are located at 5400 Perry Drive, Pontiac, Michigan 48343. The telephone number
of the Company at such offices is (810) 334-1300. The Company is the largest
drugstore chain in Michigan. The Company was incorporated in 1920 and is the
surviving corporation of the merger of Perry Pharmacy, Inc. (formerly known as
A.S. Putnam & Co.) and Perry Drug Stores, Inc. The Company operates
approximately 225 stores in 136 communities in Michigan. The primary business of
the Company is to operate a chain of drugstores. In addition to prescription
drugs, the Company's drugstores also sell non-prescription drugs and a broad
selection of traditional drugstore merchandise and services. The Company
presently offers approximately 1,000 private label products, including a wide
variety of health aids.

Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1993,
as amended (the 'Company Form 10-K') and an earnings release issued by the
Company disclosing certain financial information for the Company's fiscal year
ended October 31, 1994 (the 'Earnings Release'). More comprehensive financial
information is included in the Company Form 10-K, the Earnings Release and other
documents filed by the Company with the Commission. The financial information
that follows is qualified in its entirety by reference to the Company Form 10-K
and other documents, including the financial statements and related notes
contained therein. The Company Form 10-K and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below. Copies of the Earnings Release may be obtained from the Company.

PERRY DRUG STORES, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING STATEMENT DATA:
Net Sales................ $737,070 $698,432 $674,431
Cost of Goods Sold....... 545,780 523,765 514,577

Total Cost and
Expenses............... 728,674 704,196 683,337
Earnings from Continuing
Operations before
Taxes.................. 8,396 (5,764) (8,906)
Net Earnings (loss)...... 4,781 (4,223) (5,972)
PER SHARE INFORMATION:
Net Earnings (loss) per
Share.................. 0.40 (0.35) (0.54)
</TABLE>

<TABLE>
<CAPTION>
AT OCTOBER 31,
---------------------------------------
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets................ $ 161,577 $ 146,060 $ 157,726
Property, Plant and Equipment,
net......................... 56,543 60,047 58,485
Total Assets.................. 245,758 239,454 256,222
Long-Term Debt, current
portion..................... 180 8,180 6,295
Current Liabilities........... 96,059 95,506 93,488
Long-Term Debt, excluding
current portion............. 90,746 89,850 104,440
Shareholders' Equity.......... 56,189 51,154 55,170
</TABLE>

9
<PAGE>
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's shareholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other
information concerning the Company should also be available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York 10005. Except as
otherwise noted in this Offer to Purchase, all of the information with respect
to the Company and its affiliates set forth in this Offer to Purchase has been

derived from publicly available information.

8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.

The Purchaser. The Purchaser, a newly incorporated Delaware corporation,
has not conducted any business other than in connection with the Offer, the
Merger Agreement and the Shareholders Agreements. All of the issued and
outstanding shares of capital stock of the Purchaser are beneficially owned by
Parent. The principal executive offices of the Purchaser are located at 30
Hunter Lane, Camp Hill, Pennsylvania 17011. The telephone number of the
Purchaser at such offices is (717) 761-2633.

Parent. Parent is a Delaware corporation organized in 1968. The principal
executive offices of Parent are located at 30 Hunter Lane, Camp Hill,
Pennsylvania 17011. The telephone number of Parent at such offices is (717)
761-2633. Parent operates one of the nation's largest chains of drugstores,
serving customers at approximately 2,679 convenient locations in 23 eastern
states and the District of Columbia. Personal pharmacy service is the
cornerstone of Parent's business, with prescription sales currently totaling
over 50% of drugstore sales. Other shopping advantages include an extensive
selection of personal care items, over-the-counter medications, seasonal
merchandise and a quality line of Rite Aid brand products.

Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions with
Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's shareholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 7. The Parent's Common Stock is listed on the NYSE, and
reports, proxy statements and other information concerning Parent should also be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.

<PAGE>
Set forth below are certain selected consolidated financial data with
respect to Parent and its subsidiaries for Parent's last three fiscal years,
excerpted or derived from audited financial statements presented in Parent's
1994 Annual Report to Shareholders and from the unaudited financial statements
contained in Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended
November 26, 1994, in each case filed by Parent with the Commission. More
comprehensive financial information is included in such reports and other
documents filed by Parent with the Commission. The financial information summary
set forth below is qualified in its entirety by reference to those reports and
other documents which have been filed with the Commission and all the financial
information and related notes contained therein.

RITE AID CORPORATION

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED YEAR ENDED
---------------------------- --------------------------------------------
NOVEMBER 26, NOVEMBER 27, FEBRUARY 26, FEBRUARY 27, FEBRUARY 29,
1994 1993 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................ $3,180,085 $2,981,273 $4,058,711 $3,833,591 $3,530,560
Income from Continuing Operations before
Taxes.................................. 144,312 123,464 45,670 200,569 187,202
Income (Loss) from Discontinued
Operations............................. -- 6,824 (16,920) 8,646 9,075
Net Income............................... 88,032 80,704 9,288 132,396 124,016
PER SHARE INFORMATION:
Net Income per Share..................... 1.04 .92 .11 1.51 1.43
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 26, FEBRUARY 26, FEBRUARY 27,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets..................... $ 1,214,826 $ 1,125,425 $ 1,079,684
Property, Plant and Equipment,
net.............................. 696,457 638,694 551,392
Net Non-Current Assets of
Discontinued Operations.......... 58,493 77,784 71,406
Total Assets....................... 2,123,346 1,989,070 1,858,506
Current Liabilities................ 418,916 362,209 268,039
Long-Term Debt, less Current
Portion.......................... 663,598 613,418 489,220
Total Liabilities.................. 1,151,471 1,034,356 822,863
Total Stockholders' Equity......... 971,875 954,714 1,035,643
</TABLE>

The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.

Except as described in this Offer to Purchase, (i) none of the Purchaser,
Parent nor, to the best knowledge of the Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of the Purchaser, Parent or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Shares and (ii) none of the Purchaser, Parent nor, to the best knowledge of

the Purchaser and Parent, any of the persons or entities referred to above nor
any director, executive officer or subsidiary of any of the foregoing has
effected any transaction in the Shares during the past 60 days except as set
forth in Schedule II hereto.

Except as provided in the Merger Agreement, the Shareholders Agreements and
as otherwise described in this Offer to Purchase, none of the Purchaser, Parent
nor, to the best knowledge of the Purchaser and Parent, any of the persons
listed in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or
11
<PAGE>
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since November 1, 1991, neither the Purchaser
nor Parent nor, to the best knowledge of the Purchaser and Parent, any of the
persons listed on Schedule I hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as set forth in this Offer to
Purchase, since November 1, 1991, there have been no contracts, negotiations or
transactions between any of the Purchaser, Parent, or any of their respective
subsidiaries, or, to the best knowledge of the Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase, on the one hand, and the
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.

9. SOURCE AND AMOUNT OF FUNDS.

The total amount of funds required by the Purchaser and Parent to
consummate the Offer and the Merger (including the cash out of stock options)
and to pay related fees and expenses (inclusive of estimated expenses of the
Company) is estimated to be approximately $137 million. The total amount of
funds required to refinance all existing indebtedness under the Company's
existing credit agreement and to effect a redemption of the Company's
Convertible Debentures is estimated to be approximately $91.4 million. The
Purchaser will obtain all of such funds from Parent or its affiliates. Parent
will provide the $228.4 million for the foregoing transactions from its working
capital, the proceeds of its existing commercial paper program and/or Parent's
existing Credit Agreement (as defined below).

The Company's commercial paper program involves the private placement of
unsecured, commercial paper with maturities of up to 270 days. The commercial
paper generally has an effective interest rate approximating the then market
rate of interest for commercial paper of similar rating, currently approximately
6.25%. Parent may refinance any commercial paper borrowings used to finance the
purchase of Shares pursuant to the Offer through private placements of
additional commercial paper or, depending on market or business conditions,
through such other financing as Parent may deem appropriate.

The Company plans to obtain a portion of the funds needed for the Offer and
related transactions through unsecured borrowings from a syndicate of financial
institutions led by Morgan Guaranty Trust Company of New York ('Morgan')
pursuant to a Credit Agreement, dated as of February 7, 1994, and amended by
Amendment No. 1 to the Credit Agreement, dated as of February 16, 1994 (the
'Credit Agreement'), among Parent, Morgan, as agent, and the financial
institutions named therein. Under the terms of the Credit Agreement, Parent is
provided with a $350 million five-year revolving credit facility (the 'Credit
Facility').

Loans made under the Credit Facility bear interest, at Parent's option, (a)
at a rate equal to the sum of the applicable margin and the (i) London
inter-bank offered rate ('LIBOR'), (ii) certificate of deposit rate ('CD') or
(iii) Base Rate (the greater of Morgan's prime rate and the sum of federal funds
rate and 50 basis points), or (b) at a rate determined by a competitive bid
system among the financial institutions party to the Credit Facility. The
interest rate for LIBOR and CD loans varies with the interest period chosen by
Parent. Parent may choose interest periods of, in the case of LIBOR, one, two,
three or six months, and in the case of CD, 30, 60, 90 or 180 days. The current
interest rate for three month LIBOR is approximately 3.37% per annum and for 90
day CD is approximately 3.25% per annum. Morgan's current prime rate is 8 1/2%
per annum.

The applicable margin and certain fees payable by Parent are subject to
adjustments based on the Company's rating from time to time by Standard & Poor
Corporation and Moody's Investors Service, Inc. The margin on loans made
pursuant to the Credit Facility ranges, in the case of LIBOR, from 25 to 75
basis points, and in the case of CD, from 37.5 to 67.5 basis points. No margin
is payable under the Credit Facility for loans bearing interest at the Base
Rate. Parent will pay a utilization fee of 6.25 basis points per annum on all
borrowings in excess of 50% of the Credit Facility. Parent will also pay
facility fees (ranging from 8 to 20 basis points per annum) and fees on the
unused portion of the Credit Facility (ranging from 8 to 25 basis points per
annum). The Credit Agreement includes representations and warranties, covenants,
events of default and other terms customary to financings of this type. A copy
of the Credit Agreement has been filed with the Commission
12
<PAGE>
as an exhibit to the Tender Offer Statement on Schedule 14D-1 (the 'Schedule
14D-1') and is incorporated herein by reference.

Parent expects to repay any borrowing through future cash flow from
operations or from future borrowings.

10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.

In early November 1994, Mr. Jack Robinson, the Chairman and Chief Executive
Officer of the Company, and Mr. Alex Grass, the Chairman and Chief Executive
Officer of Parent, and Mr. Martin Grass, the President and Chief Operating
Officer of Parent, held a telephonic discussion with respect to general industry
matters. In the course of such discussion, Messrs. Alex and Martin Grass
suggested to Mr. Robinson that Parent had an interest in acquiring the Company.
Mr. Robinson stated that he would consider the matter and would respond at a
future time.

Messrs. Alex and Martin Grass had another conversation with Mr. Robinson in
early November in which further discussions were held concerning the possible
acquisition of the Company by Parent. On or about November 21, 1994, Mr.
Robinson called Mr. Alex Grass to advise him that the Board of Directors of the
Company had authorized a meeting between PJSC, the Company's financial advisor,
and Parent. On November 22, 1994, Messrs. Alex and Martin Grass met with
representatives of PJSC to discuss a possible acquisition of the Company.

In early December, representatives of PJSC contacted Martin Grass to advise
him that the Company would enter into a confidentiality agreement and would be
prepared to allow Parent to conduct due diligence with respect to the Company.
On December 14, 1994, the Company and Parent entered into the Confidentiality
Agreement (as defined).

From December 16, 1994 through December 18, 1994, members of Parent's
senior management conducted a due diligence review of the Company at the
Company's offices in Michigan and at the offices of PJSC in New York. On
December 17, 1994, Messrs. Alex and Martin Grass met with Mr. Robinson to
discuss, among other things, the Shareholders Agreements and Consulting
Agreement and other matters relating to the proposed transaction. On December
18, 1994, Mr. Martin Grass informed a representative of the Company that Parent
was prepared to make an all cash offer of $11.00 per Share if acceptable to the
Board, subject to the negotiation of a definitive Merger Agreement.

On December 19, 1994, the Board of Directors of Parent held a meeting. At
such meeting, members of Parent's senior management and Parent's outside legal
advisor made presentations to the Board regarding the proposed acquisition of
the Company. The Board of Directors analyzed and discussed the proposed Merger
Agreement, Offer, Merger, Shareholders Agreements and Consulting Agreement and
authorized senior management of Parent to proceed with the negotiations relating
to the proposed transaction.

During the week of December 19, 1994, members of senior management of
Parent and its legal advisor negotiated the terms of the Merger Agreement with
representatives of the Company and its legal advisor, and negotiated the terms
of the Shareholders Agreements and Consulting Agreement with the Selling
Shareholders and their legal advisor. Negotiations continued through December
23, 1994, culminating in Parent and the Company agreeing upon a form of
definitive Merger Agreement and Parent and the Selling Shareholders agreeing
upon a form of Shareholders Agreement and Consulting Agreement.

On December 23, 1994, the Board of Directors of Parent held a meeting to
approve the Merger Agreement, the Offer, the Shareholders Agreements, the
Consulting Agreement and the related transactions. The Board of Directors of the
Company also met on December 23, 1994. At such meeting, the Company's Board
reviewed the proposed transaction with the Company's management and the
Company's legal and financial advisors and approved the Merger Agreement and the
transactions contemplated thereby.

Parent, the Purchaser and the Company executed and delivered the Merger
Agreement in the early evening of December 23, 1994. On December 27, 1994,
Parent and the Company issued a joint press release announcing the execution of
the Merger Agreement and Shareholders Agreements. The Purchaser commenced the

Offer on December 29, 1994.

13
<PAGE>
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT;
SHAREHOLDERS AGREEMENTS; CONSULTING AGREEMENT; AND OTHER AGREEMENTS.

Purpose of the Offer. The purpose of the Offer, the Merger, the Merger
Agreement and the Shareholders Agreements is to enable Parent to acquire control
of the Company's Board of Directors and the entire equity interest in the
Company. Upon consummation of the Merger, the Company will become a wholly owned
subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement.

Plans for the Company. It is expected that, initially following the
Merger, the business and operations of the Company will, except as set forth in
this Offer to Purchase, be integrated into the operations of Parent as rapidly
as practicable following the Merger. Parent intends to close the Company's
corporate headquarters at 5400 Perry Drive, Pontiac, Michigan (the
'Headquarters') within approximately six months following consummation of the
Merger and to integrate the Company's corporate headquarters operations into
Parent's operations. In addition, Parent will continue to evaluate the business
and operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger and will take such further actions as
it deems appropriate under the circumstances then existing.

Merger Agreement. THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE
MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MERGER AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE
MERGER AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND IN
THE MANNER SET FORTH IN SECTION 7 OF THIS OFFER TO PURCHASE.

The Offer. The Merger Agreement provides that the Purchaser will
commence the Offer and that, upon the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement
provides that, without the written consent of the Company by the Board of
Directors (or a duly authorized Committee thereof), the Purchaser will not
decrease the Offer Price, decrease the number of Shares sought in the Offer,
waive the Minimum Condition, or amend any condition of the Offer in a manner
adverse to the holders of Shares except that if on the initial scheduled
Expiration Date, all conditions of the Offer shall not have been satisfied or
waived, the Offer may be extended until June 1, 1995. In addition, the Merger
Agreement provides that, without the consent of the Company, the Offer Price may
be increased and the Offer may be extended to the extent required by law in
connection with such an increase in the Offer Price.

The Merger. The Merger Agreement provides that, subject to the terms
and conditions thereof, and in accordance with Michigan Law and Delaware Law, at
the Effective Time, the Purchaser shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of the Purchaser will
cease and the Company will continue as the Surviving Corporation.

The respective obligations of Parent and the Purchaser, on the one

hand, and the Company, on the other hand, to effect the Merger are subject to
the conditions that: (i) the Merger Agreement shall have been approved and
adopted by the requisite vote of the holders of Common Stock, if required by
applicable law and the Restated Articles of Incorporation, in order to
consummate the Merger; (ii) no statute, rule, order, decree or regulation shall
have been enacted or promulgated by any foreign or domestic government or any
governmental agency or authority of competent jurisdiction which prohibits the
consummation of the Merger and all foreign or domestic governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated by the Merger Agreement will have been obtained and
shall be in effect at the Effective Time; (iii) there shall be no order or
injunction of a foreign or United States federal or state court or other
governmental authority of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger; and (iv)
Parent, the Purchaser or their affiliates shall have purchased the Shares
pursuant to the Offer.

The Merger Agreement provides that at the Effective Time, each issued
and outstanding share of Common Stock, including the associated Rights (other
than Shares that are owned by the Company as treasury stock and any Shares owned
by Parent, the Purchaser or any other wholly owned subsidiary of Parent) shall
be converted into the right to receive the Offer Price, without interest.

14
<PAGE>
Pursuant to the Merger Agreement, each issued and outstanding share of
common stock, par value $.01 per share, of the Purchaser shall be converted into
one fully paid and non-assessable share of common stock of the Surviving
Corporation.

The Merger Agreement provides that the Company will execute the Rights
Amendment (i) to prevent the Merger Agreement, the Shareholders Agreements or
the consummation of any of the transactions contemplated thereby, including
without limitation, the Offer and the consummation of the Offer and the Merger,
from resulting in the distribution of separate rights certificates or the
occurrence of a Distribution Date (as defined in the Rights Agreement) or being
deemed a Triggering Event (as defined in the Rights Agreement) and (ii) to
provide that neither Parent nor the Purchaser will be deemed to be an Acquiring
Person (as defined in the Rights Agreement) by reason of the transactions
expressly provided for in the Merger Agreement and the Shareholders Agreements.
The Rights Amendment will render the Rights inoperative with respect to any
acquisition of Shares by Parent, the Purchaser or any of their affiliates
pursuant to the Merger Agreement and/or the Shareholders Agreements. Upon
consummation of the Merger, all Rights will expire and be of no further force or
effect.

The Company's Board of Directors. The Merger Agreement provides that,
promptly upon the purchase of and payment for any Shares by Parent or any of its
subsidiaries which represents at least a majority of the outstanding Shares (on
a fully diluted basis), Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as is equal to the product of the total number of directors on such
Board (giving effect to the directors designated by Parent pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares

beneficially owned by the Purchaser, Parent or any of their affiliates bears to
the total number of Shares then outstanding. The Company shall, upon request of
the Purchaser, use its best efforts promptly either to increase the size of its
Board of Directors or, at the Company's election, secure the resignations of
such number of its incumbent directors as is necessary to enable Parent's
designees to be so elected to the Company's Board, and shall cause Parent's
designees to be so elected. The Merger Agreement also provides that the Company
shall cause persons designated by Parent to constitute the same percentage
(rounded up to the next whole number) as is on the Company's Board of Directors
of (i) each committee of the Company's Board of Directors, (ii) each board of
directors (or similar body) of each subsidiary of the Company and (iii) each
committee (or similar body) of each such board, in each case only to the extent
permitted by applicable law or the rules of any stock exchange on which the
Shares are listed. Notwithstanding the foregoing, until the Effective Time, the
Company shall use all reasonable efforts to retain as members of its Board of
Directors at least two directors who are directors of the Company on the date of
the Merger Agreement; provided, that subsequent to the purchase of and payment
for Shares pursuant to the Offer, Parent shall always have its designees
represent at least a majority of the entire Board of Directors. The Company's
obligation to appoint the Purchaser's designees to the Board of Directors is
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.

Shareholders Meeting. Pursuant to the Merger Agreement, the Company
will, if required by applicable law in order to consummate the Merger, duly
call, give notice of, convene and hold a special meeting of its shareholders
(the 'Special Meeting') as soon as practicable following the acceptance for
payment and purchase of Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the Merger Agreement. The Merger
Agreement provides that the Company will, if required by applicable law in order
to consummate the Merger, prepare and file with the Commission a preliminary
proxy or information statement relating to the Merger and the Merger Agreement
and use its reasonable efforts (i) to obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as defined
herein) and, after consultation with Parent, to respond promptly to any comments
made by the Commission with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement (the 'Proxy
Statement') to be mailed to its shareholders and (ii) to obtain the necessary
approvals of the Merger and the Merger Agreement by its shareholders. If the
Purchaser acquires at least a majority of the outstanding Shares, the Purchaser
will have sufficient voting power to approve the Merger, even if no other
shareholder votes in favor of the Merger. The Company has agreed, subject to the
fiduciary obligations of the Board under applicable law as advised by
independent counsel, to include in the Proxy Statement the recommendation of the
Board that shareholders of the Company vote in favor of the approval of the
Merger and the adoption of the Merger Agreement. Parent agrees that it will
vote, or cause to be voted, all of the Shares then owned by it, the Purchaser
15
<PAGE>
or any of its other subsidiaries and affiliates in favor of the approval of the
Merger and the adoption of the Merger Agreement.

The Merger Agreement provides that in the event that Parent, the
Purchaser or any other subsidiary of Parent acquires at least 90% of the

outstanding Shares, pursuant to the Offer or otherwise, Parent, the Purchaser
and the Company agree, at the request of Parent and subject to the terms of the
Merger Agreement, to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after such acquisition,
without a meeting of shareholders of the Company, in accordance with Michigan
Law and Delaware Law.

Interim Operations. In the Merger Agreement, the Company has agreed
that, except as expressly contemplated by the Merger Agreement or agreed to by
Parent, prior to the time the directors of the Purchaser have been elected to,
and shall constitute a majority of, the Board of Directors of the Company: (i)
the business of the Company and its subsidiaries shall be conducted only in the
ordinary and usual course and, to the extent consistent therewith, each of the
Company and its subsidiaries shall use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
suppliers, employees, creditors and business partners; (ii) the Company will
not, directly or indirectly, (a) sell, transfer or pledge or agree to sell,
transfer or pledge any Common Stock, preferred stock or capital stock of any of
its subsidiaries beneficially owned by it, either directly or indirectly; or (b)
split, combine or reclassify the outstanding Common Stock or any outstanding
capital stock of any of the subsidiaries of the Company; (iii) neither the
Company nor any of its subsidiaries shall (a) amend its articles of
incorporation or by-laws or similar organizational documents; (b) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (c) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or its
subsidiaries, other than shares of preferred stock reserved for issuance on the
date hereof upon exercise of outstanding Rights pursuant to the Rights Agreement
or issuances pursuant to the exercise of Options (as defined in the Merger
Agreement) outstanding as of the date of the Merger Agreement; (d) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any material
assets other than in the ordinary and usual course of business and consistent
with past practice, or incur or modify any material indebtedness or other
liability, other than in the ordinary and usual course of business and
consistent with past practice; (e) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock; (f) grant any increase in the
compensation payable or to become payable by the Company or any of its
subsidiaries to any of its executive officers or key employees, or adopt any new
or amend or otherwise increase or accelerate the payment or vesting of the
amounts payable or to become payable under any existing bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement; (g) enter into any employment or severance agreement
with or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to any officer, director or employee of
the Company or any of its subsidiaries; (h) modify, amend or terminate any of
its material contracts or waive, release or assign any material rights or
claims, except in the ordinary course of business and consistent with past
practice; (i) permit any material insurance policy naming the Company as a
beneficiary or a loss payable payee to be cancelled or terminated without notice
to Parent, except in the ordinary course of business and consistent with past
practice; (j) incur or assume any long-term debt, or, except in the ordinary

course of business, incur or assume any short-term indebtedness in amounts not
consistent with past practice; (k) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person, except in the ordinary course of business
and consistent with past practice; (l) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company or customary loans or advances to employees in
accordance with past practice); (m) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets); (n) change any of the accounting
principles used by it unless required by generally accepted accounting
principles; (o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any such claims, liabilities or
obligations, (1) in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated subsidiaries, (2) incurred in the
ordinary course of business and consistent with
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past practice, or (3) which are legally required to be paid, discharged or
satisfied (provided that if such claims, liabilities or obligations referred to
in this clause (3) are legally required to be paid and are also not otherwise
payable in accordance with clauses (1) or (2), the Company will notify Parent in
writing if such claims, liabilities or obligations exceed, individually or in
the aggregate, $100,000 in value, reasonably in advance of their payment); (p)
adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries (other than the Merger); (q) take, or agree
to commit to take, any action that would make any representation or warranty of
the Company contained in the Merger Agreement inaccurate in any respect at, or
as of any time prior to, the Effective Time; or (r) enter into an agreement,
contract, commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.

No Solicitation. In the Merger Agreement, the Company has agreed that
neither the Company nor any of its subsidiaries or affiliates shall (and the
Company shall use its best efforts to cause its officers, directors, employees,
representatives and agents not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent, or any of its affiliates or representatives) concerning any
merger, tender offer, exchange offer, sale of assets, sale of shares of capital
stock or debt securities or similar transactions involving the Company or any
subsidiary, division or operating or principal business unit of the Company (an
'Acquisition Proposal'). The Company also agreed that it will immediately cease
any existing activities, discussions or negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing.
The Merger Agreement provides that the Company may, directly or indirectly,
provide access and furnish information to a third party and may negotiate and
participate in discussions and negotiations with such third party concerning an
Acquisition Proposal if such third party has submitted a bona fide written
proposal to the Board of Directors of the Company and if in the opinion of the

Board of Directors of the Company, after consultation with independent legal
counsel, the failure to provide such information or access or to engage in such
discussions or negotiations would be inconsistent with the fiduciary duties of
the Board to the Company's shareholders under applicable law. The Company has
agreed to immediately notify Parent of any such proposal, or if an inquiry is
made, the Company will keep Parent fully apprised of all developments with
respect to any such Acquisition Proposal.

Directors' and Officers' Insurance and Indemnification. In the Merger
Agreement, Parent has agreed to indemnify the present and former officers,
directors, employees and agents of the Company and its subsidiaries with respect
to matters occurring at or prior to the Effective Time to the full extent
permitted under Michigan law or the Company's Restated Articles of
Incorporation, By-Laws or indemnification agreements in effect as of December
23, 1994, for a period of six years after the Effective Time. The Merger
Agreement also provides that Parent shall maintain the Company's existing
officers' and directors' liability insurance policy ('D&O Insurance') for a
period of not less than two years after the Effective Time except that Parent
may substitute therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or officers.
Parent has also agreed that if the existing D&O Insurance expires, is terminated
or cancelled during such period, Parent will use all reasonable efforts to
obtain substantially similar D&O Insurance, but in no event shall it be required
to pay aggregate premiums for such insurance in excess of 100% of the aggregate
premiums paid by the Company in 1994 ('1994 Premiums'). However, the Merger
Agreement provides that if Parent or the Purchaser would be required to expend
more than 100% of 1994 Premiums, Parent or the Surviving Corporation shall
nonetheless purchase the maximum amount of such insurance obtainable by payment
of annual premiums equal to 100% of 1994 Premiums.

Compensation and Benefits. Pursuant to the Merger Agreement, Parent
has agreed that, effective as of the Effective Time, the Surviving Corporation
and its subsidiaries will provide benefits to their employees that are
comparable with those provided by Parent to similarly situated employees of
Parent or any or its subsidiaries, taking into account all relevant factors,
including the businesses in which the Surviving Corporation and its subsidiaries
are engaged. In the Merger Agreement, Parent has further agreed that, effective
as of the Effective Time, employees of the Surviving Corporation and its
subsidiaries shall become participants in the health benefit plans and programs
maintained for similarly situated employees of Parent or any of its
subsidiaries. Such health benefit plans and programs shall (1) recognize
expenses and claims that were incurred by such employees in the year in which
the Effective Time occurs and recognize for similar purposes of computing
deductible amounts and
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copayments under the Company's plans as of the Effective Time and (2) provide
coverage for pre-existing health conditions to the extent covered under the
applicable plans or programs of the Company as of the Effective Time. In
addition, Parent has agreed that employees of the Surviving Corporation will
receive credit for their prior service with the Company and its subsidiaries for
eligibility and vesting purposes and for vacation accrual purposes.

In the Merger Agreement, Parent has guaranteed the payment of and has

agreed to honor the current severance pay arrangements and split dollar life
insurance agreements that the Company has in effect for the benefit of certain
executive officers, and Parent has acknowledged that (i) the change in each such
executive's responsibilities resulting from the completion of the Offer and the
resulting change in the Company from a publicly owned company to a majority or
wholly owned subsidiary constitutes circumstances that shall be deemed a
'Termination of Employment' following a 'Change in Control' under such severance
agreements or a resignation by the executive following a 'Change of Control' for
'Good Reason' and (ii) any decision on the part of any such executive to
terminate his employment for any reason subsequent to completion of the Offer
shall not constitue a 'voluntary termination of employment' under such split
dollar life insurance agreements. Pursuant to the Merger Agreement, in the case
of persons employed by the Company at its central administrative offices at the
completion of the Offer other than those executive officers referred to in the
preceding sentence, Parent has agreed to cause the Company or the Surviving
Corporation, as the case may be, to pay a lump sum severance benefit to each
such person whose employment is terminated by the Company or the Surviving
Corporation for any reason other than cause, death or disability prior to the
first anniversary of the completion of the Offer. Such severance benefit shall
be based on the terminated employee's number of whole years (rounded up or down
to the nearest whole year) of continuous service with the Company and/or the
Surviving Corporation, shall be calculated as follows, and shall be reduced by
withholding and employment taxes, if required by law to be withheld: if the
length of service (A) is less than 10 years, the amount of severance benefit
shall be 1 week's gross pay for each whole year of service, with a minimum
severance benefit of 2 weeks' gross pay (or, if greater, gross pay for the
number of additional business days remaining until the expiration of the
notification period required in connection with the Headquarters Closing Notices
(as defined in the Merger Agreement)); or (B) is 10 years or more, the amount of
severance benefit shall be 2 weeks' gross pay for each whole year of service,
with a maximum severance benefit of 26 weeks' gross pay.

WARN Act. In the Merger Agreement, the Company has agreed that it
shall, on behalf of Parent, within five calendar days of the date of the Merger
Agreement, issue such notices as are required under the Worker Adjustment and
Retraining Notification Act of 1988 (the 'WARN Act') and any similarly
applicable state or local law, in connection with Parent's intended closing of
the Company's current headquarters. The Merger Agreement provides that such
notices shall be given sufficiently in advance of the date of the closing of the
headquarters so that Parent shall not be liable under the WARN Act or any
similarly applicable state or local law for any penalty or payment in lieu of
notice to any employee or governmental entity.

Options. Pursuant to the Merger Agreement, Parent and the Company
have agreed to take all actions necessary to provide that, effective as of the
Effective Time, (i) each outstanding employee stock option to purchase Shares
(an 'Employee Option') granted under the Company's 1982 Incentive Stock Option
Plan (the '1982 Option Plan') or the Company's 1987 Non-Qualified Stock Option
Plan (the '1987 Option Plan' and collectively with the 1982 Option Plan, the
'Option Plans') and each outstanding non-employee director option to purchase
Shares ('Director Options' and collectively with Employee Options, 'Options')
granted under the 1987 Stock Option Plan, whether or not then exercisable or
vested, shall become fully exercisable and vested, (ii) each Option that is then
outstanding shall be cancelled and (iii) in consideration of such cancellation,

and except to the extent that Parent or the Purchaser and the holder of any such
Option otherwise agree, the Company (or, at Parent's option, the Purchaser)
shall pay to such holders of Options an amount in respect thereof equal to the
product of (A) the excess, if any, of the Offer Price over the exercise price
thereof and (B) the number of Shares subject thereto (such payment to be net of
applicable withholding taxes). In the Merger Agreement, the parties have agreed
that if it is determined that compliance with any of the foregoing would cause
any individual subject to Section 16 of the Exchange Act ('Section 16') to
become subject to the profit recovery provisions thereof, any Options held by
such individual will be cancelled or purchased, as the case may be, as promptly
as possible so as not to subject such individual to any liability pursuant to
Section 16, but no later than May 15, 1995, subject to receiving an agreement
from the holder of such Option not to exercise such Option after the
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Effective Time, and such individual shall be entitled to receive from the
Company, for each Share subject to an Option an amount equal to the excess, if
any, of the Offer Price over the per Share exercise price of such Option.
Notwithstanding the foregoing, any payment to the holders of Options
contemplated by the foregoing provisions may be withheld in respect of any
Option until any necessary consents or releases are obtained. The Merger
Agreement also provides that (i) the Option Plans and the Company's 1986
Restricted Stock Plan shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement, providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any of its subsidiaries shall be deleted as of the Effective Time and (ii) the
Company shall use all reasonable efforts to ensure that following the Effective
Time no holder of Options or any participant in the Option Plans or any other
plans, programs or arrangements shall have any right thereunder to acquire any
equity securities of the Company, the Surviving Corporation or any subsidiary
thereof.

Convertible Debentures. The Merger Agreement provides that promptly
after acceptance by the Purchaser of Shares for payment pursuant to the Offer,
if so requested by Parent, the Company shall provide appropriate notice in order
to effect a redemption by the Company of the Company's Convertible Debentures.
The Company shall cause such redemption of the Convertible Debentures, if so
requested by Parent, to occur on the date specified by Parent, which date shall
not be less than 30 nor more than 60 days after the date notices of such
redemption are mailed to debentureholders of the Company.

Representations and Warranties. In the Merger Agreement, the Company
has made customary representations and warranties to Parent and the Purchaser
with respect to, among other things, its organization, capitalization, financial
statements, public filings, labor relations, conduct of business, employee
benefit plans, insurance, compliance with laws, litigation, tax matters, real
property, consent and approvals, opinions of financial advisors, vote required,
undisclosed liabilities and the absence of any undisclosed material adverse
changes in the Company since October 31, 1993.

Termination; Fees. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the Company, (a) by mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company, (b) by either the Board of

Directors of Parent or the Board of Directors of the Company (i) if Shares have
not been purchased pursuant to the Offer on or prior to June 1, 1995, provided
that such right to terminate shall not be available to any party whose failure
to fulfill any obligation under the Merger Agreement was the cause of, or
resulted in, the failure of Parent or the Purchaser to purchase the Shares on or
before such date; or (ii) if any Governmental Entity (as defined therein) shall
have issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall use their reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and non-appealable, (c) by the
Board of Directors of the Company (i) if, prior to the purchase of Shares in the
Offer, the Board of Directors of the Company shall have withdrawn (or modified
or changed in a manner adverse to Parent) its approval or recommendation of the
Offer, the Merger Agreement or the Merger in order to permit the Company to
execute a definitive agreement providing for the acquisition of the Company by
merger or otherwise, and the failure to take such action would be inconsistent
with its fiduciary duties to the Company's shareholders under applicable law; or
(ii) if, prior to the purchase of Shares in the Offer, Parent or the Purchaser
breaches or fails in any material respect to comply with any of its material
covenants and agreements contained in the Merger Agreement or breaches its
representations and warranties in any material respect; or (iii) if Parent or
the Purchaser shall have terminated the Offer, or the Offer shall have expired,
without Parent or the Purchaser, as the case may be, purchasing any Shares
pursuant thereto; provided, that the Company may not terminate the Merger
Agreement pursuant to this clause (iii) if the Company is in material breach of
the Merger Agreement, (d) by the Board of Directors of Parent (i) if (A) prior
to the purchase of Shares pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn or modified or changed in a manner adverse to
Parent or the Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger, or shall have recommended an Acquisition Proposal or
offer, or shall have executed an agreement in principle (or similar agreement)
or definitive agreement providing for a tender offer or exchange offer for any
shares of capital stock of the Company, or a merger, consolidation or other
business combination with a person or entity other than Parent, the Purchaser or
their affiliates (or the Board of Directors of the Company resolves to do any of
the foregoing), or (B) it shall have been publicly disclosed or Parent or the
Purchaser shall have learned that any
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person, entity or 'group' (as that term is defined in Section 13(d)(3) of the
Exchange Act) (an 'Acquiring Person'), other than Parent or its affiliates or
any group of which any of them is a member, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange
Act), of more than 19.9% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 19.9% of
any class or series of capital stock of the Company (including the Shares), or
(ii) if Parent or the Purchaser, as the case may be, shall have terminated the
Offer, or the Offer shall have expired without Parent or the Purchaser, as the
case may be, purchasing any Shares thereunder, provided that Parent may not
terminate the Merger Agreement pursuant to this clause (ii) if it or the
Purchaser has failed to purchase Shares in the Offer in violation of the

material terms thereof.

In accordance with the Merger Agreement, if (1) the Board of Directors of
the Company terminates the Merger Agreement pursuant to clause (c)(i) of the
immediately preceding paragraph, (2) the Board of Directors of Parent terminates
the Merger Agreement pursuant to clause (d)(i)(A) of the immediately preceding
paragraph, (3) the Board of Directors of Parent terminates the Merger Agreement
pursuant to clause (d)(i)(B) and within one year of such termination, the
Acquiring Person shall acquire or beneficially own a majority of the then
outstanding Shares or shall have obtained representation on the Company's Board
of Directors or shall enter into a definitive agreement with the Company with
respect to an Acquisition Proposal or similar business combination or (4) the
Board of Directors of Parent terminates the Merger Agreement pursuant to clause
(d)(ii) of the immediately preceding paragraph due to a material breach by the
Company of any of the representations and warranties set forth in the Agreement
(other than as a result of an act of God) or the failure to perform or comply
with any material obligation, agreement or covenant contained in the Merger
Agreement, then the Company will pay Parent an amount equal to $3 million. The
Merger Agreement also provides that upon the termination of the Merger Agreement
due to the occurrence of one of the events specified in clauses (1), (2), (3) or
(4) of the preceding sentence, the Company will reimburse Parent for all
reasonable fees and expenses incurred, or to be incurred, by Parent or the
Purchaser and their affiliates, in connection with the Offer, the Merger and the
consummation of the transactions contemplated by the Merger Agreement in an
amount not to exceed $1 million in the aggregate.

Shareholders Agreements. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS
OF THE SHAREHOLDERS AGREEMENTS. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE SHAREHOLDERS AGREEMENTS WHICH ARE INCORPORATED HEREIN BY
REFERENCE AND COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS EXHIBITS TO
THE SCHEDULE 14D-1. THE SHAREHOLDERS AGREEMENTS MAY BE EXAMINED AND COPIES MAY
BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET FORTH IN SECTION 7 OF THIS
OFFER TO PURCHASE.

Tender of Shares. Immediately after the execution of the Merger
Agreement, the Purchaser and Selling Shareholders entered into the Shareholders
Agreements. Upon the terms and subject to the conditions of such agreements, the
Selling Shareholders have severally agreed to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer, not later
than the fifth business day after commencement of the Offer, the number of
Shares owned beneficially by them (or a total of 1,115,284 Shares, representing
9.02% of the outstanding Shares on a fully diluted basis). The Selling
Shareholders further agreed that the transfer by the Selling Shareholders of
their Shares to the Purchaser in the Offer will pass to and unconditionally vest
in the Purchaser good and valid title to such Shares.

Stock Option. In order to induce Parent and the Purchaser to enter
into the Merger Agreement, the Selling Shareholders have granted to Parent an
irrevocable option (a 'Stock Option') to purchase the Selling Shareholders'
Shares (the 'Option Shares') at a purchase price per Share equal to $11.00.
Pursuant to the Shareholders Agreements, if (i) the Offer is terminated,
abandoned or withdrawn by Parent or the Purchaser (whether due to the failure of
any of the conditions set forth in Section 14 or otherwise), or (ii) the Merger
Agreement is terminated in accordance with its terms, the Stock Option will, in

any such case, become exercisable, in whole but not in part, upon the first to
occur of any such event and remain exercisable, in whole but not in part, until
the date which is 90 days after the date of the occurrence of such event (the
'90 Day Period'), so long as: (i) all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR Act')
required for the purchase of the Option Shares upon such exercise, shall have
expired or been waived, and (ii) there shall not be in effect any preliminary or
final injunction or other order issued by any court or governmental,
administrative or regulatory agency or authority or legislative body or
commission
20
<PAGE>
prohibiting the exercise of the Stock Option pursuant to the Shareholders
Agreements. The Shareholders Agreements provide that if all HSR Act waiting
periods have not expired or been waived, or there shall be in effect any such
injunction or order, in each case on the expiration of the 90 Day Period, the 90
Day Period shall be extended until 5 business days after the later of (A) the
date of expiration or waiver of all HSR Act waiting periods and (B) the date of
removal or lifting of such injunction or order; provided that the Shareholders
Agreements shall terminate if, after one year following the commencement of the
original 90 Day Period, (1) all HSR Act waiting periods shall not have expired
or been waived or (2) there shall be in effect any such injunction or order, and
neither Parent nor Purchaser has exercised the Option. In the event that Parent
wishes to exercise the Stock Option, Parent shall send a written notice to the
Selling Shareholders identifying the place and date (not less than two nor more
than 20 business days from the date of such notice) for the closing of such
purchase.

Certain Price Protection. Parent and the Purchaser have agreed to
provide the Selling Shareholders with certain price protection. The Shareholders
Agreements provide that if, within 12 months following the exercise of the Stock
Option by Parent, Parent shall sell, transfer or otherwise dispose of any or all
of the Option Shares to a third party (or realize cash proceeds in respect of
such Shares as a result of a distribution to shareholders of the Company
following the sale of substantially all of the Company's assets) in connection
with a transaction whereby the third party is acquiring the entire equity
interest in the Company pursuant to a merger, tender offer, exchange offer, sale
of assets, sale of shares or a similar business transaction (a 'Subsequent
Sale') at a per Share price in excess of $13.00 (the 'Subsequent Sale Price'),
then Parent will promptly pay to the Selling Shareholders an amount equal to 25%
of the excess of the Subsequent Sale Price over $13.00 multiplied by the number
of Option Shares sold in the Subsequent Sale. In the event that the Subsequent
Sale Price is in excess of $14.00, then Parent will promptly pay to the Selling
Shareholders (i) 25% of the amount equal to the difference between $13.00 and
$14.00 multiplied by the number of Option Shares sold in the Subsequent Sale and
(ii) in addition, 50% of the excess of the Subsequent Sale Price over $14.00
multiplied by the number of Option Shares sold in the Subsequent Sale.

Provisions Concerning the Shares. The Selling Shareholders have
agreed that during the period commencing on the date of the Shareholders
Agreement and continuing until the first to occur of the Effective Time or
termination of the Merger Agreement in accordance with its terms, at any meeting
of the Company's shareholders or in connection with any written consent of the
Company's shareholders, the Selling Shareholders will vote (or cause to be

voted) the Shares held of record or beneficially owned by such Selling
Shareholders, whether issued, heretofore owned or hereinafter acquired, (i) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and the Shareholders Agreements and any
actions required in furtherance thereof; (ii) against any action or agreement
that would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or the Shareholders Agreements (after giving effect to any materiality
or similar qualifications contained therein); and (iii) except as otherwise
agreed to in writing in advance by Parent, against the following actions (other
than the Merger and the transactions contemplated by the Merger Agreement): (A)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or its subsidiaries; (B) a
sale, lease or transfer of a material amount of assets of the Company or its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (C) (1) any change in a majority of the
persons who constitute the board of directors of the Company; (2) any change in
the present capitalization of the Company or any amendment of the Company's
Restated Articles of Incorporation or Bylaws; (3) any other material change in
the Company's corporate structure or business; or (4) any other action which, in
the case of each of the matters referred to in clauses (C)(1), (2) or (3), is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or materially adversely affect the Merger and the transactions
contemplated by the Shareholders Agreements and the Merger Agreement. The
Selling Shareholders further agreed not to enter into any agreement or
understanding with any person or entity the effect of which would be
inconsistent or violative of the provisions and agreements described above.

Other Covenants, Representations, Warranties. In connection with the
Shareholders Agreements, the Selling Shareholders have made certain customary
representations, warranties and covenants, including with respect to (i)
ownership of the Shares, (ii) the Selling Shareholders' authority to enter into
and perform their obligations under the Shareholders Agreements, (iii) the
receipt of requisite governmental consents and
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<PAGE>
approvals, (iv) the absence of liens and encumbrances on and in respect of the
Selling Shareholders' Shares, (v) restrictions on the transfer of the Selling
Shareholders' Shares, and (vi) the solicitation of acquisition proposals.

The parties to the Shareholders Agreement with Mr. Robinson have
acknowledged that 80,705 Shares owned by Mr. Robinson (the 'Pledged Shares') are
pledged to Michigan National Bank (the 'Pledge') to secure a loan in the amount
of approximately $400,000 made to Mr. Robinson (the 'Loan'). In the Shareholders
Agreement, Mr. Robinson has agreed to terminate the Pledge within 10 calendar
days after commencement of the Offer and to take all actions necessary to
eliminate any pledge, lien, encumbrance or security interest on the Pledged
Shares by such tenth calendar day. In the event Parent purchases Shares pursuant
to the Offer and the Shareholder has not tendered the Pledged Shares because the
Pledge was not terminated as required by the above provision, the parties have
agreed that such Shares will be acquired in the Merger. In the event that Mr.
Robinson shall have breached the Shareholders Agreement by failing to comply
with the foregoing provision, the parties agree that Parent may, in its sole

discretion, pay the Loan in order to release the Shares from the Pledge, and
Parent shall deduct from the purchase price upon exercise of the Stock Option
the sum of (i) the amount paid to satisfy (in whole or in part) the Loan, (ii)
interest on such amount at the prime rate of Michigan National Bank calculated
from the date of payment of the Loan until receipt of the Pledged Shares by
Parent, and (iii) any transaction costs in connection therewith (including
attorney's fees and expenses).

Consulting Agreement. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF
THE CONSULTING AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF THE CONSULTING AGREEMENT WHICH IS INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT
TO THE SCHEDULE 14D-1. THE CONSULTING AGREEMENT MAY BE EXAMINED AND COPIES MAY
BE OBTAINED AT THE PLACE AND MANNER AS SET FORTH IN SECTION 7 OF THIS OFFER TO
PURCHASE.

Parent and Jack Robinson (the 'Consultant') have entered into the
Consulting Agreement pursuant to which the Consultant has agreed to advise
Parent on general business matters and issues, and strategy relating to Parent's
business (including issues relating to real estate and community, governmental
and industry relations). The term of the Consulting Agreement is ten years
commencing on the consummation of the Offer (the 'Term'). For the first year of
the Term, the Consultant will also serve as President of Rite Aid of Michigan,
Inc. The Consultant will also serve for five years as one of the representatives
of the Company at various National Association of Chain Drug Stores conventions.
As compensation for the Consultant's services, Parent has agreed to pay
consulting fees to the Consultant at the rate of $225,000 per annum.
Additionally, Parent will provide the Consultant and his spouse medical, health
and life insurance coverage during the Term, and certain perquisites (for up to
two years) that the Company currently provides to the Consultant. Parent has
agreed to also provide the Consultant with office space and adequate support
staff for the performance of his duties for the first two years under the
Consulting Agreement, and during the Term Parent will reimburse the Consultant
for all reasonable costs incurred in performing those duties rendered pursuant
to the Consulting Agreement. In the event that the Offer or the Merger Agreement
is terminated, the Consulting Agreement will be cancelled and of no force or
effect. If the Consultant should die before the termination of the Consulting
Agreement, the consulting relationship with Parent shall end and Parent shall
thereafter pay to the beneficiary designated by the Consultant the compensation
that the Consultant would have been paid under the Consulting Agreement for the
remainder of the Term. If, as a result of the Consultant's incapacity due to
physical or mental illness, the Consultant should become unable to perform his
duties under the Consulting Agreement, Parent may terminate the consulting
relationship with the Consultant. In such event, the Consultant shall be
entitled to receive substantially the same compensation that he would have
received under the Consulting Agreement for the remainder of the Term.

In the Consulting Agreement, the Consultant has agreed not to engage
in or be employed by any business which competes with Parent for a period of
five years after termination of his services as a consultant under the
Consulting Agreement, and has further agreed not to disclose any confidential
information acquired while performing his duties under the Consulting Agreement.

Confidentiality Agreement. THE FOLLOWING IS A SUMMARY OF THE MATERIAL

TERMS OF THE CONFIDENTIALITY AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE CONFIDENTIALITY AGREEMENT WHICH IS INCORPORATED
HEREIN BY REFERENCE AND A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN
EXHIBIT TO THE SCHEDULE 14D-1. THE CONFIDENTIALITY AGREEMENT MAY BE EXAMINED AND
COPIES MAY BE OBTAINED AT THE PLACE AND MANNER AS SET FORTH IN SECTION 7 OF THIS
OFFER TO PURCHASE.

<PAGE>
Parent entered into a Confidentiality Agreement, dated December 14,
1994, with the Company pursuant to which Parent has agreed, among other things,
to keep confidential certain non-public confidential or proprietary information
of the Company furnished to Parent by or on behalf of the Company. The
Confidentiality Agreement provides that for a period of one year from the date
of the Confidentiality Agreement, neither Parent nor any of its directors,
officers, employees, agents or representatives will, without the prior written
consent of the Company: (a) acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the Company,
or any assets of the Company or any subsidiary or division thereof or of any
such successor or controlling person; (b) make, or in any way participate,
directly or indirectly, in any 'solicitation' of 'proxies' to vote (as such
terms are used in the rules of the Commission), or seek to advise or influence
any person or entity with respect to the voting of any voting securities of the
Company; (c) make any public announcement with respect to, or submit a proposal
for, or offer of (with or without conditions) any extraordinary transaction
involving the Company or its securities or assets; (d) seek or propose to
influence or control the Company's management or policies (or request permission
to do so); or (e) form, join or in any way participate in a 'group' as defined
in Section 13(d)(3) of the Exchange Act in connection with any of the foregoing
provisions of this paragraph.

Rights Agreement. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE
RIGHTS AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
RIGHTS AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN
EXHIBIT TO THE COMPANY'S CURRENT REPORT ON FORM 8-K, DATED FEBRUARY 4, 1987, AND
THE AMENDMENT TO RIGHTS AGREEMENT, FILED AS AN EXHIBIT TO THE COMPANY'S CURRENT
REPORT ON FORM 8-K, DATED JUNE 2, 1989, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 8-KS. THE RIGHTS AGREEMENT MAY BE EXAMINED AND COPIES MAY
BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET FORTH IN SECTION 7 OF THIS
OFFER TO PURCHASE.

On February 4, 1987, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock to
shareholders of record on February 20, 1987. Each Right issued pursuant to the
Rights Agreement entitles the registered holder to purchase from the Company a
unit consisting of one one-hundredth of a share (a 'Unit') of Series A $5.00
Preferred Stock, no par value (the 'Preferred Stock') at a price of $48.00 per
Unit (the 'Purchase Price'), subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement (the 'Rights Agreement') between
the Company and State Street Bank & Trust Company, as successor Rights Agent
(the 'Rights Agent').

The Rights are evidenced by a Common Stock certificate with a copy of
the Summary of Rights (as set forth in an exhibit to the Rights Agreement)
attached thereto. The Rights will separate from the Common Stock and a
Distribution Date (as defined in the Rights Agreement) will occur upon the
earlier of (i) 10 business days (or such later date as may be determined by
action of a majority of the Continuing Directors (as defined in the Rights
Agreement) then in office) following a public announcement that an Acquiring
Person (as defined in the Rights Agreement) has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding shares of the
Common Stock or (ii) 10 business days (or such later date as may be determined
by action of a majority of the Continuing Directors then in office) following
the commencement or announcement of an intention to commence a tender offer or
exchange offer by any person if, upon consummation thereof, such person would be
an Acquiring Person (the earlier of such dates being called the 'Distribution
Date').

The Rights Agreement provides that, until the Distribution Date, (i)
the Rights will be transferred with and only with the Common Stock, (ii) new
Common Stock certificates issued after February 20, 1987 upon transfer or new
issuance of the Common Stock contain a notation incorporating the Rights
Agreement by reference, and (iii) the surrender for transfer of any of the
Common Stock certificates outstanding as of February 20, 1987, even without a
copy of the Summary of Rights attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. The Rights Agreement provides that as soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ('Right
Certificates') will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date and the
Rights will expire on February 20, 1997, unless earlier redeemed by the Company
as described below.

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<PAGE>
The Rights Agreement provides that in the event that (i) the Company
were the surviving corporation in a merger and its Common Stock were not changed
or exchanged; (ii) an Acquiring Person engages in one of a number of
self-dealing transactions specified in the Rights Agreement; or (iii) an
Acquiring Person becomes the beneficial owner of 25% or more of the outstanding
Shares, except (a) pursuant to an acquisition discussed in the following
sentence, or (b) pursuant to a tender offer or exchange offer for all
outstanding Shares at a price and on terms determined by at least a majority of
the Continuing Directors, after receiving advice from one or more investment
banking firms, to be at a price that is fair (as set forth in the Rights
Agreement) to shareholders and otherwise in the best interests of the Company
and its shareholders (a 'Fair Offer'), then proper provision shall be made so
that each holder of a Right, other than Rights that were or are beneficially
owned by the Acquiring Person (which will thereafter be void), shall thereafter
have the right to receive upon exercise, at the then current market price in
accordance with the terms of the Rights Agreement, such number of Shares having
a market value of two times the exercise price of the Right. In the event (i)

that the Company were acquired in a merger or other business combination
transaction in connection with which all or a part of the Common Stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property, except if such transaction is consummated with a
person or persons who acquired Shares pursuant to a tender offer for all
outstanding Shares if (A) the price and or terms of the tender offer are
determined by at least a majority of the Continuing Directors to be a Fair
Offer, (B) the price per Share offered in such transaction is not less than the
price per Share paid to all holders of Shares whose Shares were purchased
pursuant to such tender offer and (C) the form of consideration being offered to
the remaining holders of Shares pursuant to such transaction is the same as the
form of consideration paid pursuant to such tender offer; or (ii) that 50% or
more of the Company's assets or earning power were sold, then proper provision
shall be made so that each holder of a Right, other than Rights that were or are
beneficially owned by the Acquiring Person (which will thereafter be void),
shall thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the Acquiring Person which at the time of such transaction would have a
market value of two times the exercise price of the Right. Each of the events
described in this paragraph constitutes a 'Triggering Event' under the Rights
Agreement.

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of a least 1% in
such Purchase Price. Prior to a Triggering Event, fractional shares of the
Preferred Stock will not be issued (other than fractions which are integral
multiples of one one-hundredths of a share of Preferred Stock) and, in lieu
thereof, an adjustment in cash will be made equal to the same fraction of the
current market value of one one-hundredth of a share of Preferred Stock.
Following the occurrence of a Triggering Event, the Company shall not be
required to issue fractions of shares of Common Stock and, in lieu thereof, an
adjustment in cash will be made equal to the same fraction of the current market
value of one share of Common Stock.

At any time prior to 5:00 p.m. Detroit time, on the tenth business day
following the public announcement that a person or group of affiliated or
associated persons has acquired beneficial ownership of 20% or more of the
outstanding shares of the Common Stock of the Company (the 'Shares Acquisition
Date'), the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.05 per Right (the 'Redemption Price'); provided
that if such redemption occurs on or after the Shares Acquisition Date the Board
shall be entitled to so redeem the Rights only if such redemption is approved by
a majority of the Continuing Directors and the Continuing Directors constitute a
majority of the Board of Directors. Thereafter, the Company's right of
redemption may be reinstated, prior to a Triggering Event, if (i) an Acquiring
Person reduces his beneficial ownership to 10% or less of the outstanding shares
of Common Stock in a transaction or series of transactions not involving the
Company, and (ii) there are no other Persons, immediately following the event
described in clause (i), who are Acquiring Persons. Additionally, the Continuing
Directors may at any time prior to the occurrence of a Triggering Event, redeem
the then outstanding Rights in whole, but not in part, at the Redemption Price;
provided that such redemption is in connection with the consummation of a merger
or other business combination involving the Company but not involving an
Acquiring Person or its Affiliates or Associates which is determined to be in

the best interests of the Company and all its shareholders by a majority of the
Continuing Directors or by the holders of 80% of the outstanding Common Stock
not owned by the Acquiring Person or its Affiliates or Associates. Immediately
upon the action of the Board of Directors of the Company electing to redeem the
Rights, the Company shall make announcement thereof, and upon such election,
24
<PAGE>
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

The Company has executed the Rights Amendment (i) to prevent the
Merger Agreement, the Shareholders Agreements or the consummation of any of the
transactions contemplated thereby, including without limitation, the Offer and
the consummation of the Offer and the Merger, from resulting in the distribution
of separate Rights certificates or the occurrence of a Distribution Date (as
defined therein) or being deemed a Triggering Event (as defined therein) and
(ii) to provide that neither Parent nor the Purchaser will be deemed to be an
Acquiring Person (as defined therein) by reason of the transactions expressly
provided for in the Merger Agreement and the Shareholders Agreements. The Rights
Amendment will render the Rights inoperative with respect to any acquisition of
Shares by Parent, the Purchaser or any of their affiliates pursuant to the
Merger Agreement and/or the Shareholders Agreements. Upon consummation of the
Merger, all Rights will expire and be of no further force or effect.

General. Under Michigan Law, the approval of the Board and the affirmative
vote of the holders of a majority of the outstanding Shares is required to
approve and adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger. The Board of Directors of the Company has
unanimously approved and adopted the Merger Agreement and the transactions
contemplated thereby, and, unless the Merger is consummated pursuant to the
short-form merger provisions under Michigan Law described below, the only
remaining required corporate action of the Company is the approval and adoption
of the Merger Agreement and the transactions contemplated thereby by the
affirmative vote of the holders of a majority of the Shares. Accordingly, if the
Minimum Condition is satisfied, the Purchaser will have sufficient voting power
to cause the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other shareholders of
the Company.

Under Michigan Law, if the Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the outstanding Shares, the Purchaser will be able to
approve the Merger without a vote of the Company's shareholders. In such event,
Parent, the Purchaser and the Company have agreed in the Merger Agreement to
take, at the request of the Purchaser, all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's shareholders. If, however,
the Purchaser does not acquire at least 90% of the outstanding Shares pursuant
to the Offer or otherwise and a vote of the Company's shareholders is required
under Delaware Law, a significantly longer period of time would be required to
effect the Merger.

Under Article VIII of the Company's Restated Articles of Incorporation (the
'Company's Charter'), the affirmative vote of the holders of not less than 75%
of the outstanding Shares is required to, among other things, adopt any
agreement for, or to approve, the merger or consolidation of the Company or any
subsidiary with or into any person (defined as any individual, corporation,
partnership or other entity) if, as of the record date to vote on such
transaction, such person is, or at any time within the preceding 12 months has
been, the beneficial owner of 5% or more of the Shares. However, the Company's
Charter provides that the preceding provision is not applicable to a transaction
which meets this criteria if (i) the Board of Directors of the Company has
approved a memorandum of understanding with such person setting forth the
principal terms of the transaction and such transaction is substantially
consistent therewith, and (ii) a majority of the Board of Directors voting in
favor of such resolution were duly elected to the Board prior to the time such
person became the beneficial owner of 5% or more of the Shares. In the Merger
Agreement the parties have agreed that the Merger Agreement shall constitute the
memorandum of understanding setting forth the principal terms of the Merger and
related transactions. In the Merger Agreement, the Company has represented that
the Board of Directors of the Company, by resolution, has approved the
memorandum of understanding setting forth the principal terms of the Merger and
related transactions prior to the time that Parent or the Purchaser entered into
the Shareholders Agreements. Accordingly, the vote of the holders of not less
than 75% of the outstanding Shares, as set forth in Article VIII of the
Company's Charter, is not applicable to the Offer, the Merger, or the
transactions contemplated thereby.

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<PAGE>
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain 'going private' transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which the Purchaser
seeks to acquire the remaining Shares not held by it. The Purchaser believes,
however, that Rule 13e-3 will not be applicable to the Merger because it is
anticipated that the Merger will be effected within one year following
consummation of the Offer. Rule 13e-3 requires, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the proposed transaction and the consideration offered to
minority shareholders in such transaction, be filed with the Commission and
disclosed to shareholders prior to consummation of the transaction.

Appraisal Rights. No appraisal rights are available in connection with the
Offer and the Merger. Michigan Law provides that there shall be no right of
dissent in favor of holders of shares of any class or series in connection with
a merger in which shareholders receive cash in exchange for their shares, except
in certain situations which the Purchaser believes would not be applicable to
the Merger.

Except as noted in this Offer to Purchase, neither Parent nor the Purchaser
has any present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation, relocation
of operations, or sale or transfer of assets, involving the Company or any
material changes in the Company's corporate structure, business or composition

of its management or personnel.

12. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement
provides that, prior to the Effective Time, the Company will not (i) declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock, subsidiaries of the Company and
dividends paid in respect of directors' qualifying shares which dividends are
the property of, and for the benefit of, the Company or its direct or indirect
wholly owned subsidiaries, (ii) except as explicitly permitted by the Merger
Agreement, issue, sell, pledge, dispose of or encumber any additional shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of the Company or its subsidiaries or (iii) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock.

13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.

The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public.

According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ('NYSE Excluded Holdings')) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NYSE for continued listing and the listing of the Shares
is discontinued, the market for the Shares could be adversely affected.

If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ('NASDAQ') or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of shareholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer Price.

26
<PAGE>
The Shares are currently 'margin securities', as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the 'Federal
Reserve Board'), which has the effect, among other things, of allowing brokers

to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
'margin securities' for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.

The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with shareholders' meetings pursuant
to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with
respect to 'going private' transactions, no longer applicable to the Shares. In
addition, 'affiliates' of the Company and persons holding 'restricted
securities' of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act.

If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be 'margin securities' or be eligible for NASDAQ
reporting.

14. CONDITIONS OF THE OFFER.

Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to
pay for or return tendered Shares promptly after termination or withdrawal of
the Offer), pay for, and may delay the acceptance for payment of or, subject to
the restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminated, (ii) the Minimum
Condition has not been satisfied, (iii) the Rights Agreement shall not have been
amended in a manner which renders the Rights inoperative with respect to any
acquisition of Shares by Parent or the Purchaser, or (iv) at any time on or
after December 23, 1994 and before the time of payment for any such Shares, any
of the following events shall occur or shall be determined by the Purchaser to
have occurred:

(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or administrative agency
or authority or court or legislative body or commission which directly or
indirectly (l) prohibits, or imposes any material limitations on, Parent's
or the Purchaser's ownership or operation (or that of any of their
respective subsidiaries or affiliates) of all or a material portion of

their or the Company's businesses or assets, or compels Parent or the
Purchaser or their respective subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of the Company
or Parent and their respective subsidiaries, in each case taken as a whole,
(2) prohibits, or makes illegal the acceptance for payment, payment for or
purchase of Shares or the consummation of the Offer or the Merger, (3)
results in the delay in or restricts the ability of the Purchaser, or
renders the Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares, (4) imposes material limitations on the ability
of the Purchaser or Parent effectively to exercise full rights of ownership
of the Shares, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the Company's
shareholders, or (5) otherwise materially adversely affects the
consolidated financial condition, businesses or results of operations of
the Company and its subsidiaries, taken as a whole, provided that Parent
shall have used all reasonable efforts to cause any such judgment, order or
injunction to be vacated or lifted;

(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
for a period in excess of three hours (excluding suspensions or
27
<PAGE>
limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States, (4) any limitation (whether or not
mandatory) by any foreign or United States governmental authority on the
extension of credit by banks or other financial institutions, (5) any
decline in either the Dow Jones Industrial Average or the Standard & Poor's
Index of 500 Industrial Companies by an amount in excess of 20% measured
from the close of business on December 23, 1994, or (6) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;

(c) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct in any material respect as
of the date of consummation of the Offer as though made on or as of such
date, except (i) for changes specifically permitted by the Merger Agreement
and (ii) those representations and warranties that address matters only as
of a particular date are true and correct as of such date or the Company
shall have breached or failed in any material respect to perform or comply
with any material obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it;

(d) the Merger Agreement shall have been terminated in accordance with
its terms;

(e) (i) it shall have been publicly disclosed or Parent or the
Purchaser shall have otherwise learned that any person, entity or 'group'
(as defined in Section 13(d)(3) of the Exchange Act), other than Parent or
its affiliates or any group of which any of them is a member, shall have

acquired beneficial ownership (determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than 19.9% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted an option, right or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 19.9% of any class or series of
capital stock of the Company (including the Shares); or (ii) any person or
group shall have entered into a definitive agreement or agreement in
principle with the Company with respect to a merger, consolidation or other
business combination with the Company; or

(f) the Company's Board of Directors shall have withdrawn, or modified
or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the
Merger Agreement, or the Merger, or recommended another proposal or offer,
or shall have resolved to do any of the foregoing;

which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser giving rise to such condition) makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payments.

The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be waived by Parent or the Purchaser, in whole or in part at any
time and from time to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.

15. REGULATORY APPROVALS; STATE TAKEOVER LAWS.

General. Except as otherwise disclosed herein, based on a review of
publicly available information by the Company with the Commission, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Merger or (ii) any approval or
other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required for the acquisition or
ownership of Shares by the Purchaser as contemplated herein. Should any such
approval or other action be required, the Purchaser currently contemplates that
such approval or action would be sought. While the Purchaser does not currently
intend to delay the acceptance for payment of Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no
28
<PAGE>
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Purchaser or Parent or that
certain parts of the businesses of the Company, the Purchaser or Parent might
not have to be disposed of in the event that such approvals were not obtained or
any other actions were not taken. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See

Section 14.

Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ('FTC'), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the 'Antitrust
Division') and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer is
subject to the HSR Act requirements.

Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing under the HSR Act
by Parent, which Parent intends to make on December 29, 1994. Accordingly, if
such filing is made on December 29, 1994, the waiting period under the HSR Act
will expire at 11:59 P.M., New York City time, on January 13, 1995, unless early
termination of the waiting period is granted or Parent receives a request for
additional information of documentary material prior thereto. Pursuant to the
HSR Act, Parent has requested early termination of the waiting period applicable
to the Offer. There can be no assurances, however, that the 15-day HSR Act
waiting period will be terminated early. If either the FTC or the Antitrust
Division were to request additional information or documentary material from
Parent, the waiting period would expire at 11:59 P.M., New York City time, on
the tenth calendar day after the date of substantial compliance by the Parent
with such request. Thereafter, the waiting period could be extended only by
court order or by consent of Parent. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the purchase of and
payment for Shares pursuant to the Offer will be deferred until 10 days after
the request is substantially complied with unless the waiting period is
terminated sooner by the FTC or the Antitrust Division. See Section 2. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the rules promulgated under the HSR Act, except by
court order. Although the Company is required to file certain information and
documentary material with the Antitrust Division and the FTC in connection with
the Offer, neither the Company's failure to make such filings nor a request to
the Company from the Antitrust Division or the FTC for additional information or
documentary material will extend the waiting period.

No separate HSR Act requirements with respect to the Merger, the Merger
Agreement, and the Shareholders Agreements will apply if the 15-day waiting
period relating to the Offer (as described above) has expired or been
terminated. However, if the Offer is withdrawn or if the filing relating to the
Offer is withdrawn prior to the expiration or termination of the 15-day waiting
period relating to the Offer, the acquisition of Shares under the Shareholders
Agreements and/or the Merger pursuant to the Merger Agreement may not be
consummated until 30 calendar days after receipt by the Antitrust Division and
the FTC of the Notification and Report Forms of both Parent and the Company
unless the 30-day period is earlier terminated by the Antitrust Division and the
FTC. Within such 30-day period, the Antitrust Division or the FTC may request
additional information or documentary materials from Parent and/or the Company,
in which event, the acquisition of Shares pursuant to the Merger or the
Shareholders Agreements, as the case may be, may not be consummated until 20
days after such requests are substantially complied with by both Parent and the

Company. Thereafter, the waiting periods may be extended only by court order or
by consent.

The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, either the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by the Purchaser or divestiture
of substantial assets of Parent, the Company or any of their respective
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. Based upon an examination of publicly
available information relating to the businesses in which Parent and its
subsidiaries and the Company and its subsidiaries are involved, Parent and the
Purchaser believe that the Offer will not violate the antitrust laws.
Nevertheless, there can be no
29
<PAGE>
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if a challenge is made, what the result will be.

State Takeover Laws. The Company is incorporated under the laws of the
State of Michigan. In general, Sections 775 through 784 of Michigan Law (the
'Business Combination Statute') prevent an 'interested shareholder' (generally a
person who owns or has the right to acquire 10% or more of a corporation's
outstanding voting stock, or an affiliate or associate thereof) from engaging in
a 'business combination' (defined to include mergers and certain other
transactions) with a Michigan corporation for a period of five years following
the date such person became an interested shareholder unless, among other
things, the board of directors of the corporation approved the business
combination at any time prior to the time the interested shareholder first
became an interested shareholder. On December 23, 1994, prior to the execution
of the Merger Agreement and prior to the execution of the Shareholders
Agreements, the Board of Directors of the Company, by unanimous vote of all
directors present at a meeting held on such date, approved the Merger Agreement
and determined that each of the Offer and the Merger is fair to, and in the best
interest of, the shareholders of the Company. Accordingly, the Business
Combination Statute is inapplicable to the Offer and the Merger.

In general, Sections 790 through 799 of Michigan Law (the 'Control Share
Acquisition Statute') provide that 'control shares' (defined as shares that,
except for this statute, would have voting power that would entitle a person,
immediately after acquisition of the shares, to exercise or direct the exercise
of the voting power of one-fifth or more of all voting power of the company's
shares) acquired in a 'control share acquisition' (defined as an acquisition of
ownership or the power to direct the voting power of control shares) have voting
rights only to the extent granted by a resolution approved by both a majority of
all shares entitled to vote thereon and a majority of the shares entitled to
vote thereon excluding all interested shares. This statute does not apply to the
acquisition of any shares of a corporation if, among other things, the
corporation's articles or by-laws provide, before the control share acquisition,
that the provisions do not apply to such acquisition. On December 23, 1994,
prior to the execution of the Merger Agreement and the Shareholders Agreements,

the Company amended its By-laws to opt out of the Control Share Acquisition
Statute. Accordingly, the Control Share Acquisition Statute is not applicable to
the Offer or the Merger.

16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.

The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee shareholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.

In addition, Harris Trust Company of New York has been retained as the
Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Purchaser for customary
mailing and handling expenses incurred by them in forwarding offering material
to their customers.

17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, the Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by one or more registered brokers or dealers
which are licensed under the laws of such jurisdiction.

30
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.

Parent and the Purchaser have filed with the Commission the Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected at, and copies

may be obtained from, the same places and in the same manner as set forth in
Section 7 (except that they will not be available at the regional offices of the
Commission).

LAKE ACQUISITION CORPORATION

December 29, 1994

<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER

1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent. Unless
otherwise indicated, each person identified below is employed by Parent. The
principal address of Parent and, unless otherwise indicated below, the current
business address for each individual listed below is 30 Hunter Lane, Camp Hill,
Pennsylvania, 17011. Each such person is a citizen of the United States.
Directors are identified by an asterisk.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT;
NAME AND CURRENT MATERIAL POSITIONS HELD DURING THE PAST
BUSINESS ADDRESS FIVE YEARS
- -------------------------------------- ---------------------------------------
<S> <C>
Alex Grass*........................... Founder, Chairman of the Board and
Chief Executive Officer of Parent. Mr.
Grass is also a director of Hasbro Inc.
and is Chairman of the Board of
Directors of Super Rite Corporation. He
is the father of Martin Grass.

Martin Grass*......................... President and Chief Operating Officer.
Mr. Grass was appointed Chief Operating
Officer in April 1989. He is the Vice
Chairman of the Board of Directors and
Treasurer of Super Rite Corporation. He
is the son of Alex Grass.

Preston Robert Tisch* ................ President and Co-Chief Executive
Loews Corporation Officer of Loews Corporation since
667 Madison Avenue March 1988. In addition, since March
New York, NY 10021 1991 he has been Chairman of the Board
of the N.Y. Football GIANTS, Inc. From
August 1986 to March 1988, he was
Postmaster General of the United
States. Prior thereto, he had been
President and Chief Operating Officer
of Loews Corporation. Mr. Tisch is also
a director of Loews Corporation, CNA
Financial Corporation, Bulova Watch
Co., and Hasbro, Inc.

Franklin Brown*....................... Executive Vice President and Chief
Legal Counsel since 1993. Prior
thereto, Mr. Brown served as Senior

Vice President and General Counsel of
Parent.

Philip Neivert* ...................... Private investor whose operations are
40 Whitestone Lane based in Rochester, New York.
Rochester, NY 14618

Gerald Tsai, Jr.* .................... Chairman, President and Chief Executive
Tsai Management, Inc. Officer of Delta Life Corporation, a
200 Park Avenue position he has held since February
Suite 3709 1993. He had been Chairman of the
New York, NY 10166 Executive Committee of the Board of
Directors of Primerica Corporation
(formerly American Can Company) from
December 1988 until April 1991. Mr.
Tsai is also a director of NAC Re
Corporation, Sequa Corporation and
Zenith National Insurance Corp., and is
a trustee of Meditrust.

Leonard Stern* ....................... Chairman of the Board of The Hartz
Hartz Group, Inc. Group, Inc. and affiliated companies.
667 Madison Avenue
24th Floor
New York, NY 10021

Henry Taub* .......................... Honorary Chairman of the Board of
111 DeVriese Court Automatic Data Processing, Inc. since
Tenafly, NJ 07670 1986. He is also a director of Hasbro,
Inc.

Timothy J. Noonan..................... Executive Vice President

Alex Schamroth........................ Executive Vice President

Frank M. Bergonzi..................... Senior Vice President

Kevin J. Mann......................... Senior Vice President
</TABLE>

I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT;
NAME AND CURRENT MATERIAL POSITIONS HELD DURING THE PAST
BUSINESS ADDRESS FIVE YEARS
- -------------------------------------- ---------------------------------------
<S> <C>
Philip D. Markowitz................... Senior Vice President
Ronald A. Miller...................... Senior Vice President
Robert R. Souder...................... Senior Vice President
Joel F. Feldman....................... Senior Vice President

Dennis J. Bowman...................... Senior Vice President
Charles Slane......................... Vice President and Secretary
Thomas R. Coogan...................... Vice President and Treasurer
Gerald P. Cardinale................... Vice President
Mark E. Fogg.......................... Vice President
Allan Goldman......................... Vice President
Charles R. Kibler..................... Vice President
W. Michael Knievel.................... Vice President
James E. Krahulec..................... Vice President
James O. Lott......................... Vice President
Raymond B. McKeeby.................... Vice President
Suzanne Mead.......................... Vice President
Gregg W. Montgomery................... Vice President
Michael F. Morris..................... Vice President
Joseph S. Speaker..................... Vice President
</TABLE>

Each of the executive officers listed above has served Parent or its
subsidiaries in various executive capacities for the past five years, except for
the following individuals:

Mr. Bowman has held his present position with Parent for one year. Prior
thereto he was a Senior Information Technology Consultant with McKinsey &
Company.

Mr. Feldman has been Vice President of Managed Care Services for Parent
since 1991. From September 1989 until his appointment as Vice President, he held
the positions of Assistant Vice President of Third Party Sales and Director of
Third Party Sales for Parent.

2. Directors and Executive Officers of the Purchaser. Set forth below is the
name and position of each director and officer of the Purchaser. The principal
occupation or employment and citizenship of each such person is set forth in
Part 1 of this Schedule I. Each person identified below is employed by the
Purchaser and has held such position since the formation of the Purchaser in
December 1994. The principal address of the Purchaser and the current business
address for each individual listed below is 30 Hunter Lane, Camp Hill,
Pennsylvania 17011. Directors are identified by an asterisk.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST
NAME FIVE YEARS
- -------------------------------------- ---------------------------------------
<S> <C>
Alex Grass*........................... President
Martin Grass*......................... Vice President
Franklin Brown*....................... Secretary
Frank M. Bergonzi*.................... Treasurer
</TABLE>

I-2

<PAGE>
SCHEDULE II
TRANSACTIONS IN SHARES DURING THE PAST 60 DAYS
BY PARENT

<TABLE>
<CAPTION>
SHARES
TRANSACTION DATE ACQUIRED(1) PRICE PER SHARE(2)
- ---------------- ----------- ------------------
<S> <C> <C>
October 24, 1994 9,200 $ 7.00
October 25, 1994 40,500 7.00
October 26, 1994 15,400 7.00
October 27, 1994 31,800 7.00
October 28, 1994 1,900 7.00
October 31, 1994 9,100 7.25
November 1, 1994 9,000 7.25
</TABLE>

- ------------------
(1) Purchased by Parent in open market transactions executed on the NYSE.

(2) All prices are exclusive of brokerage commissions.

II-1

<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each shareholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary as follows:

The Depositary for the Offer is:

HARRIS TRUST COMPANY OF NEW YORK

By Mail: By Overnight Courier: By Hand:
Wall Street Station 77 Water Street, 4th Receive Window
P.O. Box 1023 Floor 77 Water Street, 5th
New York, NY 10268-1023 New York, NY 10005 Floor
New York, NY 10005
By Facsimile:
(212) 701-7636
(212) 701-7640
Confirm by telephone:
(212) 701-7624

Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or
other tender offer materials may be directed to the Information Agent at the
telephone number and address listed below. You may also contact your broker,

dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885

<PAGE>

EXHIBIT (a)(2)

LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
(Including the Associated Rights)
of
PERRY DRUG STORES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 29, 1994
BY
LAKE ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 27, 1995,
UNLESS THE OFFER IS EXTENDED.

THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK

By Hand: By Overnight Courier: By Mail:

Receive Window 77 Water Street, Wall Street Station
77 Water Street, 4th Floor P.O. Box 1023
5th Floor New York, NY 10005 New York, NY 10268-1023
New York, NY 10005

By Facsimile:
(212) 701-7636
(212) 701-7640
Confirm by telephone:
(212) 701-7624
------------------

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ('DTC'), the Midwest
Securities Trust Company ('MSTC') or the Philadelphia Depository Trust Company
('PDTC') (each a 'Book-Entry Transfer Facility' and collectively, the
'Book-Entry Transfer Facilities') pursuant to the book-entry transfer procedure
described in Section 3 of the Offer to Purchase (as defined below). Delivery of
documents to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.

Shareholders whose certificates evidencing Shares ('Share Certificates')
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section l of the Offer to Purchase) or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis and who wish
to tender their Shares must do so pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase. See Instruction 2.

/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:

Name of Tendering Institution

- ---------------------------------------------------------------------------

Check Box of Applicable Book-Entry Transfer Facility:

(CHECK ONE) / / DTC / / MSTC / / PDTC

Account Number

- ---------------------------

Transaction Code Number

- ---------------------------------

/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:

Name(s) of Registered Holder(s): _______________________________________________
Window Ticket No. (if any): ____________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution which Guaranteed Delivery: _________________________________

If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer Facility:

(CHECK ONE) / / DTC / / MSTC / / PDTC

Account Number

- ---------------------------

Transaction Code Number

- ---------------------------------

<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED

NAMES(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAMES(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ----------------------------------------------------------------- ----------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary are being
tendered hereby. See Instruction 4.

NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.

Ladies and Gentlemen:

The undersigned hereby tenders to Lake Acquisition Corporation, a Delaware
corporation ('Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation., a Delaware corporation, the above-described shares of common
stock, par value $.05 per share (the 'Common Stock'), of Perry Drug Stores,
Inc., a Michigan corporation (the 'Company'), and the associated preferred stock
purchase rights issued pursuant to the Rights Agreement, dated as of February 4,
1987, as amended, between the Company and State Street Bank & Trust Company, as
successor Rights Agent (together with the Common Stock, the 'Shares'), pursuant
to Purchaser's offer to purchase all outstanding Shares, at $11.00 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated December 29, 1994 (the 'Offer to
Purchase'), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together constitute the
'Offer'). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer.

Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, Purchaser all right, title and interest in and to all the Shares that
are being tendered hereby and all dividends, distributions (including, without
limitation, distributions of additional Shares) and rights declared, paid or
distributed in respect of such Shares on or after December 23, 1994,
(collectively, 'Distributions'), and irrevocably appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to

such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver Share Certificates evidencing such Shares and all Distributions,
or transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.

<PAGE>
The undersigned hereby irrevocably appoints Martin L. Grass and Franklin
Brown, and each of them, as the attorneys and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or his substitute shall, in his sole discretion, deem proper and
otherwise act (by written consent or otherwise) with respect to all the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of such vote or other action and all Shares and other securities issued in
Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of shareholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with the terms of the Offer. Such acceptance
for payment shall revoke all other proxies and powers of attorney granted by the
undersigned at any time with respect to such Shares (and all Shares and other
securities issued in Distributions in respect of such Shares), and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the undersigned with respect
thereto. The undersigned understands that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's acceptance of such Shares for
payment, Purchaser must be able to exercise full voting and other rights with
respect to such Shares, including, without limitation, voting at any meeting of
the Company's shareholders then scheduled.

The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when such Shares are accepted
for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Shares tendered hereby or deduct from
such purchase price, the amount or value of such Distribution as determined by

Purchaser in its sole discretion.

No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.

The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.

Unless otherwise indicated herein in the box entitled 'Special Payment
Instructions,' please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
'Description of Shares Tendered.' Similarly, unless otherwise indicated in the
box entitled 'Special Delivery Instructions,' please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under 'Description of Shares Tendered.' In the event that the boxes entitled
'Special Payment Instructions' and 'Special Delivery Instructions' are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
'Special Payment Instructions,' please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased, by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not purchase any of the Shares tendered hereby.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased are
to be returned by credit to an account at one of the Book-Entry Transfer
Facilities other than that designated above.

Issue / / check / / Share Certificate(s) to:

Name: __________________________________________________________________________
(PRINT PRINT)

Address: _______________________________________________________________________
(INCLUDE ZIP CODE)

________________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)

/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:

Check appropriate box:

/ / DTC / / MSTC / / PDTC

Account Number _________________________________________________________________

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be mailed to someone other than the undersigned, or to the undersigned at
an address other than that shown under 'Description of Shares Tendered.'

Mail / / check / / Share Certificate(s) to:

Name: __________________________________________________________________________
(PRINT PRINT)

Address: _______________________________________________________________________
(INCLUDE ZIP CODE)

<PAGE>

IMPORTANT
SHAREHOLDERS: SIGN HERE
(Please Complete Substitute Form W-9 on Reverse)

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Signature(s) of Holder(s)

Dated: ------------------------------, 199 --

(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5.)

Name(s):

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(Please Print)

Capacity (full title):

- --------------------------------------------------------------------------------

Address:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(include Zip Code)
Area Code and Telephone No.:

- --------------------------------------------------------------------------------

Taxpayer Identification or Social Security No.:

- --------------------------------------------------------------------------------
(See Substitute Form W-9 on reverse side)

GUARANTEE OF SIGNATURE(S)
(If Required--See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.

Authorized Signature:

- --------------------------------------------------------------------------------
Name:

- --------------------------------------------------------------------------------
(Please Print)
Name of Firm:

- --------------------------------------------------------------------------------
Address:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(Include Zip Code)

Area Code and Telephone No:

- --------------------------------------------------------------------------------

Dated: __________________________________________________ , 199__

<PAGE>
INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loans associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program
or the New York Stock Exchange Medallion Signature Guarantee Program or the
Stock Exchange Medallion Program (each an 'Eligible Institution'). No signature
guarantee is required on this Letter of Transmittal (a) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled 'Special Delivery Instructions' or the box entitled 'Special Payment
Instructions' on the reverse hereof, or (b) if such Shares are tendered for the
account of an Eligible Institution. See Instruction 5.

2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the reverse hereof prior to the Expiration
Date (as defined in Section l of the Offer to Purchase). If Share Certificates
are forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery.
Shareholders whose Share Certificates are not immediately available, who cannot
deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Depositary within five New York
Stock Exchange, Inc. ('NYSE') trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described in Section 3 of the Offer to
Purchase.

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES

AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.

3. Inadequate Space. If the space provided herein under 'Description of
Shares Tendered' is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.

4. Partial Tenders (not applicable to shareholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled 'Number of
Shares Tendered.' In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled 'Special Delivery
Instructions' on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.

If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.

If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.

If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.

If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.

6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.

7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled 'Description of Shares Tendered' on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Shareholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at a
Book-Entry Transfer Facility as such shareholder may designate in the box
entitled 'Special Payment Instructions' on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.

8. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent at its
address or telephone number set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
<PAGE>

9. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ('TIN') on the
Substitute Form W-9 which is provided under 'Important Tax Information' below,
and to certify, under penalties of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal Revenue Service that such
shareholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such shareholder. If the tendering shareholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such shareholder should write 'Applied For' in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If 'Applied For' is written in Part l and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such shareholder until a TIN is provided to
the Depositary.

10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the Shareholder should
promptly notify the Depositary. The Shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certifcates have been followed.

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).

IMPORTANT TAX INFORMATION

Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.

Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.

If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.
<PAGE>
WHAT NUMBER TO GIVE THE DEPOSITARY

The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write 'Applied For' in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If 'Applied For' is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.

<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK

SUBSTITUTE FORM W-9
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE

PART I--Taxpayer Identification Number--For all accounts, enter taxpayer
identification number in the box at right. (For most individuals, this is your
social security number. If you do not have a number, see Obtaining a Number in
the enclosed Guidelines.) Certify by signing and dating below. Note: If the
account is in more than one name, see the chart in the enclosed Guidelines to
determine which number to give the payer.

------------------------
Social Security Number

------------------------

Employer Identification
Number

(If awaiting TIN write 'Applied For')

Payer's Request for Taxpayer Identification Number (TIN)

PART II--For Payees Exempt From Backup Withholding, see the enclosed Guidelines
and complete as instructed therein.

CERTIFICATION--Under penalties of perjury, I certify that:

(l) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to me
and either (a) I have mailed or delivered an application to receive a
Taxpayer Identification Number to the appropriate Internal Revenue
Service ('IRS') or Social Security Administration office or (b) I
intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number
within sixty (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number), and

(2) I am not subject to backup withholding either because I have not been
notified by the IRS that I am subject to backup withholding as a result
of failure to report all interest or dividends, or the IRS has notified
me that I am no longer subject to backup withholding.

CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)

SIGNATURE DATE , 199 --

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885

December 29, 1994

<PAGE>
EXHIBIT (a)(3)

NOTICE OF GUARANTEED DELIVERY

for

Tender of Shares of Common Stock
(Including the Associated Rights)

PERRY DRUG STORES, INC.

(Not To Be Used For Signature Guarantees)

This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
('Shares Certificates') evidencing shares of common stock, par value $.05 per
share (the 'Common Stock'), of Perry Drug Stores, Inc., a Michigan corporation
(the 'Company'), and the associated preferred stock purchase rights issued
pursuant to the Rights Agreement, dated as of February 4, 1987, as amended,
between the Company and State Street Bank & Trust Company, as successor Rights
Agent (together with the Common Stock, the 'Shares'), are not immediately
available, (ii) if Share Certificates and all other required documents cannot be
delivered to Harris Trust Company of New York, as Depositary (the 'Depositary'),
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase
(as defined below)) or (iii) if the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or mail or transmitted by telegram or
facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.

The Depositary for the Offer is:

HARRIS TRUST COMPANY OF NEW YORK

By Hand: By Overnight Courier By Mail:

Receive Window 77 Water Street, 4th Wall Street Station
77 Water Street, 5th Floor P.O. Box 1023
Floor New York, NY 10005 New York, NY 10268-1023
New York, NY 10005

By Facsimile:
(212) 701-7636
(212) 701-7640

Confirm by Telephone:
(212) 701-7624

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.

This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an 'Eligible Institution'
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.

<PAGE>
Ladies and Gentlemen:

The undersigned hereby tenders to Lake Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Rite Aid Corporation, a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated December 29, 1994 (the 'Offer to Purchase'), and the related
Letter of Transmittal (which, as amended from time to time, together constitute
the 'Offer'), receipt of each of which is hereby acknowledged, the number of
Shares specified below pursuant to the guaranteed delivery procedures described
in Section 3 of the Offer to Purchase.

Number of Shares: -----------------

Certificate Nos. (if available):--------------------

- ----------------------------------------------------

Name(s) of Record Holder(s):

- ----------------------------------------------------

- ----------------------------------------------------
(Please Print)

Address(es): ---------------------------------------

- ----------------------------------------------------
(Zip Code)

Area Code and Tel. No: -----------------------------

Signature(s): --------------------------------------

- ----------------------------------------------------

Check ONE box if Shares will be
tendered by book-entry transfer:

/ / The Depository Trust Company

/ / Midwest Securities Trust
Company
/ / Philadelphia Depository Trust
Company

Account Number: ----------------------------------------------------

Dated: ----------------------------------------------------

GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a participant in the Security Transfer Agents Medallion
Program or the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in Section 2
of the Offer to Purchase) of a transfer of such Shares, in any such case
together with a properly completed and duly executed Letter of Transmittal, or a
manually signed facsimile thereof, with any required signature guarantees, and
any other documents required by the Letter of Transmittal within five New York
Stock Exchange, Inc. trading days after the date hereof.

The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in financial loss to such Eligible Institution.

Name of Firm: ---------------------- ---------------------------
(Authorized Signature)

Address: --------------------------- Title: ---------------------------
(Zip Code)

Area Code and Tel. No.: ------------ Date: ---------------------------

NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

<PAGE>

EXHIBIT (a)(4)

MACKENZIE PARTNERS, INC.

Offer to Purchase for Cash

All Outstanding Shares of Common Stock
(Including the Associated Rights)

of
PERRY DRUG STORES, INC.
at
$11.00 NET PER SHARE
by
LAKE ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 27, 1995,
UNLESS THE OFFER IS EXTENDED.

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees

We have been appointed by Lake Acquisition Corporation, a Delaware
corporation ('Purchaser') and a wholly owned subsidiary of Rite Aid Corporation,
a Delaware corporation ('Parent'), to act as Information Agent in connection
with Purchaser's offer to purchase all outstanding shares of common stock, par
value $.05 per share (the 'Common Stock'), of Perry Drug Stores, Inc., a
Michigan corporation (the 'Company'), and the associated preferred stock
purchase rights issued pursuant to the Rights Agreement, dated as of February 4,
1987, as amended, between the Company and State Street Bank & Trust Company, as
successor Rights Agent (together with the Common Stock, the 'Shares'), at a
price of $11.00 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in Purchaser's Offer to Purchase, dated December 29,
1994 (the 'Offer to Purchase'), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the 'Offer') enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.

The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, when added to the Shares owned by Purchaser and its affiliates,
constitutes at least a majority of the Shares outstanding on a fully diluted
basis.

Enclosed for your information and use are copies of the following
documents:

1. Offer to Purchase, dated December 29, 1994;

2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares;

3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Harris Trust Company of New York (the
<PAGE>
'Depositary') by the Expiration Date (as defined in the Offer to Purchase)
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date;

4. A letter to shareholders of the Company from Mr. Jack Robinson,
Chairman of the Board and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company;

5. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;

6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and

7. Return envelope addressed to the Depositary.

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 27, 1995, UNLESS THE OFFER IS EXTENDED.

In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or
facsimile thereof) properly completed and duly executed and any other required
documents in accordance with the instructions contained in the Letter of
Transmittal.

If a holder of Shares wishes to tender Shares, but cannot deliver such
holder's certificates or other required documents, or cannot comply with the
procedure for book-entry transfer, prior to the expiration of the Offer, a
tender of Shares may be effected by following the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.

Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Depositary and the Information Agent as described
in the Offer) in connection with the solicitation of tenders of Shares pursuant
to the Offer. However, Purchaser will reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients. Purchaser will pay or cause to be paid any stock transfer taxes
payable with respect to the transfer of Shares to it, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.

Any inquiries you may have with respect to the Offer and requests for
additional copies of the enclosed material should be addressed to the
Information Agent at our address and telephone number set forth on the back
cover page of the Offer to Purchase.

Very truly yours,

MACKENZIE PARTNERS, INC.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION
AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY
OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.

EXHIBIT (a)(5)
<PAGE>
Offer to Purchase for Cash

All Outstanding Shares of Common Stock
(Including the Associated Rights)

of
PERRY DRUG STORES, INC.
at
$11.00 NET PER SHARE
by
LAKE ACQUISITION CORPORATION
a wholly owned subsidiary of
RITE AID CORPORATION

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 27, 1995,
UNLESS THE OFFER IS EXTENDED.

December 29, 1994

To Our Clients:

Enclosed for your consideration is an Offer to Purchase, dated December 29,
1994 (the 'Offer to Purchase') and a related Letter of Transmittal (which, as
amended from time to time, together constitute the 'Offer') in connection with
the Offer by Lake Acquisition Corporation, a Delaware corporation ('Purchaser')
and a wholly owned subsidiary of Rite Aid Corporation, a Delaware corporation
('Parent'), to purchase all outstanding shares of common stock, par value $.05
per share (the 'Common Stock'), of Perry Drug Stores, Inc., a Michigan
corporation (the 'Company'), and the associated preferred stock purchase rights
issued pursuant to the Rights Agreement, dated as of February 4, 1987, as
amended, between the Company and State Street Bank & Trust Company, as successor
Rights Agent (together with the Common Stock, the 'Shares'), at a price of
$11.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer.

We are the holder of record of Shares held by us for your account. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.

We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.

Your attention is invited to the following:

1. The tender price is $11.00 per Share, net to the seller in cash.

2. The Offer is being made for all outstanding Shares.

3. The Board of Directors of the Company unanimously has determined
that each of the Offer and the Merger (as defined in the Offer to Purchase)
is fair to, and in the best interests of, the shareholders of the Company,
and recommends that shareholders accept the Offer and tender their Shares
pursuant to the Offer.
<PAGE>
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, January 27, 1995, unless the Offer is extended.

5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, when added to the Shares owned by Purchaser and its
affiliates, constitutes at least a majority of the Shares outstanding on a
fully diluted basis.

6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes with respect to the purchase of
Shares by Purchaser pursuant to the Offer.

If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.

The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.

<PAGE>
Instructions with Respect to
the Offer to Purchase for Cash
all Outstanding Shares of Common Stock
(Including the Associated Rights)
of
PERRY DRUG STORES, INC.
by
LAKE ACQUISITION CORPORATION

The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 29, 1994, and the related Letter of
Transmittal (which, as amended from time to time, together constitute the
'Offer'), in connection with the offer by Lake Acquisition Corporation, a
Delaware corporation ('Purchaser') and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ('Parent'), to purchase all outstanding
shares of common stock, par value $.05 per share (the 'Common Stock'), of Perry
Drug Stores, Inc., a Michigan corporation (the 'Company'), and the associated
preferred stock purchase rights (together with the Common Stock, the 'Shares').

This will instruct you to instruct your nominee to tender the number of
Shares indicated below (or, if no number is indicated below, all Shares) that
are held for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.

SIGN HERE
Number of Shares to be Tendered:

- --------------------------- Shares*
----------------------------------------

----------------------------------------
Signature(s)

----------------------------------------
Dated: , 199
----------------------------------------
Please type or print name(s)

----------------------------------------

----------------------------------------
Please type or print address

----------------------------------------
Area Code and Telephone Number

----------------------------------------
Taxpayer Identification or
Social Security Number

- ------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.

EXHIBIT (a)(6)

<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or, if the minor is
(joint account) the only contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
</TABLE>

- ----------------------------------------------------------------

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
GIVE THE EMPLOYER

IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ----------------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>

- ----------------------------------------------------------------

(1) List first and circle the name of the person whose number you furnish.

(2) Circle the minor's name and furnish the minor's social security number.

(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.

(4) Show the name of the owner.

(5) List first and circle the name of the legal trust, estate, or pension trust.

NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2

OBTAINING A NUMBER

If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form

SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING

Payees specifically exempted from backup withholding on ALL payments include the
following:

- - A corporation.

- - A financial institution.

- - An organization exempt from tax under section 501(a), or an individual
retirement plan.

- - The United States or any agency or instumentality thereof.

- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.

- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.

- - An international organization or any agency, or instrumentality thereof.

- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.

- - A real estate investment trust.

- - A common trust fund operated by a bank under section 584(a).

- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).

- - An entity registered at all times under the Investment Company Act of 1940.

- - A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:

- - Payments to nonresident aliens subject to withholding under section 1441.

- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.

- - Payments of patronage dividends where the amount received is not paid in
money.

- - Payments made by certain foreign organizations.

- - Payments made to a nominee.

Payments of interest not generally subject to backup withholding include the
following:

- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.

- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).

- - Payments described in section 6049(b)(5) to non-resident aliens.

- - Payments on tax-free covenant bonds under section 1451.

- - Payments made by certain foreign organizations.

- - Payments made to a nominee.

Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a),
6045, and 6050A.

PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.

PENALTIES

(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.

(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.

(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Shares. The Offer is made
solely by the Offer to Purchase dated December 29, 1994 and
the related Letter of Transmittal, and is being made to all
holders of Shares. Purchaser is not aware of any state where
the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute
prohibiting the making of theOffer orthe acceptance of
Shares pursuant thereto, Purchaser will make a good faith
effort to comply with such state statute. If, after such
good faith effort, Purchaser cannot comply with such state
made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction
where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of Purchaser by one or
more registered brokers or dealers licensed under the laws
of such jurisdiction.

Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Rights)
of

Perry Drug Stores, Inc.

$11.00 Net Per Share

Lake Acquisition Corporation

A Wholly Owned Subsidiary of

Rite Aid Corporation

Lake Acquisition Corporation, a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Rite Aid
Corporation, a Delaware corporation ("Parent"), is offering
to purchase all outstanding shares of common stock, par
value $.05 per share (the "Common Stock"), of Perry Drug
Stores, Inc., a Michigan corporation (the "Company"), and
the associated preferred stock purchase rights issued
pursuant to the Rights Agreement, dated as of February 4,
1987, as amended, between the Company and State Street Bank
& Trust Company, as successor Rights Agent (the "Rights"
and, together with the Common Stock, the "Shares"), at a
price of $11.00 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the
Offer to Purchase, dated December 29, 1994 (the "Offer to

Purchase"), and in the related Letter of Transmittal (which,

as amended from time to time, together constitute the "Offer").
Following the Offer, Purchaser intends to effect the Merger
described below.

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
JANUARY 27, 1995, UNLESS THE OFFER IS EXTENDED.

The Offer is conditioned upon, among other things,
there being validly tendered and not withdrawn prior to
the expiration of the Offer a number of Shares (and the
associated Rights) which, when added to the Shares owned
by Purchaser and its affiliates, constitutes at least a
majority of the Shares outstanding on a fully diluted
basis, excluding Shares reserved for issuance upon conver-
sion of the Convertible Debentures (as defined in the
Offer to Purchase) (the "Minimum Condition"). The Offer
is also subject to other terms and conditions.

The Offer is being made pursuant to an Agreement and
Plan of Merger, dated as of December 23, 1994 (the "Merger
Agreement"), by and among Parent, Purchaser and the Compa-
ny. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of
Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General
Corporation Law of the State of Delaware and the Michigan
Business Corporation Act, Purchaser will be merged with
and into the Company (the "Merger"). Following consum-
mation of the Merger, the Company will continue as the
surviving corporation and will be a wholly owned subsid-
iary of Parent. At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares
held in the treasury of the Company or owned by Purchaser,
Parent or any direct or indirect wholly owned subsidiary
of Parent) will be cancelled and converted automatically
into the right to receive $11.00 in cash, or any higher
price that may be paid per Share in the Offer, without
interest. In connection with the Merger Agreement, Parent
and Purchaser have entered into Shareholders Agreements
with Mr. Jack Robinson, the Chairman and Chief Executive
Officer of the Company, and Mrs. Aviva Robinson (together
with Mr. Robinson, the "Selling Shareholders") pursuant to
which, among other things, the Selling Shareholders have
agreed to tender in the Offer, and have granted Parent an
option to acquire at $11.00 per Share, upon the terms and
subject to the conditions thereof, all Shares owned by the
Selling Shareholders (representing approximately 9.02% of

the Company's outstanding Shares calculated on a fully
diluted basis).

The Board of Directors of the Company unanimously has
determined that each of the Offer and the Merger is fair
to, and in best interests of, the shareholders of the
Company, and unanimously recommends that shareholders
accept the Offer and tender their Shares pursuant to the
Offer.

For purposes of the Offer, Purchaser will be deemed
to have accepted for payment (and thereby purchased)
Shares validly tendered and not properly withdrawn as, if
and when Purchaser gives oral or written notice to Harris
Trust Company of New York (the "Depositary") of Purchaser's
acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of
receiving payments from Purchaser and transmitting such
payments to tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will inter-
est on the purchase price for Shares be paid, regardless
of any delay in making such payment. In all cases, pay-
ment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares
(the "Share Certificates") or timely confirmation of a
book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities (as
defined in Section 2 of the Offer to Purchase) pursuant to
the procedures set forth in Section 3 of the Offer to
Purchase, (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any
required signature guarantees and (iii) any other docu-
ments required under the Letter of Transmittal.

Purchaser expressly reserves the right, in its sole
discretion (but subject to the terms and conditions of the
Merger Agreement), at any time and from time to time, to
extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the
conditions specified in Section 14 of the Offer to Pur-
chase, by giving oral or written notice of such extension
to the Depositary. Any such extension will be followed as
promptly as practicable by public announcement thereof,
such announcement to be made no later than 9:00 a.m., New
York City time, on the next business day after the previ-
ously scheduled expiration date of the Offer. During any
such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the
rights of a tendering shareholder to withdraw such share

holder's Shares.

Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at
any time prior to 12:00 Midnight, New York City time, on
Friday, January 27, 1995 (or the latest time and date at
which the Offer, if extended by Purchaser, shall expire)
and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time
after February 27, 1995. For the withdrawal to be effec-
tive, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depos-
itary at one of its addresses set forth on the back cover
page of the Offer to Purchase. Any such notice of with-
drawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such
Shares, if different from that of the person who tendered
such Shares. If Share Certificates evidencing Shares to
be withdrawn have been delivered or otherwise identified
to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such
Share Certificates must be submitted to the Depositary and
the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution (as defined in
Section 3 of the Offer to Purchase), unless such Shares
have been tendered for the account of an Eligible Insti-
tution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in Section
3 of the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn
Shares. All questions as to the form and validity (in-
cluding the time of receipt) of any notice of withdrawal
will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding.

The information required to be disclosed by Rule 14d-
6(e)(1)(vii) of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, is con-
tained in the Offer to Purchase and is incorporated herein
by reference.

The Company has provided Purchaser with the Company's
shareholder list and security position listings for the
purpose of disseminating the Offer to holders of Shares.
The Offer to Purchase and the related Letter of Transmit-
tal will be mailed to record holders of Shares whose names
appear on the Company's shareholder list and will be fur-
nished to brokers, dealers, commercial banks, trust compa-
nies and similar persons whose names, or the names of
whose nominees, appear on the shareholder list or, if
applicable, who are listed as participants in a clearing
agency's security position listing for subsequent trans-

mittal to beneficial owners of Shares.

The Offer to Purchase and the related Letter of
Transmittal contain important information which should be
read before any decision is made with respect to the
Offer.

Questions and requests for assistance or for addi-
tional copies of the Offer to Purchase and the related
Letter of Transmittal and other tender offer materials may
be directed to the Information Agent as set forth below,
and copies will be furnished promptly at Purchaser's
expense. No fees or commissions will be paid to brokers,
dealers or other persons for soliciting tenders of Shares
pursuant to the Offer.

The Information Agent for the Offer is:

MacKenzie Partners, Inc.

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

December 29, 1994

[LOGO OF RITE AID]

MAILING ADDRESS
P.O. BOX 3165
HARRISBURG, PA 17105

PRESS RELEASE GENERAL OFFICE
FOR FURTHER INFORMATION CONTACT: 30 HUNTER LANE
CAMP HILL, PA 17011

Frank Bergonzi
Vice President, Finance
717-975-5750

For Perry Drug Stores
Jack Seamonds
810-334-1300

FOR IMMEDIATE RELEASE

RITE AID CORPORATION AGREES TO ACQUIRE
PERRY DRUG STORES, INC. FOR $11.00 PER SHARE

CAMP HILL, PA (December 27, 1994)--Rite Aid
Corporation (RAD-NYSE, PSE) and Perry Drug Stores, Inc.
(PDS-NYSE) today announced that they have entered into an
agreement pursuant to which Rite Aid would purchase all
the outstanding shares of Perry Drug Stores, Inc. for
$11.00 per share, or approximately $132 million in cash.
A definitive merger agreement was entered into by the
parties following unanimous approval by Perry's board of
directors. Perry Drug Stores, which is the largest
drugstore chain in Michigan with annual sales of approxi-
mately $735 million and 224 stores, has approximately 12
million shares outstanding.
The merger agreement provides for a subsidiary
of Rite Aid to make a cash tender offer promptly for all
outstanding shares of common stock of Perry Drug Stores
at a price of $11.00 per share. The tender offer will be
followed as soon as possible by a second-step cash merger
in which each share of Perry not acquired in the tender
offer or otherwise will be converted into the right to
receive $11.00 in cash.
Rite Aid also stated that it has entered into
shareholders agreements with Mr. Jack Robinson, Chairman,
Chief Executive Officer and founder of Perry, and Mrs.
Jack Robinson pursuant to which Mr. and Mrs. Robinson
have agreed to tender their Perry Drug Stores shares
(representing approximately 9% of Perry's outstanding
shares on a fully diluted basis) into Rite Aid's offer
and have granted Rite Aid an option to purchase such

shares under certain circumstances.
The tender offer is conditioned on, among other
things, the valid tender of a majority of the outstanding
shares on a fully diluted basis (including those shares
owned by Mr. and Mrs. Robinson) and the expiration or
termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The tender offer is scheduled to commence later this
week. The merger is expected to be completed as early in
1995 as feasible.

Mr. Robinson stated, "Perry Drug Stores has a
long and proud history in Michigan, commencing with my
first store on Perry Street in Pontiac, Michigan in 1957.
The Company now has 224 stores in 136 communities. The
Board of Directors believes this transaction is in the
best interests of Perry's shareholders and employees."
Rite Aid Corporation operates over 2,600 drug-
stores in 23 Eastern states and the District of Columbia.

# # # #

Exhibit 99.(b)(1)

CONFORMED COPY

$350,000,000

CREDIT AGREEMENT

dated as of

February 7, 1994

among

Rite Aid Corporation,

The Banks from time to time
parties hereto

and

Morgan Guaranty Trust Company of New York,
as Agent

TABLE OF CONTENTS*

Page

ARTICLE I

DEFINITIONS
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Accounting Terms and Determinations. . . . . . . . . . . . 17
SECTION 1.3. Types of Borrowings. . . . . . . . . . . . . . . . . . . . 17
SECTION 1.4. Basis for Ratings. . . . . . . . . . . . . . . . . . . . . 17

ARTICLE II

THE CREDITS
SECTION 2.1. Commitments to Lend. . . . . . . . . . . . . . . . . . . . 18
SECTION 2.2. Notice of Committed Borrowings.. . . . . . . . . . . . . . 18
SECTION 2.3. Money Market Borrowings. . . . . . . . . . . . . . . . . . 19
SECTION 2.4. Notice to Banks: Funding of Loans. . . . . . . . . . . . . 23
SECTION 2.5. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.6. Maturity of Loans. . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.7. Interest Rates. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.8. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.9. Optional Termination or Reduction of Commitments . . . . . 32
SECTION 2.10. Mandatory Termination of Commitments.. . . . . . . . . . . 32
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . 32
SECTION 2.12. General Provisions as to Payments. . . . . . . . . . . . . 33
SECTION 2.13. Funding Losses.. . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.14. Computation of Interest and Fees.. . . . . . . . . . . . . 34

ARTICLE III

CONDITIONS

SECTION 3.1. Effectiveness. . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.2. Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1. Corporate Existence and Power. . . . . . . . . . . . . . . 36
SECTION 4.2. Corporate and Governmental Authorization;
to Contravention. . . . . . . . . . . . . . . . . . . . 36
SECTION 4.3. Binding Effect. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.4. Financial Information. . . . . . . . . . . . . . . . . . . 37
SECTION 4.5. Full Disclosure. . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.6. Litigation. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.7. Compliance with ERISA. . . . . . . . . . . . . . . . . . . 38
SECTION 4.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.9. Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.10. Environmental Matters. . . . . . . . . . . . . . . . . . . 39

- -------------
* The Table of Contents is not part of this Agreement.

ARTICLE V

COVENANTS

SECTION 5.1. Information. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.2. Payment of Obligations. . . . . . . . . . . . . . . . . . 43
SECTION 5.3. Maintenance of Property; Insurance . . . . . . . . . . . . 43
SECTION 5.4. Conduct of Business and Maintenance of Existence. . . . . 43
SECTION 5.5. Compliance with Laws. . . . . . . . . . . . . . . . . . . 44
SECTION 5.6. Inspection of Property Books and Records.. . . . . . . . . 44
SECTION 5.7. Restriction on Debt of Subsidiaries. . . . . . . . . . . . 44
SECTION 5.8. Restriction on Sales with Leases. . . . . . . . . . . . . 45
SECTION 5.9. Restriction on Liens . . . . . . . . . . . . . . . . . . . 45
SECTION 5.10. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.11. Interest Coverage. . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.12. Limitation on Minority Investments . . . . . . . . . . . . 48
SECTION 5.13. Consolidations, Mergers and Sales Assets . . . . . . . . . 49
SECTION 5.14. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 49

ARTICLE VI

DEFAULTS

SECTION 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.2. Notice of Default. . . . . . . . . . . . . . . . . . . . . 52

ARTICLE VII

THE AGENT

SECTION 7.1. Appointment and Authorization. . . . . . . . . . . . . . . . 53
SECTION 7.2. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.3. Action by Agent. . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.4. Consultation with Experts. . . . . . . . . . . . . . . . . . 53
SECTION 7.5. Liability of Agent . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.7. Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.8. Successor Agent. . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.9. Agent's Fee. . . . . . . . . . . . . . . . . . . . . . . . . 55

ARTICLE VIII

CHANGE IN CIRCUMSTANCES

SECTION 8.1. Basis for Determining Interest Rate
Inadequate or Unfair. . . . . . . . . . . . . . . . . . 55
SECTION 8.2. Illegality . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.3. Increased Cost and Reduced Return. . . . . . . . . . . . . 57

SECTION 8.4. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.5. Base Rate Loans Substituted for
Affected Fixed Rate Loans . . . . . . . . . . . . . . . 60

ARTICLE IX

MISCELLANEOUS

SECTION 9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.3. Expenses; Indemnification. . . . . . . . . . . . . . . . . 62
SECTION 9.4. Sharing of Set-Offs. . . . . . . . . . . . . . . . . . . . 62
SECTION 9.5. Amendments and Waivers . . . . . . . . . . . . . . . . . . 63
SECTION 9.6. Successors and Assigns . . . . . . . . . . . . . . . . . . 63
SECTION 9.7. Collateral . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.8. Governing Law: Submission to Jurisdiction. . . . . . . . . 65
SECTION 9.9. Counterparts; Integration. . . . . . . . . . . . . . . . . 66
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . 66

Exhibit A - Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exhibit B - Form of Money Market
Quote Request . . . . . . . . . . . . . . . . . . . . . . .

Exhibit C - Form of Invitation for
Money Market Quotes . . . . . . . . . . . . . . . . . . . .

Exhibit D - Form of Money Market Quote. . . . . . . . . . . . . . . . . .

Exhibit E - Opinion of Counsel for the Borrower . . . . . . . . . . . . .

Exhibit F - Opinion of Davis Polk & Wardwell,
Special Counsel for the Agent . . . . . . . . . . . . . . .

Exhibit G - Assignment and Assumption Agreement . . . . . . . . . . . . .

CREDIT AGREEMENT

AGREEMENT dated as of February 7, 1994 among
RITE AID CORPORATION, the BANKS from time to time parties
hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Definitions. The following terms, as
used herein, have the following meanings:

"Absolute Rate Auction" means a solicitation of
Money Market Quotes setting forth Money Market Absolute
Rates pursuant to Section 2.3.

"Adjusted CD Rate" has the meaning set forth in
Section 2.7(b).

"Adjusted London Interbank Offered Rate" has
the meaning set forth in Section 2.7(c).

"Administrative Questionnaire" means, with
respect to each Bank, an administrative questionnaire in
the form prepared by the Agent and submitted to the Agent
(with a copy to the Borrower) duly completed by such
Bank.

"Agent" means Morgan Guaranty Trust Company of
New York in its capacity as agent for the Banks hereun-
der, and its successors in such capacity.

"Applicable Lending Office" means, with respect
to any Bank, (i) in the case of its Domestic Loans, its
Domestic Lending Office, (ii) in the case of its Euro-Dollar
Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.

"Applicable Margin" has the meaning set forth
in Section 2.7(h).

"Assessment Rate" has the meaning set forth in
Section 2.7(b).

"Assignee" has the meaning set forth in Section
9.6(c).

"Attributable Debt" means, as to any particular
Sale and Leaseback Transaction under which the Borrower
or any Subsidiary is at the time liable, at any date as
of which the amount thereof is to be determined (i) in
the case of any such transaction involving a Capital
Lease, the amount on such date of the Capital Lease
Obligation thereunder, or (ii) in the case of any other
Sale and Leaseback Transaction, the then present value of
the minimum rental obligations under such Sale and Lease-
back Transaction during the remaining term thereof (after
giving effect to any extensions at the option of the
lessor) computed by discounting the respective rental
payments at the actual interest factor included in such
payments or, if such interest factor cannot be readily
determined, at the rate of 14% per annum. The amount of
any rental payment required to be made under any such
Sale and Leaseback Transaction not involving a Capital
Lease may exclude amounts required to be paid by the
lessee on account of maintenance and repairs, insurance,
taxes, assessments, utilities, operating and labor costs
and similar charges.

"Bank" means each bank listed on the signature
pages hereof, each Assignee which becomes a Bank pursuant
to Section 9.6(c), and their respective successors.

"Base Rate" means, for any day, a rate per
annum equal to the higher of (i) the Prime Rate for such
day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.

"Base Rate Loan" means a Committed Loan to be
made by a Bank as a Base Rate Loan in accordance with the
applicable Notice of Committed Borrowing or pursuant to
Article VIII.

"Benefit Arrangement" means at any time an
employee benefit plan within the meaning of Section 3(3)
of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any
member of the ERISA Group.

"Borrower" means Rite Aid Corporation, a Dela-
ware corporation, and its successors.

"Borrower's 1993 Form l0-K" means the Bor-
rower's annual report on Form l0-K for 1993, as filed
with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.

"Borrowing" has the meaning set forth in Sec-

tion l.03.

"Capital Lease" means any lease of property
which, in accordance with generally accepted accounting
principles, should be capitalized on the lessee's balance
sheet; and "Capital Lease Obligation" means the amount of
the liability so capitalized in respect of a Capital
Lease.

"CD Base Rate" has the meaning set forth in
Section 2.7(b).

"CD Loan" means a Committed Loan to be made by
a Bank as a CD Loan in accordance with the applicable
Notice of Committed Borrowing.

"CD Reference Banks" means Morgan Guaranty
Trust Company of New York and such other Banks, if any,
as the Agent and the Borrower shall mutually agree.

"Commitment" means, with respect to each Bank,
the amount set forth opposite the name of such Bank on
the signature pages hereof, as such amount may be reduced
from time to time pursuant to Sections 2.9 and 2.10.

"Committed Loan" means a loan made by a Bank
pursuant to Section 2.1.

"Consolidated Debt" means at any date the Debt
of the Borrower and its Consolidated Subsidiaries, deter-
mined on a consolidated basis as of such date.

"Consolidated EBIT" means, for any period,
Consolidated Net Income for such period plus, to the
extent deducted in determining Consolidated Net Income
for such period, the aggregate amount of (i) Consolidated
Interest Charges and (ii) provision for income taxes.

"Consolidated Interest Charges" means, for any
period, the aggregate amount of interest charges, whether
expensed or capitalized, incurred or accrued by the
Borrower and its Consolidated Subsidiaries during such
period.

"Consolidated Net Income" means, for any peri-
od, the net income (or loss) of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated
basis for such period.

"Consolidated Net Tangible Assets" means the
total amount of assets (less applicable reserves and
other properly deductible items) which under generally
accepted accounting principles would be included on a
consolidated balance sheet of the Borrower and its Con-

solidated Subsidiaries after deducting therefrom (i) all
liabilities and liability items, including amounts in
respect of obligations or guarantees of obligations under
leases, which under generally accepted accounting princi-
ples would be included on such balance sheet, except
Funded Debt, capital stock and surplus, surplus reserves
and provisions for deferred income taxes, and (ii) all
goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangibles,
which in each case under generally accepted accounting
principles would be included on such consolidated balance
sheet.

"Consolidated Net Worth" means at any date the
consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries determined as of such date.

"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Borrower in its consoli-
dated financial statements if such statements were pre-
pared as of such date.

"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person
as lessee which are capitalized in accordance with gener-
ally accepted accounting principles, (v) all Debt secured
by a Lien on any asset of such Person, whether or not
such Debt is otherwise an obligation of such Person, and
(vi) all Debt of others Guaranteed by such Person.

"Default" means any condition or event which
constitutes an Event of Default or which with the giving
of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.

"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks
in New York City are authorized by law to close.

"Domestic Lending Office" means, as to each
Bank, its office located at its address set forth in its
Administrative Questionnaire (or identified in its Admin-
istrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate
as its Domestic Lending Office by notice to the Borrower
and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate

Loans, on the one hand, and its CD Loans, on the other
hand, in which case all references herein to the Domestic
Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may
require.

"Domestic Loans" means CD Loans or Base Rate
Loans or both.

"Domestic Reserve Percentage" has the meaning
set forth in Section 2.7(b).

"Effective Date" means the date this Agreement
becomes effective in accordance with Section 3.1.

"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environ-
ment or to emissions, discharges or releases of pollut-
ants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or
wastes into the environment including, without limita-
tion, ambient air, surface water, ground water, or land,
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, trans-
port or handling of pollutants, contaminants, petroleum
or petroleum products, chemicals or industrial, toxic or
hazardous substances or wastes or the clean-up or other
remediation thereof.

"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor stat-
ute.

"ERISA Group" means the Borrower, any Subsid-
iary and all members of a controlled group of corpora-
tions and all trades or businesses (whether or not incor-
porated) under common control which, together with the
Borrower or any Subsidiary, are treated as a single
employer under Section 414 of the Internal Revenue Code.

"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.

"Euro-Dollar Lending Office" means, as to each
Bank, its officer, branch or affiliate located at its
address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Bank as it may hereafter designate

as its Euro-Dollar Lending Office by notice to the Bor-
rower and the Agent.

"Euro-Dollar Loan" means a Committed Loan to be
made by a Bank as a Euro-Dollar Loan in accordance with
the applicable Notice of Committed Borrowing.

"Euro-Dollar Reference Banks" means the princi-
pal London offices of Morgan Guaranty Trust Company of
New York and of such other Banks, if any, as the Agent
and the Borrower shall mutually agree.

"Euro-Dollar Reserve Percentage" has the mean-
ing set forth in Section 2.7(c).

"Event of Default" has the meaning set forth in
Section 6.1.

"Federal Funds Rate" means, for any day, the
rate per annum (rounded upward, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day
is not a Domestic Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on
the next preceding Domestic Business Day as so published
on the next succeeding Domestic Business Day, and (ii) if
no such rate is so published on such next succeeding
Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transac-
tions as determined by the Agent.

"Fixed Rate Borrowing" means a Borrowing com-
prised of Fixed Rate Loans.

"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or Money Market Loans (excluding Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Section
8.1(a)) or any combination of the foregoing.

"Funded Debt" means any Debt maturing more than
one year after the date of determination thereof and any
Debt, regardless of its term, renewable pursuant to the
terms thereof or of a revolving credit or similar agree-
ment effective for more than one year after the date of
the creation of such Debt, which would, in accordance
with generally accepted accounting practice, be classi-
fied as funded debt but shall not include:

(a) any Debt for the payment, redemption or

satisfaction of which money (or evidences of indebt-
edness, if permitted under the instrument creating
such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or
proper depository either at or before maturity or
redemption date thereof; or

(b) guarantees arising in connection with the
sale, discount, guarantee or pledge of notes, chat-
tel mortgages, leases, accounts receivable, trade
acceptances and other paper arising, in the ordinary
course of business, out of installment or condition-
al sales to or by, or transactions involving title
retention with, distributors, dealers or other
customers of merchandise, equipment or services or
guarantees other than guarantees of indebtedness for
borrowed money.

"FYE" and "FQE" mean fiscal year end and fiscal
quarter end, respectively, and when used in conjunction
with a particular month mean the date of ending of the
relevant fiscal period nearest the last day of such
month.

"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person;
provided that the term Guarantee shall not include en-
dorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb
has a corresponding meaning.

"Indemnitee" has the meaning set forth in
Section 9.3(b).

"Interest Coverage Ratio" means, at any date,
the ratio of Consolidated EBIT to Consolidated Interest
Charges, in each case for the period of four consecutive
fiscal quarters most recently ended on or prior to such
date.

"Interest Period" means: (l) with respect to
each Euro-Dollar Borrowing, the period commencing on the
date of such Borrowing and ending one, two, three or six
months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:

(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding
Euro-Dollar Business Day;

(b) any Interest Period which begins on the
last Euro-Dollar Business Day of a calendar month
(or on a day for which there is no numerically
corresponding day in the calendar month at the end
of such Interest Period) shall, subject to clause
(c) below, end on the last Euro-Dollar Business Day
of a calendar month; and

(2) with respect to each CD Borrowing, the period com-
mencing on the date of such Borrowing and ending (subject
to Section 2.7(b)) 30, 60, 90 or 180 days thereafter, as
the Borrower may elect in the applicable Notice of Bor-
rowing; provided that:

(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day; and

(b) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.

(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30
days thereafter; provided that:

(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day; and

(b) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.

(4) with respect to each Money Market LIBOR Borrowing,
the period commencing on the date of such Borrowing and
ending such whole number of months thereafter as the
Borrower may elect in accordance with Section 2.3; pro-
vided that:

(5) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such
Borrowing and ending such number of days thereafter (but
not less than 14 days) as the Borrower may elect in
accordance with Section 2.3; provided that:

(a) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business Day
shall be extended to the next succeeding Euro-Dollar
Business Day; and

(b) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.

"Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended, or any successor stat-
ute.

"Investment" means any investment in any Per-
son, whether by means of share purchase, capital contri-
bution, loan, time deposit or otherwise. Any repurchase
by the Borrower of its own capital stock shall not con-
stitute an Investment for purposes of this Agreement.

"Level I Status" exists at any date if, at such
date, the Borrower's long-term debt is rated A+ or higher
by S&P and Al or higher by Moody's.

"Level II Status" exists at any date if, at
such date, (i) the Borrower's long-term debt is rated A
or higher by S&P and A2 or higher by Moody's and (ii)
Level I Status does not exist.

"Level III Status" exists at any date if, at
such date, (i) the Borrower's long-term debt is rated A-
or higher by S&P and A3 or higher by Moody's and (ii)
neither Level I Status nor Level II Status exists.

"Level IV Status" exists at any date if, at
such date, (i) the Borrower's long-term debt is rated

BBB+ or higher by S&P and Baal or higher by Moody's and
(ii) none of Level I Status, Level II Status or Level III
Status exists.

"Level V Status" exists at any date if, at such
date, (i) the Borrower's long-term debt is rated BBB or
higher by S&P and Baa2 or higher by Moody's and (ii) none
of Level I Status, Level II Status, Level III Status or
Level IV Status exists. Level V Status also exists at any
date if, at such date, the rating of the Borrower's
long-term debt by either S&P or Moody's in effect as of
December 31, 1993 has been neither changed nor confirmed
by S&P or Moody's, as the case may be, subsequent to such
date.

"Level VI Status" exists at any date if, at
such date, no other Status Level exists. Level VI Status
also exists at any date if, at such date, either S&P or
Moody's does not rate the Borrower's long-term debt.

"LIBOR Auction" means a solicitation of Money
Market Quotes setting forth Money Market Margins based on
the London Interbank Offered Rate pursuant to Section
2.3.

"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Borrower or any Subsid-
iary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating
to such asset.

"Loan" means a Domestic Loan or a Euro-Dollar
Loan or a Money Market Loan and "Loans" means Domestic
Loans or Euro-Dollar Loans or Money Market Loans or any
combination of the foregoing.

"London Interbank Offered Rate" has the meaning
set forth in Section 2.7(c).

"Material Debt" means Debt (other than the
Notes) of the Borrower and/or one or more of its Subsid-
iaries, arising in one or more related or unrelated
transactions, in an aggregate principal amount exceeding
$25,000,000.

"Material Plan" means at any time a Plan or
Plans having aggregate Unfunded Liabilities in excess of
$25,000,000.

"Money Market Absolute Rate" has the meaning

set forth in Section 2.3(d).

"Money Market Absolute Rate Loan" means a loan
to be made by a Bank pursuant to an Absolute Rate Auc-
tion.

"Money Market Lending Office" means, as to each
Bank, its Domestic Lending Office or such other office,
branch or affiliate of such Bank as it may hereafter
designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may
from time to time by notice to the Borrower and the Agent
designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money
Market Absolute Rate Loans, on the other hand, in which
case all references herein to the Money Market Lending
Office of such Bank shall be deemed to refer to either or
both of such offices, as the context may require.

"Money Market LIBOR Loan" means a loan to be
made by a Bank pursuant to a LIBOR Auction (including
such a loan bearing interest at the Base Rate pursuant to
Section 8.1(a)).

"Money Market Loan" means a Money Market LIBOR
Loan or a Money Market Absolute Rate Loan.

"Money Market Margin" has the meaning set forth
in Section 2.3(d).

"Money Market Quote" means an offer by a Bank
to make a Money Market Loan in accordance with Section
2.3.

"Moody's" means Moody's Investor Service, Inc.

"Multiemployer Plan" means at any time an
employee pension benefit plan within the meaning of
Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to
make contributions or has within the preceding five plan
years made contributions, including for these purposes
any Person which ceased to be a member of the ERISA Group
during such five year period.

"1993 Credit Agreements" means the $300,000,000
Credit Agreement and the $100,000,000 Credit Agreement,
each dated as of November 19, 1993 among Rite Aid Corpo-
ration, the banks listed therein and Morgan Guaranty
Trust Company of New York, as agent thereunder.

"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing
the obligation of the Borrower to repay the Loans, and

"Note" means any one of such promissory notes issued
hereunder.

"Notice of Borrowing" means a Notice of Commit-
ted Borrowing (as defined in Section 2.2) or a Notice of
Money Market Borrowing (as defined in Section 2.3(f)).

"Parent" means, with respect to any Bank, any
Person controlling such Bank.

"Participant" has the meaning set forth in
Section 9.6(b).

"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.

"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity
or organization, including a government or political
subdivision or an agency or instrumentality thereof.

"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed
to, by any member of the ERISA Group for employees of any
member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the
ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.

"Prime Rate" means the rate of interest public-
ly announced by Morgan Guaranty Trust Company of New York
in New York City from time to time as its Prime Rate.

"Quarterly Date" means the last day of each
Quarterly Period.

"Quarterly Period" means a three-month period
consisting of (i) February, March and April, (ii) May,
June and July, (iii) August, September and October or
(iv) November, December and January.

"Reference Banks" means the CD Reference Banks
or the Euro-Dollar Reference Banks, as the context may
require, and "Reference Bank" means any one of such
Reference Banks.

"Refunding Borrowing" means a Committed Borrow-
ing which, after application of the proceeds thereof,
results in no net increase in the outstanding principal

amount of Committed Loans made by any Bank.

"Regulation U" means Regulation U of the Board
of Governors of the Federal Reserve System, as in effect
from time to time.

"Required Banks" means at any time Banks having
at least 66 2/3% of the aggregate amount of the Commit-
ments or, if the Commitments shall have been terminated,
holding Notes evidencing at least 66 2/3% of the aggre-
gate unpaid principal amount of the Loans.

"Revolving Credit Period" means the period from
and including the Effective Date to and including the
Termination Date.

"Sale and Leaseback Transaction" has the mean-
ing set forth in Section 5.8.

"Secured Debt" means Debt which is secured by a
Lien on property of the Borrower or any Subsidiary, but
shall not include guarantees arising in connection with
the sale, discount, guarantee or pledge of notes, chattel
mortgages, leases, accounts receivable, trade acceptances
and other papers arising, in the ordinary course of
business, out of instalment or conditional sales to or
by, or transactions involving title retention with, dis-
tributors, dealers or other customers, of merchandise,
equipment or services.

"Significant Subsidiary" means at any time any
Subsidiary or any group of Subsidiaries having consoli-
dated assets, individually or in the aggregate, equal to
or greater than 8% of the consolidated assets of the
Borrower and its Consolidated Subsidiaries at such time.

"S&P" means Standard & Poor's Corporation.

"Specialty Retailing Assets" means the assets
of ADAP, Inc., Concord Custom Cleaners, Pen Encore Inc.,
and Sera-Tec Biologicals, Inc.

"Status Level" means Level I Status, Level II
Status, Level III Status, Level IV Status, Level V Status
or Level VI Status, whichever is in effect at the end of
the applicable day (New York City time).

"Subsidiary" means any corporation or other
entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the
board of directors or other persons performing similar
functions are at the time directly or indirectly owned by
the Borrower.

"Temporary Cash Investment" means any Invest-
ment in (i) direct obligations of the United States or
any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial
paper rated at least A-1 by S&P and P-1 by Moody's, (iii)
time deposits with, including certificates of deposit
issued by, any office located in the United States of any
bank or trust company which is organized under the laws
of the United States or any state thereof and has capi-
tal, surplus and undivided profits aggregating at least
$500,000,000 or (iv) repurchase agreements with respect
to securities described in clause (i) above entered into
with an office of a bank or trust company meeting the
criteria specified in clause (iii) above, provided in
each case that such Investment matures within one year
from the date of acquisition thereof by the Borrower or a
Subsidiary.

"Termination Date" means February 7, 1999, or,
if such day is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar
Business Day.

"Total Capital" means, at any date, the sum of
Consolidated Debt and Consolidated Net Worth, each deter-
mined as of such date.

"Unfunded Liabilities" means, with respect to
any Plan at any time, the amount (if any) by which (i)
the value of all benefit liabilities under such Plan,
determined on a plan termination basis using the assump-
tions prescribed by the PBGC for purposes of Section 4044
of ERISA, exceeds (ii) the fair market value of all Plan
assets allocable to such liabilities under Title IV of
ERISA (excluding any accrued but unpaid contributions),
all determined as of the then most recent valuation date
for such Plan, but only to the extent that such excess
represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of
ERISA.

"United States" means the United States of
America, including the States and the District of Colum-
bia, but excluding its territories and possessions.

"Wholly-Owned Consolidated Subsidiary" means
any Consolidated Subsidiary all of the shares of capital
stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.

SECTION 1.2. Accounting Terms and Determinations.

Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all accounting determi-
nations hereunder shall be made, and all financial state-
ments required to be delivered hereunder shall be pre-
pared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a
basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the
Borrower and its Consolidated Subsidiaries delivered to
the Banks; provided that, if the Borrower notifies the
Agent that the Borrower wishes to amend any covenant in
Article V to eliminate the effect of any change in gener-
ally accepted accounting principles on the operation of
such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article V for such
purpose), then the Borrower's compliance with such cove-
nant shall be determined on the basis of generally ac-
cepted accounting principles in effect immediately before
the relevant change in generally accepted accounting
principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satis-
factory to the Borrower and the Required Banks.

SECTION 1.3. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or
more Banks to be made to the Borrower pursuant to Article
II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising
such Borrowing (e.g., a "Euro-Dollar Borrowing" is a
Borrowing comprised of Euro-Dollar Loans) or by reference
to the provisions of Article II under which participation
therein is determined (i.e., a "Committed Borrowing" is a
Borrowing under 2.1 in which all Banks participate in
proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.3 in which the
Bank participants are determined on the basis of their
bids in accordance therewith).

SECTION 1.4. Basis for Ratings. The credit rat-
ings to be utilized for purposes of determining rates of
interest and fees hereunder are those assigned to the
senior unsecured long-term debt securities of the Borrow-
er without third-party credit enhancement, and any rating
assigned to any other debt security of the Borrower shall
be disregarded.

ARTICLE II

THE CREDITS

SECTION 2.1. Commitments to Lend. During the
Revolving Credit Period each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to
make loans to the Borrower pursuant to this Section from
time to time in amounts requested by the Borrower in
accordance with the terms of this Agreement, provided
that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed
the amount of its Commitment. Each Borrowing under this
Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.2(b)) and shall be
made from the several Banks ratably in proportion to
their respective Commitments. Within the foregoing
limits, the Borrower may borrow under this Section,
repay, or to the extent permitted by Section 2.11, prepay
Loans and reborrow at any time during the Revolving
Credit Period under this Section.

SECTION 2.2. Notice of Committed Borrowings. The
Borrower shall give the Agent notice (a "Notice of Com-
mitted Borrowing") not later than 10:00 A.M. (New York
City time) on (x) the date of each Base Rate Borrowing,
(y) the Domestic Business Day next preceding each CD
Borrowing and (z) the third Euro-Dollar Business Day
before each Euro-Dollar Borrowing, specifying:

(a) the date of such Borrowing, which shall be
a Domestic Business Day in the case of a Domestic
Borrowing or a Euro-Dollar Business Day in the case
of a Euro-Dollar Borrowing,

(b) the aggregate amount of such Borrowing,

(d) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of
Interest Period.

SECTION 2.3. Money Market Borrowings.

(a) The Money Market Option. In addition to
Committed Borrowings pursuant to Section 2.1, the Bor-
rower may, as set forth in this Section, request the
Banks during the Revolving Credit Period to make offers
to make Money Market Loans to the Borrower. The Banks
may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this

Section.

(b) Money Market Quote Request. When the Bor-
rower wishes to request offers to make Money Market Loans
under this Section, it shall transmit to the Agent by
telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so
as to be received no later than 10:00 A.M. (New York City
time) on (x) the fifth Euro-Dollar Business Day prior to
the date of Borrowing proposed therein, in the case of a
LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the
case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent
shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective) speci-
fying:

(i) the proposed date of Borrowing, which shall
be a Euro-Dollar Business Day in the case of a
LIBOR Auction or a Domestic Business Day in the case
of an Absolute Rate Auction,

(ii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger multiple of $1,000,000,

(iii)the duration of the Interest Period appli-
cable thereto, subject to the provisions of the
definition of Interest Period, and

(iv) whether the Money Market Quotes requested
are to set forth a Money Market Margin or a Money
Market Absolute Rate.

The Borrower may request offers to make Money Market
Loans for more than one Interest Period in a single Money
Market Quote Request. No Money Market Quote Request shall
be given within five Euro-Dollar Business Days (or such
other number of days as the Borrower and the Agent may
agree) of any other Money Market Quote Request.

(c) Invitation for Money Market Quotes.
Promptly upon receipt of a Money Market Quote Request,
the Agent shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes sub-
stantially in the form of Exhibit C hereto, which shall
constitute an invitation by the Borrower to each Bank to
submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request
relates in accordance with this Section.

(d) Submission and Contents of Money Market

Quotes. (i) Each Bank may submit a Money Market Quote
containing an offer or offers to make Money Market Loans
in response to any Invitation for Money Market Quotes.
Each Money Market Quote must comply with the requirements
of this subsection (d) and must be submitted to the Agent
by telex or facsimile transmission at its offices re-
ferred to in Section 9.1 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business
Day prior to the proposed date of Borrowing, in the case
of a LIBOR Auction or (y) 9:15 A.M. (New York City time)
on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not
later than the date of the Money Market Quote Request for
the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective); provided that
Money Market Quotes submitted by the Agent (or any affil-
iate of the Agent) in the capacity of a Bank may be
submitted, and may only be submitted, if the Agent or
such affiliate notifies the Borrower of the terms of the
offer or offers contained therein not later than (x) 1:00
P.M. (New York City time), in the case of a LIBOR Auction
or (y) 9:00 A.M. (New York City time), in the case of an
Absolute Rate Auction. Subject to Articles III and VI,
any Money Market Quote so made shall be irrevocable
except with the written consent of the Agent given on the
instructions of the Borrower.

(ii) Each Money Market Quote shall be in sub-
stantially the form of Exhibit D hereto and shall in any
case specify:

(A) the proposed date of Borrowing,

(B) the principal amount of the Money Market
Loan for which each such offer is being made, which
principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y)
may not exceed the principal amount of Money Market
Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the princi-
pal amount of Money Market Loans for which offers
being made by such quoting Bank may be accepted,

(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank
Offered Rate (the "Money Market Margin") offered for
each such Money Market Loan, expressed as a percent-
age (specified to the nearest 1/10,000th of 1%) to
be added to or subtracted from such base rate,

(D) in the case of an Absolute Rate Auction,

the rate of interest per annum (specified to the
nearest 1/10,000th of 1%) (the "Money Market Abso-
lute Rate") offered for each such Money Market Loan,
and

(E) the identity of the quoting Bank.

A Money Market Quote may set forth up to five separate
offers by the quoting Bank with respect to each Interest
Period specified in the related Invitation for Money
Market Quotes.

(iii) Any Money Market Quote shall be disre-
garded if it:

(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the
information required by subsection (d)(ii);

(B) contains qualifying, conditional or simi-
lar language;

(D) arrives after the time set forth in sub-
section (d)(i).

(e) Notice to Borrower. The Agent shall
promptly notify the Borrower of the terms (x) of any Money
Market Quote submitted by a Bank that is in accordance
with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a
previous Money Market Quote submitted by such Bank with
respect to the same Money Market Quote Request. Any such
subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is sub-
mitted solely to correct a manifest error in such former
Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money
Market Loans for which offers have been received for each
Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limi-
tations on the aggregate principal amount of Money Market
Loans for which offers in any single Money Market Quote
may be accepted.

(f) Acceptance and Notice by Borrower. Not
later than 10:00 A.M. (New York City time) on (x) the
third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) the

proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date
as the Borrower and the Agent shall have mutually agreed
and shall have notified to the Banks not later than the
date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such
change is to be effective), the Borrower shall notify the
Agent of its acceptance or non-acceptance of the offers
so notified to it pursuant to subsection (e). In the case
of acceptance, such notice (a "Notice of Money Market
Borrowing") shall specify the aggregate principal amount
of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in
part; provided that:

(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable
amount set forth in the related Money Market Quote
Request,

(ii) the principal amount of each Money Market
Borrowing must be $10,000,000 or a larger multiple
of $1,000,000,

(iii) acceptance of offers may only be made on
the basis of ascending Money Market Margins or Money
Market Absolute Rates, as the case may be, and

(iv) the Borrower may not accept any offer that
is described in subsection (d) (iii) or that other-
wise fails to comply with the requirements of this
Agreement.

(g) Allocation by Agent. If offers are made
by two or more Banks with the same Money Market Margins
or Money Market Absolute Rates, as the case may be, for a
greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related
Interest Period, the principal amount of Money Market
Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as
possible (in multiples of $1,000,000, as the Agent may
deem appropriate) in proportion to the aggregate princi-
pal amounts of such offers. Determinations by the Agent
of the amounts of Money Market Loans shall be conclusive
in the absence of manifest error.

SECTION 2.4. Notice to Banks: Funding of Loans.

(a) Upon receipt of a Notice of Borrowing, the
Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrow-
ing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.

(b) Not later than 12:00 Noon (New York City
time) on the date of each Borrowing, each Bank partici-
pating therein shall (except as provided in subsection
(c) of this Section) make available its share of such
Borrowing, in Federal or other funds immediately avail-
able in New York City, to the Agent at its address re-
ferred to in Section 9.1. Unless the Agent determines
that any applicable condition specified in Article III
has not been satisfied, the Agent will make the funds so
received from the Banks available to the Borrower at the
Agent's aforesaid address.

(c) If any Bank makes a new Loan hereunder on
a day on which the Borrower is to repay all or any part
of an outstanding Loan from such Bank, such Bank shall
apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any)
between the amount being borrowed and the amount being
repaid shall be made available by such Bank to the Agent
as provided in subsection (b), or remitted by the Borrow-
er to the Agent as provided in Section 2.12, as the case
may be.

(d) Unless the Agent shall have received
notice from a Bank prior to the date of any Borrowing
that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that
such Bank has made such share available to the Agent on
the date of such Borrowing in accordance with subsections
(b) and (c) of this Section 2.4 and the Agent may, in
reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to
the extent that such Bank shall not have so made such
share available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand
such corresponding amount together with interest thereon,
for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to
the Agent, at (i) in the case of the Borrower, a rate per
annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section
2.7 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Agent such corre-
sponding amount, such amount so repaid shall constitute
such Bank's Loan included in such Borrowing for purposes
of this Agreement.

SECTION 2.5. Notes.

(a) The Loans of each Bank shall be evidenced
by a single Note payable to the order of such Bank for
the account of its Applicable Lending Office in an amount
equal to the aggregate unpaid principal amount of such

Bank's Loans.

(b) Each Bank may, by notice to the Borrower
and the Agent, request that its Loans of a particular
type be evidenced by a separate Note in an amount equal
to the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to re-
flect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may
require.

(c) Upon receipt of each Bank's Note pursuant
to Section 3.1(b), the Agent shall forward such Note to
such Bank. Each Bank shall record the date, amount, type
and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Borrower
with respect thereto, and may, if such Bank so elects in
connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropri-
ate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that
the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Bank is
hereby irrevocably authorized by the Borrower so to
endorse its Note and to attach to and make a part of its
Note a continuation of any such schedule as and when
required.

SECTION 2.6. Maturity of Loans. Each Loan in-
cluded in any Borrowing shall mature, and the principal
amount thereof shall be due and payable, on the last day
of the Interest Period applicable to such Borrowing.

SECTION 2.7. Interest Rates.

(a) Each Base Rate Loan shall bear interest on
the outstanding principal amount thereof, for each day
from the date such Loan is made until it becomes due, at
a rate per annum equal to the Base Rate for such day.
Such interest shall be payable for each Interest Period
on the last day thereof. Any overdue principal of or
interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate otherwise
applicable to Base Rate Loans for such day.

(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day during
the Interest Period applicable thereto, at a rate per
annum equal to the sum of the Applicable Margin for such

day plus the applicable Adjusted CD Rate for such Inter-
est Period; provided that if any CD Loan or any portion
thereof shall, as a result of clause (2)(b) of the defi-
nition of Interest Period, have an Interest Period of
less than 30 days, such portion shall bear interest
during such Interest Period at the rate applicable to
Base Rate Loans during such period; and provided further
that so long as there is only one Bank party to this
Agreement, such Bank and the Borrower may agree to fix
the interest rate on CD Loans at such rates and for such
Interest Periods not to exceed 30 days as they may mutu-
ally agree from time to time. Such interest shall be
payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall
bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the Applicable Margin for such
day plus the Adjusted CD Rate applicable to such Loan and
(ii) the rate applicable to Base Rate Loans for such day.

The "Adjusted CD Rate" applicable to any Inter-
est Period means a rate per annum determined pursuant to
the following formula:

[ CDBR ]*
ACDR = [------------- ] + AR
[ 1.00 - DRP ]

ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate

--------------
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%

The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the Agent to
be the average (rounded upward, if necessary, to the next
higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter
as practicable) on the first day of such Interest Period
by two or more New York certificate of deposit dealers of
recognized standing for the purchase at face value from
each CD Reference Bank of its certificates of deposit in
an amount comparable to the principal amount of the CD
Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such

Interest Period.

"Domestic Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of Gover-
nors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including
without limitation any basic, supplemental or emergency
reserves) for a member bank of the Federal Reserve System
in New York City with deposits exceeding five billion
dollars in respect of new non-personal time deposits in
dollars in New York City having a maturity comparable to
the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automat-
ically on and as of the effective date of any change in
the Domestic Reserve Percentage.

"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by
a member of the Bank Insurance Fund classified as ade-
quately capitalized and within supervisory subgroup "A"
(or a comparable successor assessment risk classifica-
tion) within the meaning of 12 C.F.R. 327.3(d) (or any
successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or
such successor's) insuring time deposits at offices of
such institution in the United States. The Adjusted CD
Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.

(c) Each Euro-Dollar Loan shall bear interest
on the outstanding principal amount thereof, for each day
during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin for
such day plus the applicable Adjusted London Interbank
Offered Rate for such Interest Period. Such interest
shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day
thereof.

The "Adjusted London Interbank Offered Rate"
applicable to any Interest Period means a rate per annum
equal to the quotient obtained (rounded upward, if neces-
sary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.

The "London Interbank Offered Rate" applicable
to any Interest Period means the average (rounded upward,
if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars
are offered to each of the Euro-Dollar Reference Banks in
the London interbank market at approximately 11:00 A.M.

(London time) two Euro Dollar Business Days before the
first day of such Interest Period in an amount approxi-
mately equal to the principal amount of the Euro-Dollar
Loan of such Euro-Dollar Reference Bank to which such
Interest Period is to apply and for a period of time
comparable to such Interest Period.

"Euro-Dollar Reserve Percentage" means for any
day that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of Gover-
nors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member
bank of the Federal Reserve System in New York City with
deposits exceeding five billion dollars in respect of
"Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by refer-
ence to which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or
other assets which includes loans by a non-United States
office of any Bank to United States residents). The
Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.

(d) Any overdue principal of or interest on
any Euro-Dollar Loan shall bear interest, payable on
demand, for each day from and including the date payment
thereof was due to but excluding the date of actual
payment, at a rate per annum equal to the sum of 2% plus
the higher of (i) the sum of the Applicable Margin for
such day plus the Adjusted London Interbank Offered Rate
applicable to such Loan and (ii) the Applicable Margin
for such day plus the quotient obtained (rounded upward,
if necessary, to the next higher 1/100 of 1%) by dividing
(x) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum
at which one day (or, if such amount due remains unpaid
more than three Euro-Dollar Business Days, then for such
other period of time not longer than six months as the
Agent may select) deposits in dollars in an amount ap-
proximately equal to such overdue payment due to each of
the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market
for the applicable period determined as provided above by
(y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if
the circumstances described in clause (a) or (b) of
Section 8.1 shall exist, at a rate per annum equal to the
sum of 2% plus the rate applicable to Base Rate Loans for
such day).

(e) Subject to Section 8.1(a), each Money
Market LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period appli-
cable thereto, at a rate per annum equal to the sum of

the London Interbank Offered Rate for such Interest
Period (determined in accordance with Section 2.7(c) as
if the related Money Market LIBOR Borrowing were a Com-
mitted Euro-Dollar Borrowing) plus (or minus) the Money
Market Margin quoted by the Bank making such Loan in
accordance with Section 2.3. Each Money Market Absolute
Rate Loan shall bear interest on the outstanding princi-
pal amount thereof, for the Interest Period applicable
thereto, at a rate per annum equal to the Money Market
Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.3. Such interest shall be
payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof.
Any overdue principal of or interest on any Money Market
Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.

(f) The Agent shall determine each interest
rate applicable to the Loans hereunder. The Agent shall
give prompt notice to the Borrower and the participating
Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence
of manifest error.

(g) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as contemplat-
ed by this Section. If any Reference Bank does not
furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or
Banks or, if none of such quotations is available on a
timely basis, the provisions of Section 8.1 shall apply.

(h) The "Applicable Margin" with respect to
any CD Loan or Euro-Dollar Loan at any date is the appli-
cable percentage amount set forth in the table below
based on the Status Level for such date:

Level I Level II Level III Level IV Level V Level VI
Status Status Status Status Status Status

Euro-Dollar .2500% .2500% .3000% .3750% .4250% .5500%
Loans
CD Loans .3750% .3750% .4250% .5000% .5500% .6750%

SECTION 2.8. Fees.

(a) Commitment Fee. During the Revolving
Credit Period, the Borrower shall pay to the Agent for
the account of the Banks ratably in proportion to their
Commitments a commitment fee at the Commitment Fee Rate

on the daily amount by which the aggregate amount of the
Commitments exceeds the aggregate outstanding principal
amount of the Loans. Such commitment fee shall accrue
from and including the Effective Date to but excluding
the Termination Date.

For this purpose, the "Commitment Fee Rate" is
a rate per annum equal to (i) 0.0250% for any day on
which Level I Status, Level II Status or Level III Status
exists and (ii) 0.0500% for any other day.

(b) Facility Fee. The Borrower shall pay to
the Agent for the account of the Banks ratably in propor-
tion to their respective Commitments a facility fee at
the Facility Fee Rate. Such facility fee shall accrue
(i) from and including the Effective Date to but exclud-
ing the Termination Date, on the daily aggregate amount
of the Commitments (whether used or unused) and (ii) from
and including the Termination Date to but excluding the
date the Loans shall be repaid in their entirety, on the
daily average aggregate outstanding principal amount of
the Loans.

For this purpose, the "Facility Fee Rate" is a
rate per annum equal to (i) 0.1000% for any day on which
Level I Status exists, (ii) 0.1250% for any day on which
Level II Status or Level III Status exists, (iii) 0.1500%
for any day on which Level IV Status exists, (iv) 0.1750%
for any day on which Level V Status exists and (v) 0.2000%
for any other day.

(c) Excess Utilization Fee. The Borrower shall
pay to the Agent for the account of the Banks ratably in
proportion to their Commitments a fee at the rate of
.0625% per annum on the daily average amount by which the
aggregate outstanding principal amount of the Loans
exceeds 50% of the aggregate amount of the Commitments.

(d) Payments. Accrued fees under this Section
shall be payable quarterly on each Quarterly Date and
upon the date of termination of the Commitments in their
entirety (and, if later, the date the Loans shall be
repaid in their entirety).

SECTION 2.9. Optional Termination or Reduction of
Commitments. During the Revolving Credit Period, the
Borrower may, upon at least three Domestic Business Days'
notice to the Agent, (i) terminate the Commitments at any
time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount
of $10,000,000 or any larger multiple thereof, the aggre-
gate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.

SECTION 2.10. Mandatory Termination of Commit-
ments. The Commitments shall terminate on the Termina-
tion Date, and any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on
such date.

SECTION 2.11. Optional Prepayments.

(a) The Borrower may (i) upon at least three
Domestic Business Days' notice to the Agent, prepay any
Domestic Borrowing (or any Money Market Borrowing bearing
interest at the Base Rate pursuant to Section 8.1(a)) or
(ii) upon at least three Euro-Business Days' notice to
the Agent, prepay any Euro-Dollar Borrowing, in whole at
any time, or from time to time in part in amounts aggre-
gating $10,000,000 or any larger multiple of $1,000,000,
by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such
Borrowing.

(b) Except as provided in clause (i) of Section
2.11(a), the Borrower may not prepay all or any portion
of the principal amount of any Money Market Loan prior to
the maturity thereof.

(c) Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's
ratable share (if any) of such prepayment and such notice
shall not thereafter be revocable by the Borrower.

SECTION 2.12. General Provisions as to Payments.

(a) The Borrower shall make each payment of
principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time)
on the date when due, in Federal or other funds immedi-
ately available in New York City, to the Agent at its
address referred to in Section 9.1. The Agent will
promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account
of the Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due
on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next suc-
ceeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall
be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month,
in which case the date for payment thereof shall be the

next preceding Euro-Dollar Business Day. Whenever any
payment of principal of, or interest on, the Money Market
Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day.
If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be
payable for such extended time.

(b) Unless the Agent shall have received notice
from the Borrower prior to the date on which any payment
is due to the Banks hereunder that the Borrower will not
make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on
such date and the Agent may, in reliance upon such as-
sumption, cause to be distributed to each Bank on such
due date an amount equal to the amount then due such
Bank. If and to the extent that the Borrower shall not
have so made such payment, each Bank shall repay to the
Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from
the date such amount is distributed to such Bank until
the date such Bank repays such amount to the Agent, at
the Federal Funds Rate.

SECTION 2.13. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed
Rate Loan (pursuant to Article II, VI or VIII or other-
wise) on any day other than the last day of the Interest
Period applicable thereto, or the end of an applicable
period fixed pursuant to Section 2.7(d), or if the Bor-
rower fails to borrow or prepay any Fixed Rate Loans
after notice has been given to any Bank in accordance
with Section 2.4(a) or 2.11(c), the Borrower shall reim-
burse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an exist-
ing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period
after any such payment or failure to borrow or prepay,
provided that such Bank shall have delivered to the
Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the
absence of clearly demonstrable error.

SECTION 2.14. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be
computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last
day). All other interest and fees shall be computed on
the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but

excluding the last day).

ARTICLE III

CONDITIONS

SECTION 3.1. Effectiveness. This Agreement shall
become effective on the date that each of the following
conditions shall have been satisfied (or waived in accor-
dance with Section 9.5):

(a) receipt by the Agent of counterparts
hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in
form satisfactory to it of telegraphic, telex or other
written confirmation from such party of execution of a
counterpart hereof by such party);

(b) receipt by the Agent for the account of
each Bank of a duly executed Note dated on or before the
Effective Date complying with the provisions of Section
2.5;

(c) receipt by the Agent of an opinion of
Franklin C. Brown, Esq., Senior Vice President of and
Chief Counsel for the Borrower, substantially in the form
of Exhibit E hereto;

(d) receipt by the Agent of an opinion of
Davis Polk & Wardwell, special counsel for the Agent,
substantially in the form of Exhibit F hereto and cover-
ing such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably
request;

(e) receipt by the Agent of all documents it
may reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of
this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory
to the Agent;

(f) receipt by the Agent of evidence satisfac-
tory to it of the payment of all amounts payable under
the 1993 Credit Agreements and the termination of the
commitments thereunder;

provided that this Agreement shall not become effective
or be binding on any party hereto unless all of the
foregoing conditions are satisfied not later than Febru-
ary 18, 1994.

The Agent shall promptly notify the Borrower
and the Banks of the Effective Date, and such notice
shall be conclusive and binding on all parties hereto.

SECTION 3.2. Borrowings. The obligation of any
Bank to make a Loan on the occasion of any Borrowing is
subject to thesatisfaction of the following conditions:

(a) receipt by the Agent of a Notice of Bor-
rowing as required by Section 2.2 or 2.3, as the case may
be;

(b) the fact that, immediately after such
Borrowing, the aggregate outstanding principal amount of
the Loans will not exceed the aggregate amount of the
Commitments;

(d) the fact that the representations and
warranties of the Borrower contained in this Agreement
(except, in the case of a Refunding Borrowing, the repre-
sentations and warranties set forth in Sections 4.4(c)
and 4.6 as to any matter which has theretofore been
disclosed in writing by the Borrower to the Banks) shall
be true in all material respects on and as of the date of
such Borrowing.

Each Borrowing hereunder shall be deemed to be a repre-
sentation and warranty by the Borrower on the date of
such Borrowing as to the facts specified in clauses (b),
(c) and (d) of this Section.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that:

SECTION 4.1. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State
of Delaware, and has all corporate powers and all materi-
al governmental licenses, authorizations, consents and
approvals required to carry on its business as now con-
ducted.

SECTION 4.2. Corporate and Governmental Autho-
rization; No Contravention. The execution, delivery and
performance by the Borrower of this Agreement and the Notes
are within the Borrower's corporate powers, have been duly

authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any govern-
mental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation
or by-laws of the Borrower or of any agreement or instru-
ment evidencing or governing Debt of the Borrower or any
subsidiary or any other material agreement, instrument,
judgment, injunction, order or decree binding upon the
Borrower or any Subsidiary or result in the creation or
imposition of any Lien on any asset of the Borrower or
any Subsidiary pursuant to any such agreement, instru-
ment, judgment, injunction, order or decree.

SECTION 4.3. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower
and the Notes, when executed and delivered in accordance
with this Agreement, will constitute valid and binding
obligations of the Borrower.

SECTION 4.4. Financial Information.

(a) The consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of February
27, 1993 and the related consolidated statements of
income and cash flows for the fiscal year then ended,
reported on by KPMG Peat Marwick and set forth in the
Borrower's 1993 Form 10-K, a copy of which has been
delivered to each of the Banks, fairly present, in con-
formity with generally accepted accounting principles,
the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for
such fiscal year.

(b) The unaudited consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of
November 27, 1993 and the related unaudited consolidated
statements of income and cash flows for the nine months
then ended, set forth in the Borrower's quarterly report
for the fiscal quarter ended November 27, 1993 as filed
with the Securities and Exchange Commission on Form 10-Q,
a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted
accounting principles applied on a basis consistent with
the financial statements referred to in subsection (a) of
this Section, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and
cash flows for such nine-month period (subject to normal
year-end adjustments).

tion, results of operations or prospects of the Borrower
and its Consolidated Subsidiaries, considered as a whole.

SECTION 4.5. Full Disclosure. All financial
Statements and other documents furnished by the Borrower
to the Banks in connection with this Agreement do not and
will not contain any untrue statement of material fact or
omit to state a material fact necessary in order to make
the statements contained therein not misleading. The
Borrower has disclosed to the Banks in writing any and
all facts which materially and adversely affect the
business, operations or condition, financial or other-
wise, of the Borrower and its Subsidiaries or the Bor-
rower's ability to perform obligations under this Agree-
ment.

SECTION 4.6. Litigation. There is no action,
suit or proceeding pending against, or to the knowledge
of the Borrower threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or
arbitrator or any government body, agency or official in
which there is a reasonable possibility of an adverse
decision which could materially adversely affect the
business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidat-
ed Subsidiaries or which in any manner draws into ques-
tion the validity of this Agreement or the Notes.

SECTION 4.7. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligation under the
minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan and is in compli-
ance in all material respects with the presently applica-
ble provisions of ERISA and the Internal Revenue Code
with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code in respect
of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any
Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Internal Reve-
nue Code or (iii) incurred any liability under Title IV
of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA.

SECTION 4.8. Taxes. United States Federal income
tax returns of the Borrower and its Subsidiaries have
been examined and closed through the fiscal year ended
February 28, 1987. The Borrower and its Subsidiaries
have filed all United States Federal income tax returns,
and the Borrower and its Significant Subsidiaries have
filed all other material tax returns, which are required

to be filed by them and have paid all taxes due pursuant
to such returns or pursuant to any assessment received by
the Borrower or any Significant Subsidiary except where
the payment of any such taxes is being contested in good
faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Consol-
idated Subsidiaries in respect of taxes or other govern-
mental charges are, in the opinion of the Borrower,
adequate.

SECTION 4.9. Subsidiaries. Each of the Bor-
rower's corporate Significant Subsidiaries is a corpo-
ration duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorpora-
tion, and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now con-
ducted.

SECTION 4.10. Environmental Matters. In the
ordinary course of its business, the Borrower conducts an
ongoing review of the effect of Environmental Laws on the
business, operations and properties of the Borrower and
its Subsidiaries, in the course of which it identifies
and evaluates associated liabilities and costs (includ-
ing, without limitation, any capital or operating expen-
ditures required for clean-up or closure of properties
presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance
with environmental protection standards imposed by law or
as a condition of any license, permit or contract, any
related constraints on operating activities, including
any periodic or permanent shutdown of any facility or
reduction in the level of or change in the nature of
operations conducted thereat, any costs or liabilities in
connection with off-site disposal of wastes or hazardous
substances, and any actual or potential liabilities to
third parties, including employees, and any related costs
and expenses). On the basis of this review, the Borrower
has reasonably concluded that such associated liabilities
and costs, including the costs of compliance with Envi-
ronmental Laws, are unlikely to have a material adverse
effect on the business, financial condition, results of
operations or prospects of the Borrower and its Consoli-
dated Subsidiaries, considered as a whole.

ARTICLE V

COVENANTS

The Borrower agrees that, so long as any Bank
has any Commitment hereunder or any amount payable under
any Note remains unpaid:

SECTION 5.1. Information. The Borrower will
deliver to each of the Banks:

(a) as soon as available and in any event
within 90 days after the end of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner accept-
able to the Securities and Exchange Commission by KPMG
Peat Marwick or other independent public accountants of
nationally recognized standing;

(b) as soon as available and in any event
within 45 days after the end of each of the first three
quarters of each fiscal year of the Borrower, a consoli-
dated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such quarter and the relat-
ed consolidated statements of income and cash flows for
such quarter and for the portion of the Borrower's fiscal
year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corre-
sponding quarter and the corresponding portion of the
Borrower's previous fiscal year, all certified (subject
to normal year-end adjustments) as to fairness of presen-
tation, generally accepted accounting principles and
consistency by the chief financial officer or the chief
accounting officer of the Borrower;

(c) simultaneously with the delivery of each
set of financial statements referred to in clauses (a)
and (b) above, a certificate of the chief financial
officer or the chief accounting officer of the Borrower
(i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compli-
ance with the requirements of Sections 5.7 to 5.12,
inclusive, on the date of such financial statements and
(ii) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Bor-
rower is taking or proposes to take with respect thereto;

(d) simultaneously with the delivery of each
set of financial statements referred to in clause (a)
above, a statement of the firm of independent public
accountants which reported on such statements (i) whether
anything has come to their attention to cause them to
believe that any Default existed on the date of such
statements and (ii) confirming the calculations set forth
in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;

(e) within five days after any officer of the
Borrower obtains knowledge of any Default, if such De-
fault is then continuing, a certificate of the chief
financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action
which the Borrower is taking or proposes to take with
respect thereto;

(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;

(g) promptly upon the filing thereof, copies
of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K
(or their equivalents) which the Borrower shall have
filed with the Securities and Exchange Commission;

(h) promptly upon any change in Status Level,
notice thereof;

(i) if and when any member of the ERISA Group
(i) gives or is required to give notice to the PBGC of
any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liabil-
ity under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) re-
ceives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) or appoint a trust-
ee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of
such application; (v) gives notice of intent to terminate
any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrange-
ment or makes any amendment to any Plan or Benefit Ar-
rangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or

the chief accounting officer of the Borrower setting
forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA
Group is required or proposes to take; and

(j) from time to time such additional informa-
tion regarding the financial position or business of the
Borrower and its Subsidiaries as the Agent, at the re-
quest of any Bank, may reasonably request.

SECTION 5.2. Payment of Obligations. The Bor-
rower will, and will cause each of its Subsidiaries to,
pay and discharge, as the same shall become due and
payable, (i) all material claims or demands of material-
men, mechanics, carriers, warehousemen, landlords and
other like Persons prior to the time such claims or
demands give rise to a Lien upon any of its property or
assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or
assets, except where any of the items in clause (i) or
(ii) above may be contested in good faith by appropriate
proceedings, and the Borrower or such Subsidiary, as the
case may be, shall have set aside on its books, in accor-
dance with generally accepted accounting principles,
appropriate reserves, if any, for the accrual of any such
items.

SECTION 5.3. Maintenance of Property; Insurance.

(a) The Borrower will keep, and will cause each
Subsidiary to keep, all property useful and necessary in
its business in good working order and condition, ordi-
nary wear and tear excepted.

(b) The Borrower will, and will cause each of
its Subsidiaries to, maintain (either in the name of the
Borrower or in such Subsidiary's own name) with finan-
cially sound and responsible insurance companies, insur-
ance on all their respective properties in at least such
amounts and against at least such risks (and with such
risk retention) as are usually insured against in the
same general area by companies of established repute
engaged in the same or a similar business; and will
furnish to the Banks, upon request from the Agent, infor-
mation presented in reasonable detail as to the insurance
so carried.

SECTION 5.4. Conduct of Business and Maintenance
of Existence. Except as otherwise permitted in this
Agreement, the Borrower will continue, and will cause
each Significant Subsidiary to continue, to engage in
business of the same general type as now conducted by the
Borrower and its Significant Subsidiaries, and will
preserve, renew and keep in full force and effect, and

will cause each Significant Subsidiary (except where such
Significant Subsidiary merges into the Borrower or any
other Subsidiary) to preserve, renew and keep in full
force and effect their respective corporate existence and
their respective rights, privileges and franchises neces-
sary or desirable in the normal conduct of business.

SECTION 5.5. Compliance with Laws. The Borrower
will comply, and cause each Subsidiary to comply, in all
material respects with all applicable laws, ordinances,
rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental
Laws and ERISA and the rules and regulations thereunder)
except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or
where the failure to comply would not have a material
adverse effect on the business, financial position or
results of operations of the Borrower and its Consoli-
dated Subsidiaries, considered as a whole.

SECTION 5.6. Inspection of Property Books and
Records. The Borrower will keep, and will cause each
Subsidiary to keep, proper books of record and account in
which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsid-
iary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respec-
tive properties, to examine and make abstracts from any
of their respective books and records and to discuss
their respective affair, finances and accounts with their
respective officers, employees and independent public
accountants, all at such reasonable times and as often as
may reasonably be desired.

SECTION 5.7. Restriction on Debt of Subsidiaries.
The Borrower will not permit any Subsidiary to create,
issue, incur, assume, or in any other way become liable
for any unsecured Debt unless immediately prior thereto
the Borrower would be entitled under subsection (d) of
Section 5.9 to create Secured Debt not specifically
permitted under Section 5.9 but for subsection (d)
thereof in an amount equal to such Debt; provided that the
foregoing restriction shall not prevent (i) any Subsid-
iary from becoming liable to the Borrower or to a
Wholly-Owned Consolidated Subsidiary for Debt or (ii) the
extension, renewal or refunding of any Debt of any Sub-
sidiary so long as Consolidated Debt is not thereby
increased.

SECTION 5.8. Restriction on Sales with Leases.
Except for a sale or transfer by a Subsidiary to the
Borrower or a Wholly-Owned Consolidated Subsidiary, the
Borrower will not, and will not permit any Subsidiary to,

sell or transfer any manufacturing plant, warehouse,
retail store or equipment now or hereafter owned and
operated by the Borrower or a Subsidiary, with the inten-
tion that the Borrower or any Subsidiary take back a
lease thereof, except a lease for a period, including
renewals, not exceeding 24 months, by the end of which
period it is intended that the use of such property or
equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "Sale and
Leaseback Transaction"); provided that, notwithstanding
the foregoing, the Borrower or any Subsidiary may enter
into a Sale and Leaseback Transaction if the Borrower or
a Subsidiary would be entitled under subsection (d) of
Section 5.9 to create Secured Debt not specifically
permitted under Section 5.9 but for subsection (d) there-
of in an amount equal to the Attributable Debt respecting
such Sale and Leaseback Transaction; provided further
that, notwithstanding the foregoing, the Borrower or any
Subsidiary may enter into a Sale and Leaseback Transac-
tion if entered into in respect of property acquired by
the Borrower or a Subsidiary if such Sale and Leaseback
Transaction is entered into within 24 months from the
date of such acquisition; and provided still further
that, notwithstanding the foregoing, the Borrower or any
Subsidiary may enter into a Sale and Leaseback Transac-
tion if the Borrower, within 120 days before or after the
sale or transfer shall have been made by the Borrower or
by any Subsidiary, applied or applies an amount equal to
the greater of (i) the net proceeds of the sale of the
property sold and leased back pursuant to such arrange-
ment or (ii) the fair market value of the property so
sold and leased back at the time of entering into such
arrangement (as determined by any two of the following:
the Chairman of the Board of the Borrower, its Chief
Executive Officer, its President, any Vice President of
the Borrower, its Treasurer and its Controller) to the
retirement of Secured Debt of the Borrower other than at
maturity or pursuant to any mandatory sinking fund pay-
ment or any mandatory prepayment provision.

SECTION 5.9. Restriction on Liens. The Borrower
will not, and will not permit any Subsidiary to, create,
issue, incur, assume or guarantee any Secured Debt with
out making effective provision (and the Borrower cove
nants that in such case it will make or cause to be made
effective provision) whereby the Loans (and any other
Debt of the Borrower or such Subsidiary then entitled
thereto) shall be secured by the same Lien equally and
ratably with (or prior to) any and all other obligations
and Debt thereby secured for so long as any such other
obligations and Debt shall be so secured; provided that
the foregoing covenant shall not apply to the following:

(a)(i) Any Lien on any property acquired

or constructed by the Borrower or a Subsidiary
and created contemporaneously with, or within
24 months after, such acquisition or the com-
pletion of such construction and commencement
of full operation of such property, whichever
is later, to secure or provide for the payment
of any part of the purchase or construction
price of such property, or (ii) the acquisition
by the Borrower or a Subsidiary of property
subject to any Lien upon such property existing
at the time of acquisition thereof, whether or
not assumed by the Borrower or such Subsidiary,
or (iii) any conditional sales agreement or
other title retention agreement with respect to
any property hereafter acquired; provided that
the Lien does not spread to other property
except unimproved real property previously
owned upon which any new construction has taken
place and subsequent additions to such acquired
or constructed property;

(b) Any Lien created for the sole purpose
of extending, renewing or refunding, in whole
or part, any Lien permitted by this Section
5.09 or any Lien securing the Debt of the Bor-
rower or of any Subsidiary on the date of this
Agreement or of a corporation at the time such
corporation becomes a subsidiary, or any exten-
sions, renewals or refundings of any such Lien;
provided that the principal amount of Debt
secured thereby shall not exceed the principal
amount of Debt so secured at the time of such
extension, renewal or refunding and that such
extension, renewal or refunding Lien shall be
limited to all or that part of the same proper-
ty which secured the Debt so extended, renewed
or refunded;

(d) Secured Debt of the Borrower and its
Subsidiaries which would otherwise be prohibit-
ed by the foregoing restrictions (not including
Secured Debt permitted to be secured under
subsections (a) through (c) above) so long as
the sum of any such Secured Debt hereafter
incurred and outstanding at the time plus At-
tributable Debt of the Borrower and any Subsid-
iaries in respect of Sale and Leaseback Trans-
actions hereafter entered into and outstanding
at the time (excluding Attributable Debt in-
curred in respect of any Sale and Leaseback

Transaction entered into in respect of property
acquired by the Borrower or a Subsidiary not
more than 24 months prior to the date such Sale
and Leaseback Transaction is entered into) plus
unsecured Debt of any Subsidiary hereafter
incurred and outstanding at the time (excluding
unsecured Debt incurred through the extension,
renewal or refunding of Debt of such Subsidiary
where Consolidated Debt was not thereby in-
creased and excluding any Debt owed to the
Borrower or a Wholly-Owned Consolidated Subsid-
iary) does not at the time exceed 5% of Consol-
idated Net Tangible Assets.

SECTION 5.10. Leverage Ratio. Consolidated Debt
will not, at any time during any of the periods set forth
below, exceed the percentage of Total Capital indicated
opposite such period:

Period Percentage

Effective Date to but not
including FQE August 1995 66%

FQE August 1995 to but not
including FYE February 1996 58%

FYE February 1996 to but not
including FYE February 1997 54%

FYE February 1997 to but not
including FYE February 1998 50%

FYE February 1998 to but not
including FQE August 1998 45%

FQE August 1998 and thereafter 42%

SECTION 5.11. Interest Coverage. The Interest
Coverage Ratio will not, for any period of four consecu-
tive fiscal quarters ending during any period set forth
below, be less than the percentage indicated opposite
such latter period:

Four Consecutive
Fiscal Quarters Ending
On or Between Percentage

FYE February 1994 and FQE November 1994 340%
FYE February 1995 and FQE November 1995 340%
FYE February 1996 and FQE November 1996 425%
FYE February 1997 and FQE November 1997 475%

FYE February 1998 and FQE November 1998 500%
FYE February 1999 and FQE November 1999 500%

SECTION 5.12. Limitation on Minority Investments.
Neither the Borrower nor any Consolidated Subsidiary will
make or acquire any Investment in any Person other than:

(a) Investments in Consolidated Subsidiaries;

(b) Temporary Cash Investments;

(d) any Investment not otherwise permitted by
the foregoing clauses of this Section if, immediate-
ly after such Investment is made or acquired, the
aggregate net book value of all Investments permit-
ted by this clause (d) does not exceed 15% of Con-
solidated Net Worth.

SECTION 5.13. Consolidations, Mergers and Sales
Assets. The Borrower will not (i) consolidate or merge
with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, all or any
substantial part (other than Specialty Retailing Assets)
of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person; provided that the Bor-
rower may merge with another Person if (A) the Borrower
is the corporation surviving such merger and (B) immedi-
ately after giving effect to such merger, no Default
shall have occurred and be continuing.

SECTION 5.14. Use of Proceeds. The proceeds of
the Loans made under this Agreement will be used by the
Borrower (i) to refinance certain indebtedness, (ii) to
finance the repurchase by the Borrower of up to 22 mil-
lion shares of the Borrower's common stock and related
transaction expenses and (iii) for general corporate
purposes. No such use of the proceeds for general corpo-
rate purposes will be, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the meaning
of Regulation U.

ARTICLE VI

DEFAULTS

SECTION 6.1. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:

(a) the Borrower shall fail to pay when
due any principal of any Loan, or shall fail to
pay within five days of the due date thereof
any interest, fees or other amount payable
hereunder;

(b) the Borrower shall fail to observe or
perform any covenant contained in Sections 5.07
to 5.14, inclusive;

(c) the Borrower shall fail to observe or
perform any covenant or agreement contained in
this Agreement (other than those covered by
clause (a) or (b) above) for 30 days after
written notice thereof has been given to the
Borrower by the Agent at the request of any
Bank;

(d) any material representation, warran-
ty, certification or statement made by the
Borrower in this Agreement or in any certifi-
cate, financial statement or other document
delivered pursuant to this Agreement shall
prove to have been incorrect in any material
respect when made (or deemed made);

(e) the Borrower or any Subsidiary shall
fail to make any payment in respect of any
Material Debt when due or within any applicable
grace period;

(f) any event or condition shall occur
which results in the acceleration of the matu-
rity of any Material Debt or enables (or, if
such event or condition does not otherwise give
rise to a Default hereunder, which with the
giving of notice or lapse of time or both would
enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate
the maturity thereof;

(g) the Borrower or any Significant Sub-
sidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorgani-
zation or other relief with respect to itself
or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect
or seeking the appointment of a trustee, re-
ceiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or shall consent to any such relief
or to the appointment of or taking possession
by any such official in an involuntary case or
other proceeding commenced against it, or shall

make a general assignment for the benefit of
creditors, or shall fail generally to pay its
debts as they become due, or shall take any
corporate action to authorize any of the fore-
going;

(h) an involuntary case or other proceed-
ing shall be commenced against the Borrower or
any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to
it or its debts under any bankruptcy, insolven-
cy or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other simi-
lar official of it or any substantial part of
its property, and such involuntary case or
other proceeding shall remain undismissed and
unstayed for a period of 60 day; or an order
for relief shall be entered against the Borrow-
er or any Significant Subsidiary under the
federal bankruptcy laws as now or hereafter in
effect;

(i) any member of the ERISA Group shall
fail to pay when due an amount or amounts ag-
gregating in excess of $5,000,000 which it
shall have become liable to pay under Title IV
of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any
plan administrator or any combination of the
foregoing; or the PBGC shall institute proceed-
ings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to
cause a trustee to be appointed to administer
any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Mate-
rial Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or
a default, within the meaning of Section 4
219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one
or more members of the ERISA Group to incur a
current payment obligation in excess of
$25,000,000;

(j) a judgment or order for the payment
of money in excess of $25,000,000 shall be
rendered against the Borrower or any Subsidiary
and such judgment or order shall continue un-
satisfied and unstayed for a period of 30 days;
or

(k) any person or group of persons (with-
in the meaning of Section 13 or 14 of the Secu-
rities Exchange Act of 1934, as amended) shall
have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Secu-
rities and Exchange Commission under said Act)
of 20% or more of the outstanding shares of
common stock of the Borrower; or, during any
period of 12 consecutive calendar months, indi-
viduals who were directors of the Borrower on
the first day of such period shall cease to
constitute a majority of the board of directors
of the Borrower;

then, and in every such event, the Agent shall (i) if
requested by the Required Banks, by notice to the Borrow-
er terminate the Commitments and they shall thereupon
terminate, and (ii) if requested by Banks holding Notes
evidencing more than 66 2/3% in aggregate principal
amount of the Loans, by notice to the Borrower declare
the Notes (together with accrued interest thereon) to be,
and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with
respect to the Borrower, without any notice to the Bor-
rower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become
immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are
hereby waived by the Borrower.

SECTION 6.2. Notice of Default. The Agent shall
give notice to the Borrower under Section 6.01(c)
promptly upon being requested to do so by any Bank and
shall thereupon notify all the Banks thereof.

ARTICLE VII

THE AGENT

SECTION 7.1. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise
such powers under this Agreement and the Notes as are
delegated to the Agent by the terms hereof or thereof,
together with all such powers as are reasonably inciden-
tal thereto.

SECTION 7.2. Agent and Affiliates. Morgan Guar-

anty Trust Company of New York shall have the same rights
and powers under this Agreement as any other Bank and may
exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of
New York and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of busi-
ness with the Borrower or any Subsidiary or affiliate of
the Borrower as if it were not the Agent hereunder.

SECTION 7.3. Action by Agent. The obligations of
the Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the forego-
ing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided
in Article VI.

SECTION 7.4. Consultation with Experts. The
Agent may consult with legal counsel (who may be counsel
for the Borrower), independent public accountants and
other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel,
accountants or experts.

SECTION 7.5. Liability of Agent. Neither the
Agent nor any of its affiliates nor any of their respec-
tive directors, officers, agents or employees shall be
liable for any action taken or not taken by it or any of
them in connection herewith (i) with the consent or at
the request of the Required Banks or (ii) in the absence
of its or their own gross negligence or willful miscon-
duct. Neither the Agent nor any of its affiliates nor
any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this
Agreement or any borrowing hereunder; (ii) the perfor-
mance or observance of any of the covenants or agreements
of the Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items re-
quired to be delivered to the Agent; or (iv) the validi-
ty, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any
liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.

SECTION 7.6. Indemnification. Each Bank shall,
ratably in accordance with its Commitment, indemnify the
Agent, its affiliates and their respective directors,
officers, agents and employees (to the extent not reim-
bursed by the Borrower) against any cost, expense (in-

cluding counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from
such indemnitees' gross negligence or willful misconduct)
that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by
such indemnitees hereunder.

SECTION 7.7. Credit Decision. Each Bank acknow-
ledges that it has, independently and without reliance
upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon the Agent
or any other Bank, and based on such documents and infor-
mation as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking
any action under this Agreement.

SECTION 7.8. Successor Agent. The Agent may
resign at any time by giving notice thereof to the Banks
and the Borrower. Upon any such resignation, the Re-
quired Banks shall have the right, with the consent of
the Borrower, to appoint a successor Agent. If no suc-
cessor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within
30 days after the retiring Agent gives notice of resigna-
tion, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a com-
mercial bank organized or licensed under the laws of the
United States of America or of any State thereof and
having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resig-
nation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.

SECTION 7.9. Agent's Fee. The Borrower shall
pay to the Agent for its own account fees in the amounts
and at the times previously agreed upon between the
Borrower and the Agent.

ARTICLE VIII

CHANGE IN CIRCUMSTANCES

SECTION 8.1. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of
any Interest Period for any Fixed Rate Borrowing:

(a) the Agent is advised by the Reference
Banks that deposits in dollars (in the applica-
ble amounts) are not being offered to the Ref-
erence Banks in the relevant market for such
Interest Period, or

(b) in the case of a Committed Borrowing,
Banks having 50% or more of the aggregate amount
of the Commitments advise the Agent that
the Adjusted CD Rate or the Adjusted London
Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and
fairly reflect the cost to such Banks of fund-
ing their CD Loans or Euro-Dollar Loans, as the
case may be, for such Interest Period,

the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent noti-
fies the Borrower that the circumstances giving rise to
such suspension no longer exist, the obligations of the
Banks to make CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended. Unless the Borrower notifies
the Agent at least two Domestic Business Days before the
date of any Fixed Rate Borrowing for which a Notice of
Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is
a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate
Borrowing is a Money Market LIBOR Borrowing, the Money
Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to
but excluding the last day of the Interest Period appli-
cable thereto at the Base Rate for such day.

SECTION 8.2. Illegality. If, on or after the date
of this Agreement, the adoption of any applicable law,
rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority,
central bank or comparable agency charged with the inter-
pretation or administration thereof, or compliance by any
Bank (or its Euro-Dollar Lending Office) with any request
or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency
shall make it unlawful or impossible for any Bank (or its

Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to
the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Agent that the circum-
stances giving rise to such suspension no longer exist,
the obligation of such Bank to make Euro-Dollar Loans
shall be suspended. Before giving any notice to the
Agent pursuant to this Section, such Bank shall designate
a different Euro-Dollar Lending Office if such designa-
tion will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvan-
tageous to such Bank. If such Bank shall determine that
it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall
so specify in such notice the Borrower shall immediately
prepay in full the then outstanding principal amount of
each such Euro-Dollar Loan, together with accrued inter-
est thereon. Concurrently with prepaying each such
Euro-Dollar Loan, the Borrower shall borrow a Base Rate
Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contempora-
neously with the related Euro-Dollar Loans of the other
Banks), and such Bank shall make such a Base Rate Loans.

SECTION 8.3. Increased Cost and Reduced Return.
(a) If on or after (x) the date hereof, in the
case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money
Market Quote, in the case of any Money Market Loan, the
adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or
any change in the interpretation or administration there-
of by any governmental authority, central bank or compa-
rable agency charged with the interpretation or adminis-
tration thereof, or compliance by any Bank (or its Appli-
cable Lending Office) with any request or directive
(whether or not having the force of law) of any such
authority, central bank or comparable agency shall im-
pose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but
excluding (i) with respect to any CD Loan any such re-
quirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan
any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insur-
ance assessment (excluding, with respect to any CD Loan,
any such requirement reflected in an applicable Assess-
ment Rate) or similar requirement against assets of,
deposits with or for the account of, or credit extended
by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or
on the United States market for certificates of deposit

or the London interbank market any other condition af-
fecting its Fixed Rate Loans, its Note or its obligation
to make Fixed Rate Loans and the result of any of the
foregoing is to increase the cost to such Bank (or its
Applicable Lending Office) of making or maintaining any
Fixed Rate Loan, or to reduce the amount of any sum
received or receivable by such Bank (or its Applicable
Lending Office) under this Agreement or under its Note
with respect thereto, by an amount deemed by such Bank to
be material, then, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduc-
tion.

(b) If any Bank shall have determined that,
after the date hereof, the adoption of any applicable
law, rule or regulation regarding capital adequacy, or
any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by
any governmental authority, central bank or comparable
agency charged with the interpretation or administration
thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on
capital of such Bank (or its Parent) as a consequence of
such Bank's obligations hereunder to a level below that
which such Bank (or its Parent) could have achieved but
for such adoption, change, request or directive (taking
into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be materi-
al, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower
shall pay to such Bank such additional amount or amounts
as will compensate such Bank (or its Parent) for such
reduction.

(c) Each Bank will promptly notify the Borrow-
er and the Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this
Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in
the absence of clearly demonstrable error. In determin-
ing such amount, such Bank may use any reasonable averag-
ing and attribution methods.

SECTION 8.4. Taxes. (a) Any and all payments by

the Borrower to or for the account of any Bank or the
Agent hereunder or under any Note shall be made free and
clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charg-
es or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the
Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of
which such Bank or the Agent (as the case may be) is
organized or any political subdivision thereof and, in
the case of each Bank, taxes imposed on its income, and
franchise or similar taxes imposed on it, by the juris-
diction of such Bank's Applicable Lending Office or any
political subdivision thereof (all such non-excluded
taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred
to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Bank or the Agent, (i)
the sum payable shall be increased as necessary so that
after making all required deductions (including deduc-
tions applicable to additional sums payable under this
Section 8.04) such Bank or the Agent (as the case may be)
receives an amount equal to the sum it would have re-
ceived had no such deductions been made, (ii) the Borrow-
er shall make such deductions, (iii) the Borrower shall
pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applica-
ble law and (iv) the Borrower shall furnish to the Agent,
at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment
thereof.

(b) In addition, the Borrower agrees to pay
any present or future stamp or documentary taxes and any
other excise or property taxes, or charges or similar
levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or
otherwise with respect to, this Agreement or any Note
(hereinafter referred to as "Other Taxes").

(c) The Borrower agrees to indemnify each Bank
and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts pay-
able under this Section 8.04) paid by such Bank or the
Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be made
within 15 days from the date such Bank or the Agent (as
the case may be) makes demand therefor.

(d) Each Bank organized under the laws of a
jurisdiction outside the United States; on or prior to

the date of its execution and delivery of this Agreement
in the case of each Bank listed on the signature pages
hereof and on or prior to the date on which it be-
comes a Bank in the case of each other Bank, and from
time to time thereafter if requested in writing by the
Borrower (but only so long as such Bank remains lawfully
able to do so), shall provide the Borrower with Internal
Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Ser-
vice, certifying that such Bank is entitled to benefits
under an income tax treaty to which the United States is
a party which reduces the rate of withholding tax on
payments of interest or certifying that the income re-
ceivable pursuant to this Agreement is effectively con-
nected with the conduct of a trade or business in the
United States. If the form provided by a Bank at the
time such Bank first becomes a party to this Agreement
indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be
considered excluded from "Taxes" as defined in Section
8.04(a).

(e) For any period with respect to which a Bank
has failed to provide the Borrower with the appropriate form
pursuant to Section 8.04(d) (unless such failure is due to a
change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be pro-
vided), such Bank shall not be entitled to indemnification
under Section 8.04(a) with respect to Taxes imposed by the
United States; provided, however, that should a Bank, which
is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower
shall take such steps as such Bank shall reasonably request
to assist such Bank to recover such Taxes.

(f) If the Borrower is required to pay additional
amounts to or for the account of any Bank pursuant to this
Section 8.04, then such Bank will change the jurisdiction of
its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if
such change, in the judgment of such Bank, is not otherwise
disadvantageous to such Bank.

SECTION 8.5. Base Rate Loans Substituted for Affected
Fixed Rate Loans. If (i) the obligation of any Bank to make
Euro-Dollar Loans has been suspended pursuant to Section 8.02
or (ii) any Bank has demanded compensation under Section 8.03
or 8.04 with respect to its CD Loans or Euro-Dollar Loans and
the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to
such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspen-

sion or demand for compensation no longer exist:

(a) all Loans which would otherwise be made by
such Bank as CD Loans or Euro-Dollar Loans, as the case may
be, shall be made instead as Base Rate Loans (on which inter-
est and principal shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and

(b) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid, all payments of
principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission
or similar writing) and shall be given to such party: (x) in
the case of the Borrower or the Agent, at its address or
telex number set forth on the signature pages hereof, (y) in
the case of any Bank, at its address or telex number set
forth in its Administrative Questionnaire or (z) in the case
of any party, such other address or telex number as such
party may hereafter specify for the purpose by notice to the
Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in
this Section and the appropriate answerback is received, (ii)
if given by mail, 72 hours after such communication is depos-
ited in the mail with first class postage prepaid, addressed
as aforesaid or (iii) if given by any other means, when
delivered at the address specified in this Section; provided
that notices to the Agent under Article II or Article VIII
shall not be effective until received.

SECTION 9.2. No Waivers. No failure or delay by the
Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

SECTION 9.3. Expenses; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses
of the Agent, including fees and disbursements of special
counsel for the Agent, in connection with the preparation and
administration of this Agreement, any waiver or consent

hereunder or any amendment hereof or any Default or alleged
Default hereunder and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Agent and each Bank,
including fees and disbursements of counsel, in connection
with such Event of Default and collection, bankruptcy, insol-
vency and other enforcement proceedings resulting therefrom.

(b) The Borrower agrees to indemnify the Agent and
each Bank, their respective affiliates and the respective
directors, officers, agents and employees of the foregoing
(each an "Indemnitee") and hold each Indemnitee harmless from
and against any and all liabilities, losses, damages, costs
and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be
incurred by such Indemnitee in connection with any adminis-
trative or judicial proceeding (whether or not such Indemni-
tee shall be designated a party thereto) brought or threat-
ened relating to or arising out of this Agreement or any
actual or proposed use of proceeds of Loans hereunder; pro-
vided that no Indemnitee shall have the right to be indemni-
fied hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent
jurisdiction.

SECTION 9.4. Sharing of Set-Offs. Each Bank agrees
that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of
the aggregate amount of principal and interest due with
respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect
to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro
rata; provided that nothing in this Section shall impair the
right of any Bank to exercise any right of set-off or coun-
terclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other
than its indebtedness under the Notes.

The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a
participation in a Note acquired pursuant to the foregoing
arrangements may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor
of the Borrower in the amount of such participation.

SECTION 9.5. Amendments and Waivers. Any provision
of this Agreement or the Notes may be amended or waived if,
but only if, such amendment or waiver is in writing and is

signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any addi-
tional obligation, (ii) reduce the principal of or rate of
interest on any Loan or any fees hereunder, (iii) postpone
the date fixed for any payment of principal of or interest on
any Loan or any fees hereunder or for or termination of any
Commitment or (iv) change the percentage of the Commitments
or of the aggregate unpaid principal amount of the Notes, or
the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any
other provision of this Agreement.

SECTION 9.6. Successors and Assigns. (a) The provi-
sions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective suc-
cessors and assigns, except that the Borrower may not assign
or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.

(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant") partici-
pating interests in its Commitment or any or all of its
Loans. In the event of any such grant by a Bank of a partic-
ipating interest to a Participant, whether or not upon notice
to the Borrower and the Agent, such Bank shall remain respon-
sible for the performance of its obligations hereunder, and
the Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower
hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modifica-
tion, amendment or waiver of this Agreement described in
clause (i), (ii) or (iii) of Section 9.05 without the consent
of the Participant. The Borrower agrees that each Partici-
pant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or
(d) below shall be given effect for purposes of this Agree-
ment only to the extent of a participating interest granted
in accordance with this subsection (b).

(c) Any Bank may at any time assign to one or more
banks or other institutions (each an "Assignee") all, or a
proportionate part of all, of its rights and obligations

under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit
G hereto executed by such Assignee and such transferor Bank,
with (and subject to) notice to, and the subscribed consent
of, the Borrower and the Agent (such consent of the Borrower
and the Agent not to be unreasonably withheld); provided that
(i) if an Assignee is an affiliate of such transferor Bank,
such notice shall be given but no such consent shall be
required, (ii) such assignment may, but need not, include
rights of the transferor Bank in respect of outstanding Money
Market Loans, (iii) unless the assignment covers all rights
and obligations of such assignor Bank, the assignment shall
cover the equivalent of a Commitment of not less than
$10,000,000 and (iv) the remaining Commitment (if any) of the
assignor Bank after any such assignment is at least
$10,000,000. Upon execution and delivery of such instrument
and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such trans-
feror Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall
be required. Upon the consummation of any assignment pursu-
ant to this subsection (c), the transferor Bank, the Agent
and the Borrower shall make appropriate arrangements so that,
if required, a new Note is issued to the Assignee. In con-
nection with `any such assignment, the transferor Bank shall
pay to the Agent an administrative fee for processing such
assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America
or a state thereof, it shall, prior to the first date on
which interest or fees are payable hereunder for its account,
deliver to the Borrower and the Agent certification as to
exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.04.

(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Bank from its obligations hereunder.

(e) No Assignee, Participant or other transferee
of any Bank's rights shall be entitled to receive any greater
payment under Section 8.03 than such Bank would have been
entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior writ-
ten consent or by reason of the provisions of Section 8.02,
8.03 or 8.04 requiring such Bank to designate a different
Applicable Lending Office under certain circumstances or at a
time when the circumstances giving rise to such greater
payment did not exist.

SECTION 9.7. Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it
in good faith is not relying upon any "margin stock" (as
defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.

SECTION 9.8. Governing Law: Submission to Juris-
diction. This Agreement and each Note shall be governed by
and construed in accordance with the laws of the State of New
York. The Borrower hereby submits to the nonexclusive juris-
diction of the United States District Court for the Southern
District of New York and of any New York State court sitting
in New York City for purposes of all legal proceedings aris-
ing out of or relating to this Agreement or the transactions
contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in
an inconvenient forum.

SECTION 9.9. Counterparts; Integration. This Agree-
ment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and under-
standing among the parties hereto and supersedes any and all
prior agreements and understandings, oral or written, relat-
ing to the subject matter hereof.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSAC-
TIONS CONTEMPLATED HEREBY.

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective autho-
rized officers as of the day and year first above written.

RITE AID CORPORATION

By: /s/ Frank Bergonzi

Title: Senior Vice President-Finance

30 Hunter Lane
Camp Hill, PA 17011
Attention: Martin Grass
Frank Bergonzi

Telephone No.: (717) 761-2633

Telecopier No.: (717) 975-5952
Telex No.: 705954

Commitments

$350,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK

By: /s/ P. Kenneally

Title: Vice President

Total Commitments

$350,000,000
=====================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent

By: /s/ P. Kenneally

Title: Vice President

60 Wall Street
New York, New York 10260-0060
Attention: Loan Department

Telex number: 177615

AMENDMENT NO. 1 TO CREDIT AGREEMENT

AMENDMENT dated as of February 16, 1994 among RITE AID
CORPORATION (the "Borrower"), the BANKS listed on the signature
pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("Morgan"), as Agent (the "Agent").

W I T N E S S E T H :

WHEREAS, the Borrower, Morgan and the Agent have hereto-
fore entered into the $350,000,000 Credit Agreement dated as of
February 7, 1994 (the "Agreement"); and

WHEREAS, the parties hereto desire to amend the Agree-
ment to add the New Banks as parties to the Agreement, to provide
for the Commitments of the Banks and to modify certain other
Sections of the Agreement;

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Agreement shall have the meaning assigned to such
term in the Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof
refer to the Agreement as amended hereby.

SECTION 2. Amendment of Section 1.01 of the Agreement.
Section 1.01 of the Agreement is amended as follows:

(a) The definition of "CD Reference Banks" is amended
to read in its entirety as follows:

"CD Reference Banks" means PNC Bank, National Associa-
tion, Citibank, N.A. and Morgan Guaranty Trust Company
of New York.

(b) The definition of "Euro-Dollar Reference Banks" is
amended to read in its entirety as follows:

"Euro-Dollar Reference Banks" means the principal London
offices of PNC Bank, National Association, Citibank,
N.A. and Morgan Guaranty Trust Company of New York.

SECTION 3. Amendment to Section 9.06 of the Agreement.
Section 9.06(c) of the Agreement is amended by the insertion
following the phrase "with (and subject to) notice to, and the
subscribed consent of, the Borrower" of the following: ", so long
as no Default shall have occurred and be continuing,".

SECTION 4. New Banks; Changes in Commitments. With
effect from and including the date this Amendment becomes effec-
tive in accordance with Section 7 hereof, (i) each Person listed
on the signature pages hereof which is not a party to the Agree-
ment (a "New Bank") shall become a Bank party to the Agreement and
(ii) the Commitment of each Bank (including Morgan) shall be the
amount set forth opposite the name of such Bank on the signature
pages hereof, as such amount may be reduced from time to time
pursuant to Section 2.09 of the Agreement.

SECTION 5. Deletion of Single Bank Pricing Option. The
further proviso to Section 2.07(b), and the reference thereto in
the definition of "Interest Period", are deleted.

SECTION 6. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the State
of New York.

SECTION 7. Counterparts; Conditions to Effectiveness.

This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date hereof, and
simultaneously with the effectiveness of the Agreement, when the
Agent shall have received:

(a) duly executed counterparts hereof signed by the
Borrower and each of the Banks (or, in the case of any, party
as to which an executed counterpart shall not have been
received, the Agent shall have received telegraphic, telex,
or telecopy or other written confirmation from such party of
execution of a counterpart hereof by such party);

(b) a duly executed Note for each of the New Banks (a
"New Note"), dated on or before the date of effectiveness
hereof and otherwise in compliance with Section 2.05 of the
Agreement; and

(c) evidence satisfactory to it that all conditions to
effectiveness of the Agreement under Section 3.01 thereof have
been satisfied.

SECTION 8. Termination of 1993 Credit Agreements. The
parties hereto which are also parties to the 1993 Credit Agree-
ments agree that the commitments of the Banks under the 1993
Credit Agreements shall terminate simultaneously with the effec-
tiveness of this Amendment and the Agreement as amended hereby,
without further action by any party hereto or thereto.

IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.

RITE AID CORPORATION

By: /s/ Frank Bergonzi
Title: Senior Vice President-
Finance

Commitments:

$14,285,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK

By: /s/ P. Kenneally
Title: Vice President

$14,285,000 J.P. MORGAN DELAWARE

By: /s/ David S. Morris
Title: Vice President

$26,250,000 CIBC, INC.

By: /s/ Cynthia J. Prectors
Title: Authorized Signatory

$26,250,000 CITIBANK N.A.

By: /s/ Theodore J. Beck
Title: Vice President

$26,250,000 CONTINENTAL BANK N.A.

By: /s/ T.H. Peak
Title: Vice President

$26,250,000 MELLON BANK, N.A.

By: /s/ Gary S. Gegan
Title: Vice President and
Manager

$26,250,000 NATIONSBANK

By: /s/ R.B. Na
Title: Vice President

$26,250,000 PNC BANK, NATIONAL ASSOCIATION

By: /s/ Scott Reilly
Title: Vice President

$26,250,000 SWISS BANK CORPORATION
NEW YORK BRANCH

By: /s/ E. Gossens
Title: Associate Director

By: /s/ George W. Lamueltson
Title: Associate Director

$16,330,000 SOCIETY NATIONAL BANK

By: /s/ Laurence J. Mack
Title: Vice President

$15,750,000 BANK OF MONTREAL

By: /s/ Kanu Modi
Title: Director

$15,750,000 CREDIT SUISSE

By: /s/ P. Bessid
Title: Associate

By: /s/ Jay Chall
Title: Member Senior
Management

$15,750,000 ROYAL BANK OF CANADA

By: /s/ Peter D. Styff
Title: Senior Manager

$15,750,000 WACHOVIA BANK OF GEORGIA, N.A.

By: /s/ Tina P. Hayer
Title: A.V.P.

$11,670,000 THE BANK OF NEW YORK

By: /s/ E. Massery
Title: Vice President

$11,670,000 THE BANK OF NOVA SCOTIA

By: /s/
Title:

$11,670,000 NBD, N.A.

By: /s/
Title:

$11,670,000 THE SANWA BANK, LIMITED

By: /s/ Joseph E. Leo
Title: Vice President

$11,670,000 SUNBANK, N.A.

By: /s/ Lorraine L. McCullen
Title: Vice President

Total Commitments

$350,000,000

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent

By: /s/ P. Kenneally
Title: Vice President

Exhibit 99.(c)(1)

CONFORMED COPY
================================================================================

AGREEMENT AND PLAN OF MERGER

by and among

RITE AID CORPORATION,

LAKE ACQUISITION CORPORATION,

and

PERRY DRUG STORES, INC.

dated as of

December 23, 1994

- --------------------------------------------------------------------------------

TABLE OF CONTENTS
Page

ARTICLE I THE OFFER AND MERGER. . . . . . . . . . . . . . . . . . 1

Section 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . 3
Section 1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.4 The Merger. . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.5 Effective Time. . . . . . . . . . . . . . . . . . . . . 9
Section 1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.7 Directors and Officers of the
Surviving Corporation. . . . . . . . . . . . . . . . 9
Section 1.8 Shareholders' Meeting . . . . . . . . . . . . . . . . . 10
Section 1.9 Merger Without Meeting of
Shareholders . . . . . . . . . . . . . . . . . . . . 10

ARTICLE II CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . 11

Section 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . 11
Section 2.2 Exchange of Certificates. . . . . . . . . . . . . . . . 12
Section 2.3 Company Option Plans. . . . . . . . . . . . . . . . . . 14

ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . 15

Section 3.1 Organization. . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . 16
Section 3.3 Authorization; Validity of
Agreement; Company Action. . . . . . . . . . . . . . 18
Section 3.4 Consents and Approvals; No
Violations . . . . . . . . . . . . . . . . . . . . . 19
Section 3.5 SEC Reports and Financial
Statements . . . . . . . . . . . . . . . . . . . . . 20
Section 3.6 Absence of Certain Changes. . . . . . . . . . . . . . . 21
Section 3.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . 21
Section 3.8 Information in Proxy Statement. . . . . . . . . . . . . 22
Section 3.9 Employee Benefit Plans; ERISA . . . . . . . . . . . . . 22
Section 3.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.11 Conduct of Business . . . . . . . . . . . . . . . . . . 24
Section 3.12 Reimbursement . . . . . . . . . . . . . . . . . . . . . 25
Section 3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.14 Labor Relations . . . . . . . . . . . . . . . . . . . . 28
Section 3.15 Compliance with Laws. . . . . . . . . . . . . . . . . . 28
Section 3.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.17 Contracts . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.18 Real Property . . . . . . . . . . . . . . . . . . . . . 29
Section 3.19 Opinions of Financial Advisors. . . . . . . . . . . . . 29
Section 3.20 Vote Required . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER. . . . . . . . . . . . . 30

Section 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2 Authorization; Validity of
Agreement; Necessary Action. . . . . . . . . . . . . 30
Section 4.3 Consents and Approvals; No
Violations . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4 Information in Proxy Statement;
Schedule 14D-9 . . . . . . . . . . . . . . . . . . . 32
Section 4.5 Financing . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.6 Purchaser's Operations. . . . . . . . . . . . . . . . . 32

ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 32

Section 5.1 Interim Operations of the
Company. . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.2 Rights Agreement. . . . . . . . . . . . . . . . . . . . 35
Section 5.3 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.4 Access to Information . . . . . . . . . . . . . . . . . 36
Section 5.5 Consents and Approvals. . . . . . . . . . . . . . . . . 36
Section 5.6 Employee Benefits . . . . . . . . . . . . . . . . . . . 37
Section 5.7 No Solicitation . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 Brokers or Finders. . . . . . . . . . . . . . . . . . . 40
Section 5.9 Additional Agreements . . . . . . . . . . . . . . . . . 40
Section 5.10 Convertible Debentures. . . . . . . . . . . . . . . . . 40
Section 5.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.12 Notification of Certain Matters . . . . . . . . . . . . 41
Section 5.13 Directors' and Officers'
Insurance and Indemnification. . . . . . . . . . . . 41
Section 5.14 WARN Act. . . . . . . . . . . . . . . . . . . . . . . . 42

ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 43

Section 6.1 Conditions to Each Party's
Obligation To Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . 43

ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . 44

Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . 47

ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 47

Section 8.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . 47
Section 8.2 Amendment and Modification. . . . . . . . . . . . . . . 48
Section 8.3 Nonsurvival of Representations
and Warranties . . . . . . . . . . . . . . . . . . . 48
Section 8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.5 Interpretation. . . . . . . . . . . . . . . . . . . . . 49
Section 8.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . 50
Section 8.7 Entire Agreement; No Third Party
Beneficiaries; Rights of
Ownership. . . . . . . . . . . . . . . . . . . . . . 50
Section 8.8 Severability. . . . . . . . . . . . . . . . . . . . . . 50

Section 8.9 Governing Law . . . . . . . . . . . . . . . . . . . . . 50
Section 8.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . 50

CONDITIONS TO THE TENDER OFFER . . . . . . . . . . . . . . . . . . .Annex A

Index of Defined Terms

Defined Term Section No.

Acquiring Person. . . . . . . . . . . . 7.1(d)(ii)
Appointment Date. . . . . . . . . . . . 5.1
BCA . . . . . . . . . . . . . . . . . . 1.2(a)
Benefit Plans . . . . . . . . . . . . . 3.9(a)
Certificate of Merger . . . . . . . . . 1.5(a)
Certificates. . . . . . . . . . . . . . 2.2(b)
Closing . . . . . . . . . . . . . . . . 1.6
Closing Date. . . . . . . . . . . . . . 1.6
Code. . . . . . . . . . . . . . . . . . 3.9(b)
Company . . . . . . . . . . . . . . . . Recitals
Company Common Stock. . . . . . . . . . 1.1(a)
Company SEC Documents . . . . . . . . . 3.5
Confidentiality Agreement . . . . . . . 5.4
Convertible Debentures. . . . . . . . . 3.2(a)
Credit Agreement. . . . . . . . . . . . 3.2(b)
DGCL. . . . . . . . . . . . . . . . . . 1.4
Director Options. . . . . . . . . . . . 2.3(a)
D&O Insurance . . . . . . . . . . . . . 5.13
Effective Time. . . . . . . . . . . . . 1.5(a)
Employee Option . . . . . . . . . . . . 2.3(a)
ERISA . . . . . . . . . . . . . . . . . 3.9(a)
ERISA Affiliate . . . . . . . . . . . . 3.9(a)
Exchange Act. . . . . . . . . . . . . . 1.1(a)
GAAP. . . . . . . . . . . . . . . . . . 3.5
Governmental Entity . . . . . . . . . . 3.4
Headquarters Closing. . . . . . . . . . 5.15
Headquarters Closing Date . . . . . . . 5.15
Headquarters Closing Notices. . . . . . 5.15
HSR Act . . . . . . . . . . . . . . . . 3.4
Indemnified Party . . . . . . . . . . . 5.13
Indenture . . . . . . . . . . . . . . . 3.2(a)
Material Agreements . . . . . . . . . . 3.17
Merger. . . . . . . . . . . . . . . . . 1.4
Merger Consideration. . . . . . . . . . 2.1(c)
Michigan Bureau . . . . . . . . . . . . 1.5(a)
Minimum Condition . . . . . . . . . . . 1.1(a)
1982 Option Plan. . . . . . . . . . . . 2.3(a)
1987 Option Plan. . . . . . . . . . . . 2.3(a)
1993 Financial Statements . . . . . . . 3.5
NLRB. . . . . . . . . . . . . . . . . . 3.14
Offer . . . . . . . . . . . . . . . . . 1.1(a)
Offer Documents . . . . . . . . . . . . 1.1(b)
Offer Price . . . . . . . . . . . . . . 1.1(a)
Offer to Purchase . . . . . . . . . . . 1.1(a)
Option Plans. . . . . . . . . . . . . . 2.3(a)
Options . . . . . . . . . . . . . . . . 2.3(a)
Parent. . . . . . . . . . . . . . . . . Recitals
Paying Agent. . . . . . . . . . . . . . 2.2(a)

Preferred Stock . . . . . . . . . . . . 3.2(a)
Proxy Statement . . . . . . . . . . . . 1.8(a)
Purchaser . . . . . . . . . . . . . . . Recitals
Purchaser Common Stock. . . . . . . . . 2.1
Restricted Stock Plan . . . . . . . . . 2.3(b)
Rights. . . . . . . . . . . . . . . . . 1.1(a)
Rights Agreement. . . . . . . . . . . . 1.1(a)
Rights Amendment. . . . . . . . . . . . 1.2(d)
Schedule 14D-1. . . . . . . . . . . . . 1.1(b)
Schedule 14D-9. . . . . . . . . . . . . 1.2(b)
SEC . . . . . . . . . . . . . . . . . . 1.1(b)
Secretary of State. . . . . . . . . . . 1.5(a)
Securities Act. . . . . . . . . . . . . 3.4
Section 16. . . . . . . . . . . . . . . 2.3(a)
Service . . . . . . . . . . . . . . . . 3.9(h)
Shares. . . . . . . . . . . . . . . . . 1.1(a)
Special Meeting . . . . . . . . . . . . 1.8(a)
Shareholders Agreements . . . . . . . . 1.2(a)
Subsidiary. . . . . . . . . . . . . . . 3.1
Surviving Corporation . . . . . . . . . 1.4
Taxes . . . . . . . . . . . . . . . . . 3.13(b)
Tax Return. . . . . . . . . . . . . . . 3.13(b)
Transactions. . . . . . . . . . . . . . 1.2(a)
Trigger Event . . . . . . . . . . . . . 8.1(b)
Voting Debt . . . . . . . . . . . . . . 3.2(a)
WARN Act. . . . . . . . . . . . . . . . 5.14

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of
December 23, 1994, by and among Rite Aid Corporation, a
Delaware corporation ("Parent"), Lake Acquisition Corpo-
ration, a Delaware corporation and a direct, wholly owned
subsidiary of Parent (the "Purchaser"), and Perry Drug
Stores, Inc., a Michigan corporation (the "Company").

WHEREAS, the Boards of Directors of Parent, the
Purchaser and the Company have approved, and deem it
advisable and in the best interests of their respective
shareholders to consummate, the acquisition of the Compa-
ny by Parent upon the terms and subject to the conditions
set forth herein;

NOW, THEREFORE, in consideration of the forego-
ing and the respective representations, warranties,
covenants and agreements set forth herein, the parties
hereto agree as follows:

ARTICLE I

THE OFFER AND MERGER

Section 1.1 The Offer. (a) As promptly as
practicable (but in no event later than five business
days after the public announcement of the execution
hereof), the Purchaser shall commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) an offer (the "Offer")
to purchase for cash all shares of the issued and out-
standing Common Shares, par value $.05 per share (re-
ferred to herein as either the "Shares" or "Company
Common Stock"), of the Company (including the associated
Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement between the Company and
National Bank of Detroit, dated as of February 4, 1987,
as amended (the "Rights Agreement")), at a price of
$11.00 per Share, net to the seller in cash (such price,
or such higher price per Share as may be paid in the
Offer, being referred to herein as the "Offer Price"),
subject to there being validly tendered and not withdrawn
prior to the expiration of the Offer, that number of
Shares which, together with the Shares beneficially owned
by Parent or the Purchaser, represent at least a majority
of the Shares outstanding on a fully diluted basis (the
"Minimum Condition") and to the other conditions set
forth in Annex A hereto. The Purchaser shall, on the
terms and subject to the prior satisfaction or waiver
(except that the Minimum Condition may not be waived) of
the conditions of the Offer, accept for payment and pay
for Shares tendered as soon as it is legally permitted to

do so under applicable law. The obligations of the
Purchaser to commence the Offer and to accept for payment
and to pay for any Shares validly tendered on or prior to
the expiration of the Offer and not withdrawn shall be
subject only to the Minimum Condition and the other
conditions set forth in Annex A hereto. The Offer shall
be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agree-
ment, the Minimum Condition and the other conditions set
forth in Annex A hereto. The Purchaser shall not amend
or waive the Minimum Condition and shall not decrease the
Offer Price or decrease the number of Shares sought, or
amend any other condition of the Offer in any manner
adverse to the holders of the Shares (other than with re-
spect to insignificant changes or amendments) without the
written consent of the Company (such consent to be autho-
rized by the Board of Directors of the Company or a duly
authorized committee thereof), provided, however, that if
on the initial scheduled expiration date of the Offer (as
it may be extended), all conditions to the Offer shall
not have been satisfied or waived, the Offer may be
extended from the time to time until June 1, 1995. In
addition, the Offer Price may be increased and the Offer
may be extended to the extent required by law in connec-
tion with such increase in each case without the consent
of the Company.

(b) As soon as practicable on the date
the Offer is commenced, Parent and the Purchaser shall
file with the United States Securities and Exchange Com-
mission (the "SEC") a Tender Offer Statement on Schedule
14D-1 with respect to the Offer (together with all amend-
ments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of
letter of transmittal and summary advertisement (collec-
tively, together with any amendments and supplements
thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions
of applicable federal securities laws and, on the date
filed with the SEC and on the date first published, sent
or given to the Company's shareholders, shall not contain
any untrue statement of a material fact or omit to state
any material fact required to be stated therein or neces-
sary in order to make the statements therein, in light of
the circumstances under which they were made, not mis-
leading, except that no representation is made by Parent
or the Purchaser with respect to information supplied by
the Company in writing for inclusion in the Offer Docu-
ments. Each of Parent and the Purchaser further agrees
to take all steps necessary to cause the Offer Documents
to be filed with the SEC and to be disseminated to hold-
ers of Shares, in each case as and to the extent required
by applicable federal securities laws. Each of Parent

and the Purchaser, on the one hand, and the Company, on
the other hand, agrees promptly to correct any informa-
tion provided by it for use in the Offer Documents if and
to the extent that it shall have become false and mis-
leading in any material respect and the Purchaser further
agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to
be disseminated to holders of Shares, in each case as and
to the extent required by applicable federal securities
laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is
filed with the SEC. In addition, Parent and the Purchas-
er agree to provide the Company and its counsel in writ-
ing with any comments Parent, the Purchaser or their
counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after
the receipt of such comments.

Section 1.2 Company Actions.

(a) The Company hereby approves of and
consents to the Offer and represents that the Board of
Directors, at a meeting duly called and held, has, sub-
ject to the terms and conditions set forth herein, (i)
approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger (collectively,
the "Transactions"), and such approvals, together with
the approval solely for the purposes of the BCA (as de-
fined) of the Shareholders Agreements, to be entered into
immediately after this Agreement on the date hereof,
between Parent, the Purchaser and Mr. Jack Robinson,
individually and as trustee, and Mrs. Aviva Robinson,
individually and as trustee, (the "Shareholders Agree-
ments"), constitute all requisite approvals for purposes
of Sections 775 through 784 of the Business Corporation
Act of the State of Michigan (the "BCA"), (ii) approved a
memorandum of understanding with Parent and the Purchaser
pursuant to Article VIII of the Restated Articles of
Incorporation of the Company, (iii) resolved to recommend
that the shareholders of the Company accept the Offer,
tender their Shares thereunder to the Purchaser and ap-
prove and adopt this Agreement and the Merger; provided,
that such recommendation may be withdrawn, modified or
amended if, in the opinion of the Board of Directors,
after consultation with independent legal counsel, such
recommendation would be inconsistent with its fiduciary
duties to the Company's shareholders under applicable law
and (iv) adopted an amendment to the Company's By-laws,
pursuant to Section 794 of the BCA (providing that Chap-
ter 7B of the BCA will not apply to any purchase of
Shares pursuant to the Offer, the Merger or the Share-
holders Agreements). The Company represents that the ac-
tions set forth in this Section 1.2(a) and all other
actions it has taken in connection therewith are, assum-

ing the accuracy of, and in reliance upon, the informa-
tion received in writing from Parent as to the ownership
of Shares by Parent and their affiliates, sufficient to
render (i) the relevant provisions of such Chapters 7A
and 7B of the BCA inapplicable to the Offer, the Merger
and the Shareholders Agreements and (ii) the s
upermajority voting requirements set forth in the Com
pany's Restated Articles of Incorporation inapplicable to
this Agreement and the Transactions. The parties agree
that this Agreement shall constitute the memorandum of
understanding contemplated by Article VIII of the Com
pany's Restated Articles of Incorporation setting forth
the principal terms of the Merger and related transac
tions. The Company represents that the Board of Direc-
tors of the Company, by resolution, has approved the
memorandum of understanding setting forth the principal
terms of the Merger and related transactions prior to the
time that Parent or the Purchaser entered into the Share-
holders Agreements (as defined).

(b) Concurrently with the commencement of
the Offer, the Company shall file with the SEC a Solici-
tation/Recommendation Statement on Schedule 14D-9 (to-
gether with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9")
which shall, subject to the fiduciary duties of the
Company's directors under applicable law and to the
provisions of this Agreement, contain the recommendation
referred to in clause (iii) of Section 1.2(a) hereof.
The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders,
shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading, except that no representation
is made by the Company with respect to information sup-
plied by Parent or the Purchaser in writing for inclusion
in the Offer Documents. The Company further agrees to
take all steps necessary to cause the Schedule 14D-9 to
be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company,
on the one hand, and Parent and the Purchaser, on the
other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false and misleading
in any material respect and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as
so corrected to be filed with the SEC and to be dissemi-
nated to holders of the Shares, in each case as and to
the extent required by applicable federal securities

laws. Parent and its counsel shall be given the opportu-
nity to review the Schedule 14D-9 before it is filed with
the SEC. In addition, the Company agrees to provide
Parent, the Purchaser and their counsel in writing with
any comments the Company or its counsel may receive from
time to time from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such
comments. Notwithstanding anything to the contrary
contained herein, if the members of the Board of Direc-
tors of the Company determine in the exercise of their
fiduciary duties to withdraw, modify or amend the recom-
mendation referred to in clause (iii) of Section 1.2(a)
hereof, such withdrawal, modification or amendment shall
not constitute a breach of this Agreement.

(c) In connection with the Offer, the
Company will promptly furnish or cause to be furnished to
the Purchaser mailing labels, security position listings
and any available listing or computer file containing the
names and addresses of the record holders of the Shares
as of a recent date, and shall furnish the Purchaser with
such information and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer
to the shareholders of the Company. Except for such
steps as are necessary to disseminate the Offer Docu-
ments, Parent and the Purchaser shall hold in confidence
the information contained in any of such labels and lists
and the additional information referred to in the preced-
ing sentence, will use such information only in connec-
tion with the Offer, and, if this Agreement is terminat-
ed, will upon request of the Company deliver or cause to
be delivered to the Company all copies of such informa-
tion then in its possession or the possession of its
agents or representatives.

(d) As promptly as practicable on or
after the date hereof, but in no event later than five
days following announcement of the Offer, the Company
will amend the Rights Agreement, as necessary (the "
Rights Amendment"), (i) to prevent this Agreement, the
Shareholders Agreements or the consummation of any of the
transactions contemplated hereby or thereby, including
without limitation, the publication or other announcement
of the Offer and the consummation of the Offer and the
Merger, from resulting in the distribution of separate
rights certificates or the occurrence of a Distribution
Date (as defined therein) or being deemed a Triggering
Event (as defined therein) and (ii) to provide that
neither Parent nor the Purchaser shall be deemed to be an
Acquiring Person (as defined therein) by reason of the
transactions expressly provided for in this Agreement and
the Shareholders Agreements. The Company represents that
the Rights Amendment will be sufficient to render the
Rights inoperative with respect to any acquisition of

Shares by Parent, the Purchaser or any of their affili-
ates pursuant to this Agreement and/or the Shareholders
Agreements. As a result of the Rights Amendment, the
Rights shall not be exercisable upon or at any time
after, the acceptance for payment of Shares pursuant to
the Offer and/or the purchase of Shares pursuant to the
Shareholders Agreements.

Section 1.3 Directors.

(a) Promptly upon the purchase of and
payment for any Shares by Parent or any of its subsidiar-
ies which represents at least a majority of the outstand-
ing shares of Company Common Stock (on a fully diluted
basis) Parent shall be entitled to designate such number
of directors, rounded up to the next whole number, on the
Board of Directors of the Company as is equal to the
product of the total number of directors on such Board
(giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by
the Purchaser, Parent and any of their affiliates bears
to the total number of shares of Company Common Stock
then outstanding. The Company shall, upon request of the
Purchaser, use its best efforts promptly either to in-
crease the size of its Board of Directors or, at the
Company's election, secure the resignations of such
number of its incumbent directors as is necessary to
enable Parent's designees to be so elected to the Com-
pany's Board, and shall cause Parent's designees to be so
elected. At such time, the Company shall also cause
persons designated by Parent to constitute the same
percentage (rounded up to the next whole number) as is on
the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of
directors (or similar body) of each Subsidiary (as de-
fined in Section 3.1) of the Company and (iii) each
committee (or similar body) of each such board, in each
case only to the extent permitted by applicable law or
the rules of any stock exchange on which the Company
Common Stock is listed. Notwithstanding the foregoing,
until the Effective Time (as defined in Section 1.5
hereof), the Company shall use all reasonable efforts to
retain as a member of its Board of Directors at least two
directors who are directors of the Company on the date
hereof; provided, that subsequent to the purchase of and
payment for Shares pursuant to the Offer, Parent shall
always have its designees represent at least a majority
of the entire Board of Directors. The Company's obliga-
tions under this Section 1.3(a) shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-1 promul-
gated thereunder. The Company shall promptly take all
actions required pursuant to such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this

Section 1.3(a), including mailing to shareholders the
information required by such Section 14(f) and Rule 14f-1
as is necessary to enable Parent's designees to be elect-
ed to the Company's Board of Directors. Parent or the
Purchaser will supply the Company any information with
respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f)
and Rule 14f-1. The provisions of this Section 1.3(a)
are in addition to and shall not limit any rights which
the Purchaser, Parent or any of their affiliates may have
as a holder or beneficial owner of Shares as a matter of
law with respect to the election of directors or other-
wise.

(b) From and after the time, if any, that
Parent's designees constitute a majority of the Company's
Board of Directors, any amendment of this Agreement, any
termination of this Agreement by the Company, any exten-
sion of time for performance of any of the obligations of
Parent or the Purchaser hereunder, any waiver of any
condition or any of the Company's rights hereunder or
other action by the Company hereunder may be effected
only by the action of a majority of the directors of the
Company then in office who were directors of the Company
on the date hereof, which action shall be deemed to
constitute the action of the full Committee and the full
Board of Directors; provided, that if there shall be no
such directors, such actions may be effected by majority
vote of the entire Board of Directors of the Company.

Section 1.4 The Merger. Subject to the terms
and conditions of this Agreement, at the Effective Time
(as defined in Section 1.5 hereof), the Company and the
Purchaser shall consummate a merger (the "Merger") pursu-
ant to which (a) the Purchaser shall be merged with and
into the Company and the separate corporate existence of
the Purchaser shall thereupon cease, (b) the Company
shall be the successor or surviving corporation in the
Merger and shall continue to be governed by the laws of
the State of Michigan, and (c) the separate corporate
existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaf-
fected by the Merger. Pursuant to the Merger, (x) the
Restated Articles of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corpora-
tion until thereafter amended as provided by law and such
Restated Articles of Incorporation, and (y) the By-laws
of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law,
the Restated Articles of Incorporation and such By-laws.
The corporation surviving the Merger is sometimes here-
inafter referred to as the "Surviving Corporation." The

Merger shall have the effects set forth in the BCA and
the Delaware General Corporation Law (the "DGCL").

Section 1.5 Effective Time. (a) Parent, the
Purchaser and the Company will cause an appropriate
Certificate of Merger (the "Certificate of Merger") to be
executed and filed on the date of the Closing (as defined
in Section 1.6) (or on such other date as Parent and the
Company may agree) with the Michigan Department of Com-
merce, Corporation and Securities Bureau, Corporation
Division (the "Michigan Bureau") as provided in the BCA
and the Secretary of State of the State of Delaware (the
"Secretary of State") as provided in the DGCL. The
Merger shall become effective on the date on which the
Certificate of Merger has been duly filed with the Michi-
gan Bureau and the Secretary of State or such time as is
agreed upon by the parties and specified in the Certifi-
cate of Merger, and such time is hereinafter referred to
as the "Effective Time."

(b) The Merger shall have the effects set
forth in the DGCL and the BCA.

Section 1.6 Closing. The closing of the
Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties, which shall be no
later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022, unless another date or place is agreed
to in writing by the parties hereto.

Section 1.7 Directors and Officers of the
Surviving Corporation. The directors and officers of the
Purchaser at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respec-
tively, of the Surviving Corporation until their succes-
sors shall have been duly elected or appointed or quali-
fied or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Articles
of Incorporation and By-laws.

Section 1.8 Shareholders' Meeting.

(a) If required by applicable law in
order to consummate the Merger, the Company, acting
through its Board of Directors, shall, in accordance with
applicable law:

(i) duly call, give notice of, convene
and hold a special meeting of its shareholders (the
"Special Meeting") as soon as practicable following
the acceptance for payment and purchase of Shares by

the Purchaser pursuant to the Offer for the purpose
of considering and taking action upon this Agree-
ment;

(ii) prepare and file with the SEC a pre-
liminary proxy or information statement relating to
the Merger and this Agreement and use its reasonable
efforts (x) to obtain and furnish the information
required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after con-
sultation with Parent, to respond promptly to any
comments made by the SEC with respect to the prelim-
inary proxy or information statement and cause a
definitive proxy or information statement (the
"Proxy Statement") to be mailed to its shareholders
and (y) to obtain the necessary approvals of the
Merger and this Agreement by its shareholders; and

(iii) subject to the fiduciary obliga-
tions of the Board under applicable law as advised
by independent counsel, include in the Proxy State-
ment the recommendation of the Board that sharehold-
ers of the Company vote in favor of the approval of
the Merger and the adoption of this Agreement.

(b) Parent agrees that it will vote, or
cause to be voted, all of the Shares then owned by it,
the Purchaser or any of its other subsidiaries and affil-
iates in favor of the approval of the Merger and the
adoption of this Agreement.

Section 1.9 Merger Without Meeting of
Shareholders. Notwithstanding Section 1.8 hereof, in the
event that Parent, the Purchaser or any other subsidiary
of Parent shall acquire at least 90% of the outstanding
shares of each class of capital stock of the Company,
pursuant to the Offer or otherwise, the parties hereto
agree, at the request of Parent and subject to Article VI
hereof, to take all necessary and appropriate action to
cause the Merger to become effective as soon as practica-
ble after such acquisition, without a meeting of share-
holders of the Company, in accordance with Section 253 of
the DGCL and Section 711 of the BCA.

ARTICLE II

CONVERSION OF SECURITIES

Section 2.1 Conversion of Capital Stock. As
of the Effective Time, by virtue of the Merger and with-
out any action on the part of the holders of any shares
of Company Common Stock or common stock, par value $.01
per share, of the Purchaser (the "Purchaser Common

Stock"):

(a) Purchaser Common Stock. Each issued
and outstanding share of the Purchaser Common Stock shall
be converted into and become one fully paid and nonas-
sessable share of common stock of the Surviving Corpora-
tion.

(b) Cancellation of Treasury Stock and
Parent-Owned Stock. All shares of Company Common Stock
that are owned by the Company as treasury stock and any
shares of Company Common Stock owned by Parent, the
Purchaser or any other wholly owned Subsidiary (as de-
fined in Section 3.1 hereof) of Parent shall be cancelled
and retired and shall cease to exist and no stock of
Parent or other consideration shall be delivered in
exchange therefor.

(c) Exchange of Shares. Each issued and
outstanding share of Company Common Stock, including the
associated Rights (other than shares to be cancelled in
accordance with Section 2.1(b)) shall be converted into
the right to receive the Offer Price, payable to the
holder thereof, without interest (the "Merger Consider-
ation"), upon surrender of the certificate formerly
representing such share of Company Common Stock in the
manner provided in Section 2.2. All such shares of
Company Common Stock, when so converted, shall no longer
be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the sur-
render of such certificate in accordance with Section
2.2, without interest.

Section 2.2 Exchange of Certificates.

(a) Paying Agent. Parent shall designate
a bank or trust company to act as agent for the holders
of shares of Company Common Stock in connection with the
Merger (the "Paying Agent") to receive the funds to which
holders of shares of Company Common Stock shall become
entitled pursuant to Section 2.1(c). Such funds shall be
invested by the Paying Agent as directed by Parent or the
Surviving Corporation.

(b) Exchange Procedures. As soon as rea-
sonably practicable after the Effective Time, the Paying
Agent shall mail to each holder of record of a certifi-
cate or certificates, which immediately prior to the
Effective Time represented outstanding shares of Company
Common Stock (the "Certificates"), whose shares were con-
verted pursuant to Section 2.1 into the right to receive

the Merger Consideration (i) a letter of transmittal
(which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of
the Merger Consideration. Upon surrender of a Certifi-
cate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented
by such Certificate and the Certificate so surrendered
shall forthwith be cancelled. If payment of the Merger
Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that
the person requesting such payment shall have paid any
transfer and other taxes required by reason of the pay-
ment of the Merger Consideration to a person other than
the registered holder of the Certificate surrendered or
shall have established to the satisfaction of the Surviv-
ing Corporation that such tax either has been paid or is
not applicable. Until surrendered as contemplated by
this Section 2.2, each Certificate shall be deemed at any
time after the Effective Time to represent only the right
to receive the Merger Consideration in cash as contem-
plated by this Section 2.2.

(c) Transfer Books; No Further Ownership
Rights in Company Common Stock. At the Effective Time,
the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the re-
cords of the Company. From and after the Effective Time,
the holders of Certificates evidencing ownership of
shares of Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any
rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviv-
ing Corporation for any reason, they shall be cancelled
and exchanged as provided in this Article II.

(d) Termination of Fund; No Liability.
At any time following six months after the Effective
Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto)

which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates,
and thereafter such holders shall be entitled to look to
the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable
upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither
the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consid-
eration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

Section 2.3 Company Option Plans.

(a) Parent and the Company shall take all
actions necessary to provide that, effective as of the
Effective Time, (i) each outstanding employee stock
option to purchase Shares (an "Employee Option") granted
under the Company's 1982 Incentive Stock Option Plan (the
"1982 Option Plan") or the Company's 1987 Non-Qualified
Stock Option Plan (the "1987 Option Plan" and collective-
ly with the 1982 Option Plan, the "Option Plans") and
each outstanding non-employee director option to purchase
Shares ("Director Options" and collectively with Employee
Options, "Options") granted under the 1987 Stock Option
Plan, whether or not then exercisable or vested, shall
become fully exercisable and vested, (ii) each Option
that is then outstanding shall be cancelled and (iii) in
consideration of such cancellation, and except to the
extent that Parent or the Purchaser and the holder of any
such Option otherwise agree, the Company (or, at Parent's
option, the Purchaser) shall pay to such holders of
Options an amount in respect thereof equal to the product
of (A) the excess, if any, of the Offer Price over the
exercise price thereof and (B) the number of Shares
subject thereto (such payment to be net of applicable
withholding taxes); provided that the foregoing (x) shall
be subject to the obtaining of any necessary consents of
holders of Options and the making of any necessary amend-
ments to the Option Plans, it being agreed that the
Company and Parent will use all reasonable efforts to
obtain any such consents and make any such amendments,
and (y) shall not require any action that violates the
Option Plans; provided, further, that if it is determined
that compliance with any of the foregoing would cause any
individual subject to Section 16 of the Exchange Act
("Section 16") to become subject to the profit recovery
provisions thereof, any Options held by such individual
will be cancelled or purchased, as the case may be, as
promptly as possible so as not to subject such individual
to any liability pursuant to Section 16, but no later
than May 15, 1995, subject to receiving an agreement from
the holder of such Option not to exercise such Option

after the Effective Time, and such individual shall be
entitled to receive from the Company, for each Share
subject to an Option an amount equal to the excess, if
any, of the Offer Price over the per Share exercise price
of such Option. Notwithstanding the foregoing, any
payment to the holders of Options contemplated by this
Section 2.3 may be withheld in respect of any Option
until any necessary consents or releases are obtained.

(b) Except as provided herein or as
otherwise agreed to by the parties and to the extent
permitted by the Option Plans and the Company's 1986 Re-
stricted Stock Plan (the "Restricted Stock Plan"), (i)
the Option Plans and the Restricted Stock Plan shall
terminate as of the Effective Time and the provisions in
any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the
capital stock of the Company or any of its subsidiaries
shall be deleted as of the Effective Time and (ii) the
Company shall use all reasonable efforts to ensure that
following the Effective Time no holder of Options or any
participant in the Option Plans or any other plans,
programs or arrangements shall have any right thereunder
to acquire any equity securities of the Company, the
Surviving Corporation or any subsidiary thereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent
and the Purchaser as follows:

Section 3.1 Organization. Each of the Company
and its Subsidiaries is a corporation, partnership or
other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incor-
poration or organization and has all requisite corporate
or other power and authority and all necessary governmen-
tal approvals to own, lease and operate its properties
and to carry on its business as now being conducted,
except where the failure to be so organized, existing and
in good standing or to have such power, authority, and
governmental approvals would not have a material adverse
effect on the Company and its Subsidiaries taken as a
whole. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or
other organization, whether incorporated or unincorporat-
ed, of which (i) such party or any other Subsidiary of
such party is a general partner (excluding such partner-
ships where such party or any Subsidiary of such party do
not have a majority of the voting interest in such part-
nership) or (ii) at least a majority of the securities or

other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporation or other organization is directly or indi-
rectly owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or
more of its Subsidiaries. As used in this Agreement, any
reference to any event, change or effect being material
or having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means
such event, change or effect is materially adverse to the
consolidated financial condition, businesses or results
of operations of such entity (or, if used with respect
thereto, of such group of entities taken as a whole).
The Company and each of its Subsidiaries is duly quali-
fied or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate
have a material adverse effect on the Company and its
Subsidiaries taken as a whole. Exhibit 22 to the Com-
pany's Report on Form 10-K for the fiscal year ended
October 31, 1993 sets forth a complete list of the Com-
pany's active Subsidiaries. The Company's inactive
subsidiaries have no operations or liabilities.

Section 3.2 Capitalization. (a) The authorized
capital stock of the Company consists of 30,000,000
shares of Company Common Stock and 5,000,000 preferred
shares, without par value (the "Preferred Stock"). As of
the date hereof, (i) 12,027,382 shares of Company Common
Stock are issued and outstanding, (ii) no shares of
Company Common Stock are issued and held in the treasury
of the Company, (iii) 341,050 shares of Company Common
Stock are reserved for issuance upon exercise of then
outstanding Options granted under the Option Plans or
rights granted under the Restricted Stock Plan, and (iv)
2,758,400 shares of Company Common Stock are reserved for
issuance upon conversion of the 8-1/2% Convertible Subor-
dinated Debentures of the Company due 2010 (the "Con-
vertible Debentures"). As of the date hereof, there are
no shares of Preferred Stock issued and outstanding and
150,000 shares of Preferred Stock were reserved for issu-
ance upon exercise of the Rights. All the outstanding
shares of the Company's capital stock are, and all shares
which may be issued pursuant to the exercise of outstand-
ing Options or Rights or upon conversion of Convertible
Debentures will be, when issued in accordance with the
respective terms thereof, duly authorized, validly is-
sued, fully paid and non-assessable. Except for the
Convertible Debentures, there are no bonds, debentures,
notes or other indebtedness having general voting rights

(or convertible into securities having such rights)
("Voting Debt") of the Company or any of its Subsidiaries
issued and outstanding. Except as set forth above and
except for the transactions contemplated by this Agree-
ment, as of the date hereof, (i) there are no shares of
capital stock of the Company authorized, issued or out-
standing and (ii) there are no existing options, war-
rants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital
stock of the Company or any of its Subsidiaries, obligat-
ing the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its
Subsidiaries or securities convertible into or exchange-
able for such shares or equity interests or obligations
of the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or
commitment. Except as contemplated by this Agreement and
except for the Company's obligation under the Indenture,
dated as of September 1, 1985 (the "Indenture"), between
the Company and National Bank of Detroit, to redeem the
Convertible Debentures on the terms set forth in the
Indenture, there are no outstanding contractual obliga-
tions of the Company or any of its Subsidiaries to repur-
chase, redeem or otherwise acquire any Shares, Convert-
ible Debentures or the capital stock of the Company or
any subsidiary or affiliate of the Company or to provide
funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary or
any other entity.

(b) All of the outstanding shares of
capital stock of each of the Subsidiaries are beneficial-
ly owned by the Company, directly or indirectly, and all
such shares have been validly issued and are fully paid
and nonassessable and, except for security interests
arising under the Credit Agreement, dated as of July 15,
1994, as amended, among the Company, National City Bank,
as agent, and the banks named therein (the "Credit Agree-
ment"), are owned by either the Company or one of its
Subsidiaries free and clear of all liens, charges, claims
or encumbrances.

(c) There are no voting trusts or other
agreements or understandings to which the Company or any
of its Subsidiaries is a party with respect to the voting
of the capital stock of the Company or any of the Subsid-
iaries. None of the Company or its Subsidiaries is
required to redeem, repurchase or otherwise acquire
shares of capital stock of the Company, or any of its
Subsidiaries, respectively, as a result of the transac-

tions contemplated by this Agreement.

Section 3.3 Authorization; Validity of
Agreement; Company Action. (a) The Company has full
corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the necessary approv-
al of its shareholders, to consummate the transactions
contemplated hereby. The execution, delivery and perfor-
mance by the Company of this Agreement, and the consumma-
tion by it of the transactions contemplated hereby, have
been duly authorized by its Board of Directors and,
except for those actions contemplated by Section 1.2(a)
hereof and obtaining the approval of its shareholders as
contemplated by Section 1.8 hereof, no other corporate
action on the part of the Company is necessary to autho-
rize the execution and delivery by the Company of this
Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly exe-
cuted and delivered by the Company and is a valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equita-
ble defenses and to the discretion of the court before
which any proceeding therefor may be brought.

(b) The Board of Directors of the Company
has duly and validly approved and taken all corporate
action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this
Agreement, including the Offer, the acquisition of Shares
pursuant to the Offer, the Merger and the Shareholders
Agreements, including, but not limited to, all actions
required to render the provisions of Section 775 through
Section 784 of the BCA restricting business combinations
with "interested shareholders" and Article VIII of the
Company's Restated Articles of Incorporation inapplicable
to such transactions. The Company has taken all action
necessary to opt out of Sections 790 through 799 of the
BCA in order to render the provisions of such statutes
restricting voting rights of "control shares" inapplica-
ble to Shares acquired by Parent, the Purchaser or their
affiliates pursuant to this Offer, the Merger or the
Shareholders Agreements.

Section 3.4 Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act of 1933, as

amended (the "Securities Act"), state securities or blue
sky laws, state and federal laws with respect to the sale
of alcoholic beverages, prescription drugs and lottery
tickets, the BCA and the DGCL, neither the execution,
delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions
contemplated hereby nor compliance by the Company with
any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the articles of
incorporation or by-laws or similar organizational docu-
ments of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, con-
sent or approval of, any court, arbitral tribunal, admin-
istrative agency or commission or other governmental or
other regulatory authority or agency (a "Governmental
Entity"), except where the failure to obtain such per-
mits, authorizations, consents or approvals or to make
such filings would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole, (iii)
except for the Credit Agreement, result in a violation or
breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceler-
ation) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party
or by which any of them or any of their properties or
assets may be bound and which has been filed as an exhib-
it to the Company SEC Documents (the "Material Agree-
ments") or (iv) violate any order, writ, injunction, de-
cree, statute, rule or regulation applicable to the
Company, any of its Subsidiaries or any of their proper-
ties or assets, except in the case of (iii) or (iv) for
such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries taken as a
whole, and which will not materially impair the ability
of the Company to consummate the transactions contemplat-
ed hereby.

Section 3.5 SEC Reports and Financial
Statements. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and
other documents required to be filed by it since November
1, 1991 under the Exchange Act or the Securities Act (as
such documents have been amended since the time of their
filing, collectively, the "Company SEC Documents"). As
of their respective dates or, if amended, as of the date
of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements
or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a

material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading
and (b) complied in all material respects with the appli-
cable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. None of the Subsid-
iaries is required to file any forms, reports or other
documents with the SEC pursuant to Section 12 or 15 of
the Exchange Act. The financial statements of the Compa-
ny (the "1993 Financial Statements") included in the
Company's annual report on Form 10-K for the fiscal year
ended October 31, 1993, as amended and subsequently
restated (including the related notes thereto) (the "1993
Form 10-K")and in the quarterly reports on Form 10-Q for
the three fiscal quarters filed since the 1993 Form 10-K
have been prepared from, and are in accordance with, the
books and records of the Company and its consolidated
subsidiaries, comply in all material respects with appli-
cable accounting requirements and with the published
rules and regulations of the SEC with respect thereto,
have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except
as may be indicated in the notes thereto and subject, in
the case of quarterly financial statements, to normal and
recurring year-end adjustments) and fairly present the
consolidated financial position and the consolidated
results of operations and cash flows (and changes in
financial position, if any) of the Company and its con-
solidated subsidiaries as at the dates thereof or for the
periods presented therein.

Section 3.6 Absence of Certain Changes. Except
as disclosed in the Company SEC Documents and except for
a change in fiscal year end from October 31 to the last
Saturday in October of each year, since October 31, 1993,
the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual
course and there has not occurred (i) any events, chang-
es, or effects (including the incurrence of any liabili-
ties of any nature, whether or not accrued, contingent or
otherwise) having, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiar-
ies, taken as a whole; (ii) any declaration, setting
aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the
equity interests of the Company or of any of its Subsid-
iaries; or (iii) any change by the Company or any of its
Subsidiaries in accounting principles or methods, except
insofar as may be required by a change in GAAP.

Section 3.7 No Undisclosed Liabilities. Except
(a) as disclosed in the Company's SEC Documents and (b)

for liabilities and obligations incurred in the ordinary
course of business and consistent with past practice,
since October 31, 1993, neither the Company nor any of
its Subsidiaries has incurred any liabilities or obliga-
tions of any nature, whether or not accrued, contingent
or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on the Company and its
Subsidiaries taken as a whole or would be required by
GAAP to be reflected on a consolidated balance sheet of
the Company and its Subsidiaries (including the notes
thereto). As of the date hereof, the total amounts of
principal and unpaid interest outstanding under the
Credit Agreement and with respect to the Convertible
Debentures do not exceed $62,000,000 and $51,500,000, re-
spectively, in the aggregate, and the long-term principal
portions thereof (including such amounts as are required
to be classified as current debt under GAAP) do not
exceed $60,000,000 and $49,996,000, respectively.

Section 3.8 Information in Proxy Statement. The
Proxy Statement (or any amendment thereof or supplement
thereto) will, at the date mailed to Company shareholders
and at the time of the meeting of Company shareholders to
be held in connection with the Merger, not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they are made, not misleading,
except that no representation is made by the Company with
respect to statements made therein based on information
supplied by Parent or the Purchaser in writing for inclu-
sion in the Proxy Statement. The Proxy Statement will
comply in all material respects with the provisions of
the Exchange Act and the rules and regulations there-
under.

Section 3.9 Employee Benefit Plans; ERISA.

(a) There are no material employee bene-
fit plans, arrangements, contracts or agreements (includ-
ing employment agreements and severance agreements) of
any type (including but not limited to plans described in
section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), maintained by the
Company, any of its Subsidiaries or any trade or busi-
ness, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company would be deemed a "single
employer" within the meaning of section 4001(b)(15) of
ERISA, or with respect to which the Company or any of its
Subsidiaries has or may have a liability, other than
those listed on Schedule 3.9 ("Benefit Plans"). Neither
the Company nor any ERISA Affiliate has any formal plan
or commitment, whether legally binding or not, to create
any additional Benefit Plan or modify or change any

existing Benefit Plan that would affect any employee or
terminated employee of the Company or any Subsidiary.

(b) With respect to each Benefit Plan:
(i) if intended to qualify under section 401(a), 401(k)
or 403(a) of the Internal Revenue Code of 1986, as amend-
ed, and the rules and regulations promulgated thereunder
(the "Code"), such plan so qualifies, and its trust is
exempt from taxation under section 501(a) of the Code;
(ii) such plan has been administered in all material
respects in accordance with its terms and applicable law;
(iii) no breaches of fiduciary duty have occurred which
might reasonably be expected to give rise to material
liability on the part of the Company; (iv) no disputes
are pending, or, to the knowledge of the Company, threat-
ened that might reasonably be expected to give rise to
material liability on the part of the Company; (v) no
prohibited transaction (within the meaning of Section 406
of ERISA) has occurred that might reasonably be expected
to give rise to material liability on the part of the
Company; and (vi) all contributions and premiums due as
of the date hereof (including any extensions for such
contributions and premiums) have been made in full.

(c) Neither the Company nor any ERISA
Affiliate maintains or has maintained within the last six
years, any employee benefit plan that is subject to Title
IV of ERISA.

(d) With respect to each Benefit Plan
that is a "welfare plan" (as defined in section 3(1) of
ERISA): except as disclosed in Schedule 3.9, no such plan
provides medical or death benefits with respect to cur-
rent or former employees of the Company or any of its
Subsidiaries beyond their termination of employment,
other than on an employee-pay-all basis.

(e) Except as set forth on Schedule 3.9,
the consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to sever-
ance pay or accelerate the time of payment or vesting, or
increase the amount, of compensation or benefits due to
any individual (other than as disclosed in writing), (ii)
constitute or result in a prohibited transaction under
section 4975 of the Code or section 406 or 407 of ERISA
or (iii) subject the Company, any of its Subsidiaries,
any ERISA Affiliate, any of the Benefit Plans, any relat-
ed trust, any trustee or administrator thereof, or any
party dealing with the Benefit Plans or any such trust to
either a civil penalty assessed pursuant to section 409
or 502(i) of ERISA or a tax imposed pursuant to section
4976 or 4980B of the Code.

(f) There is no Benefit Plan that is a

"multiemployer plan," as such term is defined in section
3(37) of ERISA.

(g) The maximum amount that could be pay-
able under all Benefit Plans (excluding Options and
restricted stock) and any other plan, policy, agreement
or arrangement to which the Company or any Subsidiary is
a party, as a result (in whole or in part) of the trans-
actions contemplated hereby shall not exceed $7,500,000.

(h) With respect to each Benefit Plan,
the Company has delivered to Parent accurate and complete
copies of all plan texts, summary plan descriptions,
summary of material modifications, trust agreements and
other related agreements including all amendments to the
foregoing; the most recent annual report; the most recent
annual and periodic accounting of plan assets; the most
recent determination letter received from the United
States Internal Revenue Service (the "Service"); and the
most recent actuarial valuation, to the extent any of the
foregoing may be applicable to a particular Benefit Plan.

Section 3.10 Litigation. Except as disclosed in
the Company SEC Documents filed prior to the date of this
Agreement, there is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of the
Company, threatened against or affecting, the Company or
any of its Subsidiaries which, individually or in the
aggregate, is reasonably likely, in the reasonable judg-
ment of the Company, to have, individually or in the
aggregate, a material adverse effect on the Company and
its Subsidiaries, taken as a whole, or a material adverse
effect on the ability of the Company to consummate the
transactions contemplated by this Agreement.

Section 3.11 Conduct of Business. The business
of the Company and each of its Subsidiaries is not being
conducted in default or violation of any term, condition
or provision of (i) its respective articles of incorpora-
tion or by-laws or similar organizational documents, (ii)
any Material Agreement or (iii) any federal, state, local
or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise,
permit or license or other governmental authorization or
approval applicable to the Company or any of its Subsid-
iaries, excluding from the foregoing clauses (ii) and
(iii), defaults or violations that would not, individu-
ally or in the aggregate, have a material adverse effect
on the Company and its Subsidiaries, taken as a whole.
Except as previously disclosed to Parent in writing, as
of the date of this Agreement, no investigation or review
by any Governmental Entity or other entity with respect
to the Company or any of its Subsidiaries is pending or,
to the best knowledge of the Company, threatened, nor has

any Governmental Entity or other entity indicated an
intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be
foreseen, in the future will not, individually or in the
aggregate have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.

Section 3.12 Reimbursement. The Company or its
Subsidiaries, as the case may be, are parties to such
agreements with third party payors, including Medicaid,
health maintenance organizations, preferred provider
organizations, insurance companies and other payment
sources, which are necessary to conduct their respective
businesses as of the date of this Agreement.

Section 3.13 Taxes. (a) The Company and its
Subsidiaries have (i) duly filed (or there has been filed
on their behalf) with the appropriate governmental au-
thorities all Tax Returns (as hereinafter defined) re-
quired to be filed by them on or prior to the date here-
of, and such Tax Returns are true, correct and complete
in all material respects, and (ii) duly paid in full or
made provision in accordance with generally accepted
accounting principles (or there has been paid or provi-
sion has been made on their behalf) for the payment of
all Taxes (as hereinafter defined) for all periods ending
through the date hereof.

(b) There are no material liens for Taxes
upon any property or assets of the Company or any Subsid-
iary thereof, except for liens for Taxes not yet due and
liens for Taxes the assessment of which is being contest-
ed in good faith.

(c) Except as described in Section 3.6,
neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from
any taxing authority or signed an agreement likely to
have a material adverse effect on the Company and its
Subsidiaries taken as a whole.

(d) The Company and its Subsidiaries have
complied in all material respects with all applicable
laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under any foreign laws)
and have, within the time and the manner prescribed by
law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to
be so withheld and paid over under applicable laws.

(e) Other than the assessment by the
State of Michigan of additional Michigan Single Business

Tax for the fiscal years ended October 31, 1990, 1991 and
1992 (which the Company is contesting), and disputed
claims for refunds of Michigan Single Business Tax paid
for the fiscal years ended October 31, 1986, 1987, 1988
and 1989, no federal, state, local or foreign audits or
other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns
of the Company or its Subsidiaries wherein an adverse
determination or ruling in any one such proceeding or in
all such proceedings in the aggregate could have a mate-
rial adverse effect on the Company and its Subsidiaries,
taken as a whole, and neither the Company nor its subsid-
iaries has received a written notice of any pending
audits or proceedings.

(f) The federal income Tax Returns of the
Company and its Subsidiaries have been examined by the
Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have
expired) for all periods through and including October
31, 1992, and no material deficiencies were asserted as a
result of such examinations which have not been resolved
and fully said.

(g) There are no outstanding requests,
agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any
Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either
the Company or any of its Subsidiaries with respect to
any Taxes is currently in force.

(h) Neither the Company nor any of its
Subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes.

(i) Except for certain agreements dis-
closed to Parent on Schedule 3.9, neither the Company nor
its Subsidiaries is a party to any agreement, contract or
arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute pay-
ments" within the meaning of Section 280G of the Code.

(j) Neither the Company nor any of its
Subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a
consent to the application of Section 341(f) of the Code,
or agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries.

(k) The deductibility of compensation
paid by the Company and/or its Subsidiaries will not be

limited by Section 162(m) of the Code.

(l) "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social securi-
ty, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes,
fees and charges, imposed by the Service or any taxing
authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign govern-
ment or any subdivision or taxing agency thereof (includ-
ing a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest whether
paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be
supplied to any taxing authority or jurisdiction (foreign
or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with
respect to or accompanying payments of estimated Taxes,
or with respect to or accompanying requests for the
extension of time in which to file any such report,
return, document, declaration or other information.

Section 3.14 Labor Relations. There is no labor
strike, slowdown or work stoppage or lockout against the
Company or any of its Subsidiaries, there is no unfair
labor practice charge or complaint against or pending
before the National Labor Relations Board (the "NLRB")
which if decided adversely could have a material adverse
effect on the Company and its Subsidiaries, taken as a
whole, and there is no representation claim or petition
pending before the NLRB and no question concerning repre-
sentation exists with respect to the employees of the
Company or its Subsidiaries.

Section 3.15 Compliance with Laws. The Compa-
ny and its Subsidiaries have complied in a timely manner
with all laws and governmental regulations and orders
relating to any of the property owned, leased or used by
them, or applicable to their business, including, but not
limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, antitrust
laws, warehousing, storage and/or sale of food and/or
drugs and/or alcoholic beverages, except where the fail-
ure to so comply would not, individually or in the aggre-
gate, have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.

Section 3.16 Insurance. As of the date here-

of, the Company and each of its Subsidiaries are insured
by insurers, reasonably believed by the Company to be of
recognized financial responsibility and solvency, against
such losses and risks and in such amounts as are custom-
ary in the businesses in which they are engaged. All
material policies of insurance and fidelity or surety
bonds are in full force and effect. The Company is self
insured for its basic medical program. Stop loss insur-
ance coverage is maintained. The Company is self insured
for general liability and workers' compensation claims
and maintains liability coverage in excess of certain
self insurance limits from various carriers. Descrip-
tions of these plans and related liability coverage have
been previously provided to Parent. Schedule 3.16 con-
tains a listing of all open workers compensation and
general liability claims as of October 31, 1994. These
claims, individually or in the aggregate, would not have
a material adverse effect on the Company and its Subsid-
iaries, taken as a whole. All necessary notifications of
claims have been made to insurance carriers other than
those which will not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole.

Section 3.17 Contracts. Each Material Agree-
ment is legally valid and binding and in full force and
effect, except where failure to be legally valid and
binding and in full force and effect would not have a
material adverse effect on the Company and its Subsidiar-
ies taken as a whole, and there are no defaults thereun-
der, except those defaults that would not have a material
adverse effect on the Company and its Subsidiaries taken
as a whole. The Company has previously made available
for inspection by Parent or the Purchaser all Material
Agreements.

Section 3.18 Real Property. The Company and
the Subsidiaries, as the case may be, have sufficient
title or leaseholds to real property to conduct their
respective businesses as currently conducted with only
such exceptions as individually or in the aggregate would
not have a material adverse effect on the Company and the
Subsidiaries, taken as a whole.

Section 3.19 Opinions of Financial Advisors.
The Company has received opinions from Peter J. Solomon
Company Limited and from Wasserstein, Perella & Co., Inc.
to the effect that the consideration to be received by
the shareholders of the Company pursuant to the Offer and
the Merger is fair to such shareholders from a financial
point of view, a copy of which opinions will be delivered
to Parent.

Section 3.20 Vote Required. The affirmative
vote of the holders of a majority of the outstanding

shares of Company Common Stock are the only votes of the
holders of any class or series of the Company's capital
stock necessary to approve the Merger.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER

Parent and the Purchaser represent and warrant
to the Company as follows:

Section 4.1 Organization. Each of Parent and
the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Delaware
and has all requisite corporate or other power and au-
thority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its
business as now being conducted, except where the failure
to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals
would not have a material adverse effect on Parent and
its Subsidiaries taken as a whole. Parent and each of
its Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the
nature of the business conducted by it makes such quali-
fication or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing
would not, in the aggregate, have a material adverse
effect on Parent and its Subsidiaries, taken as a whole.

Section 4.2 Authorization; Validity of
Agreement; Necessary Action. Each of Parent and the
Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, deliv-
ery and performance of this Agreement and the consumma-
tion of the Merger and of the other transactions contem-
plated hereby have been duly authorized by all necessary
corporate action on the part of Parent and the Purchaser
and no other corporate proceedings on the part of Parent
and the Purchaser are necessary to authorize this Agree-
ment or to consummate the transactions so contemplated.
This Agreement has been duly executed and delivered by
Parent and the Purchaser, as the case may be, and, assum-
ing this Agreement constitutes a valid and binding obli-
gation of the Company, constitutes a valid and binding
obligation of each of Parent and the Purchaser, as the
case may be, enforceable against them in accordance with
its respective terms, except that (i) such enforcement
may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of

specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceed-
ing therefor may be brought.

Section 4.3 Consents and Approvals; No
Violations. Except for filings, permits, authorizations,
consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the
Securities Act, the HSR Act, the BCA, the DGCL, state
securities or blue sky laws and, the laws of other states
in which Parent or the Purchaser is qualified to do or is
doing business and applicable state takeover laws, nei-
ther the execution, delivery or performance of this
Agreement by Parent and the Purchaser nor the consumma-
tion by Parent and the Purchaser of the transactions
contemplated hereby nor compliance by Parent and the
Purchaser with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of
the respective certificate of incorporation or by-laws of
Parent and the Purchaser, (ii) require any filing with,
or permit, authorization, consent or approval of, any
Governmental Entity (except where the failure to obtain
such permits, authorizations, consents or approvals or to
make such filings would not have a material adverse
effect on Parent and its Subsidiaries taken as a whole),
(iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, can-
cellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other
instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, any of its Subsidiaries
or any of their properties or assets, except in the case
of (iii) and (iv) for violations, breaches or defaults
which would not, individually or in the aggregate, have a
material adverse effect on Parent and its Subsidiaries
taken as a whole.

Section 4.4 Information in Proxy Statement;
Schedule 14D-9. None of the information supplied by
Parent or the Purchaser for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 14D-9
will, at the date mailed to shareholders and at the time
of the meeting of shareholders to be held in connection
with the Merger, contain any untrue statement of a mate-
rial fact or omit to state any material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading.

Section 4.5 Financing. Either Parent or the
Purchaser has sufficient funds available (through exist-
ing credit arrangements or otherwise) to purchase all of
the Shares outstanding on a fully diluted basis and to
pay all fees and expenses related to the transactions
contemplated by this Agreement.

Section 4.6 Purchaser's Operations. The Pur-
chaser was formed solely for the purpose of engaging in
the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations
other than in connection with the transactions con-
templated hereby.

ARTICLE V

COVENANTS

Section 5.1 Interim Operations of the Company.
The Company covenants and agrees that, except (i) as ex-
pressly contemplated by this Agreement, or (ii) as agreed
in writing by Parent, after the date hereof, and prior to
the time the directors of the Purchaser have been elected
to, and shall constitute a majority of, the Board of
Directors of the Company pursuant to Section 1.3 (the
"Appointment Date"):

(a) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary and
usual course and, to the extent consistent therewith,
each of the Company and its Subsidiaries shall use its
best efforts to preserve its business organization intact
and maintain its existing relations with customers,
suppliers, employees, creditors and business partners;

(b) the Company will not, directly or
indirectly, (i) sell, transfer or pledge or agree to
sell, transfer or pledge any Company Common Stock, Pre-
ferred Stock or capital stock of any of its Subsidiaries
beneficially owned by it, either directly or indirectly;
or (ii) split, combine or reclassify the outstanding
Company Common Stock or any outstanding capital stock of
any of the Subsidiaries of the Company;

(c) except for those actions contemplated
in Section 1.2, neither the Company nor any of its Sub-
sidiaries shall: (i) amend its articles of incorporation
or by-laws or similar organizational documents; (ii) de-
clare, set aside or pay any dividend or other distribu-
tion payable in cash, stock or property with respect to
its capital stock; (iii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, war-

rants, calls, commitments or rights of any kind to ac-
quire, any shares of capital stock of any class of the
Company or its Subsidiaries, other than shares of Pre-
ferred Stock reserved for issuance on the date hereof
upon exercise of outstanding Rights pursuant to the
Rights Agreement or issuances pursuant to the exercise of
Options outstanding on the date hereof; (iv) transfer,
lease, license, sell, mortgage, pledge, dispose of, or
encumber any material assets other than in the ordinary
and usual course of business and consistent with past
practice, or incur or modify any material indebtedness or
other liability, other than in the ordinary and usual
course of business and consistent with past practice; or
(v) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;

(d) neither the Company nor any of its
Subsidiaries shall: (i) grant any increase in the com-
pensation payable or to become payable by the Company or
any of its Subsidiaries to any of its executive officers
or key employees or (A) adopt any new, or (B) amend or
otherwise increase, or accelerate the payment or vesting
of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compen-
sation, severance, profit sharing, stock option, stock
purchase, insurance, pension, retirement or other employ-
ee benefit plan agreement or arrangement; or (ii) enter
into any employment or severance agreement with or,
except in accordance with the existing written policies
of the Company, grant any severance or termination pay to
any officer, director or employee of the Company or any
its Subsidiaries;

(e) neither the Company nor any of its
Subsidiaries shall modify, amend or terminate any of its
material contracts or waive, release or assign any mate-
rial rights or claims, except in the ordinary course of
business and consistent with past practice;

(f) neither the Company nor any of its
Subsidiaries shall permit any material insurance policy
naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except
in the ordinary course of business and consistent with
past practice;

(g) neither the Company nor any of its
Subsidiaries shall: (i) incur or assume any long-term
debt, or except in the ordinary course of business, incur
or assume any short-term indebtedness in amounts not
consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (wheth-
er directly, contingently or otherwise) for the obliga-
tions of any other person, except in the ordinary course

of business and consistent with past practice; (iii) make
any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly
owned Subsidiaries of the Company or customary loans or
advances to employees in accordance with past practice);
or (iv) enter into any material commitment or transaction
(including, but not limited to, any borrowing, capital
expenditure or purchase, sale or lease of assets);

(h) neither the Company nor any of its
Subsidiaries shall change any of the accounting princi-
ples used by it unless required by GAAP;

(i) neither the Company nor any of its
Subsidiaries shall pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims,
liabilities or obligations, (x) in the ordinary course of
business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial state-
ments (or the notes thereto) of the Company and its
consolidated Subsidiaries, (y) incurred in the ordinary
course of business and consistent with past practice or
(z) which are legally required to be paid, discharged or
satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally
required to be paid and are also not otherwise payable in
accordance with clauses (x) or (y) above, the Company
will notify Parent in writing if such claims, liabilities
or obligations exceed, individually or in the aggregate,
$100,000 in value, reasonably in advance of their pay-
ment);

(j) neither the Company nor any of its
Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restruc-
turing, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merg-
er);

(k) neither the Company nor any of its
Subsidiaries will take, or agree to commit to take, any
action that would make any representation or warranty of
the Company contained herein inaccurate in any respect
at, or as of any time prior to, the Effective Time; or

(l) neither the Company nor any of its
Subsidiaries will enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention
to do any of the foregoing.

Section 5.2 Rights Agreement. Except for the
amendments contemplated by Section 1.2(d) hereof or
amendments approved in writing by Parent or the Purchas-
er, the Company will not, following the date hereof,
amend the Rights Agreement in any manner. In addition
the Company covenants and agrees that it will not redeem
the Rights unless such redemption is consented to in
writing by Parent prior to such redemption.

Section 5.3 HSR Act. The Company and Parent
shall take all reasonable actions necessary to file as
soon as practicable notifications under the HSR Act and
to respond as promptly as practicable to any inquiries
received from the Federal Trade Commission and the Anti-
trust Division of the Department of Justice for addition-
al information or documentation and to respond as prompt-
ly as practicable to all inquiries and requests received
from any State Attorney General or other Governmental
Entity in connection with antitrust matters.

Section 5.4 Access to Information. Upon reason-
able notice, the Company shall (and shall cause each of
its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other repre-
sentatives of Parent, access, during normal business
hours during the period prior to the Appointment Date, to
all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and
shall cause each of its Subsidiaries to) furnish promptly
to the Parent (a) a copy of each report, schedule, regis-
tration statement and other document filed or received by
it during such period pursuant to the requirements of
federal securities laws and (b) all other information
concerning its business, properties and personnel as
Parent may reasonably request. After the Appointment
Date the Company shall provide Parent and such persons as
Parent shall designate with all such information, at such
time, as Parent shall request. Unless otherwise required
by law and until the Appointment Date, Parent will hold
any such information which is nonpublic in confidence in
accordance with the provisions of the letter agreement
between the Company and the Parent (the "Confidentiality
Agreement").

Section 5.5 Consents and Approvals. Each of the
Company, Parent and the Purchaser will take all reason-
able actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to
this Agreement and the transactions contemplated hereby
(which actions shall include, without limitation, fur-
nishing all information required under the HSR Act and in
connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any

such requirements imposed upon any of them or any of
their Subsidiaries in connection with this Agreement and
the transactions contemplated hereby. Each of the Compa-
ny, Parent and the Purchaser will, and will cause its
Subsidiaries to, take all reasonable actions necessary to
obtain (and will cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by
Parent, the Purchaser, the Company or any of their Sub-
sidiaries in connection with the Merger or the taking of
any action contemplated thereby or by this Agreement.

Section 5.6 Employee Benefits.

(a) Parent agrees that, effective as of
the Effective Time, the Surviving Corporation and its
Subsidiaries shall provide benefits to their employees
that are comparable with those provided by Parent to
similarly situated employees of Parent or any of its Sub-
sidiaries, taking into account all relevant factors,
including, without limitation, the businesses in which
the Surviving Corporation and its Subsidiaries are en-
gaged. Parent further agrees that, effective as of the
Effective Time, employees of the Surviving Corporation
and its Subsidiaries shall become participants in the
health benefit plans and programs maintained for similar-
ly situated employees of Parent or any of its Subsidiar-
ies. Such health benefit plans and programs shall (1)
recognize expenses and claims that were incurred by such
employees in the year in which the Effective Time occurs
and recognized for similar purposes of computing deduct-
ible amounts and copayments under the Company's plans as
of the Effective Time and (2) provide coverage for pre-
existing health conditions to the extent covered under
the applicable plans or programs of the Company as of the
Effective Time. In addition, employees of the Surviving
Corporation will receive credit for their prior service
with the Company and its Subsidiaries for eligibility and
vesting purposes and for vacation accrual purposes.

(b) Parent guarantees the payment of, and
agrees to honor, the current severance pay arrangements
and split dollar life insurance agreements, which agree-
ments and arrangements are listed on Schedule 5.6(b)
hereto, that the Company has in effect for the benefit of
certain executive officers, copies of whose written
severance pay arrangements and split dollar insurance
agreements have been provided to Parent. Parent acknowl-
edges that (i) the change in each such executive's re-
sponsibilities resulting from the completion of the Offer
and the resulting change in the Company from a publicly
owned company to a majority or wholly owned subsidiary
constitutes circumstances that shall be deemed a "Termi-

nation of Employment" following a "Change in Control"
under such severance agreements or a "Resignation by the
Executive following a Change in Control for Good Reason"
and (ii) any decision on the part of any such executive
to terminate his employment for any reason subsequent to
completion of the Offer shall not constitute a "voluntary
termination of employment" under such split dollar life
insurance agreements.

(c) In the case of persons employed by
the Company at its central administrative offices at the
completion of the Offer other than those executive offi-
cers referred to in (b) above, Parent agrees to cause the
Company or the Surviving Corporation, as the case may be,
to pay a lump sum severance benefit to each such person
whose employment is terminated by the Company or the
Surviving Corporation for any reason other than cause,
death or disability prior to the first anniversary of the
completion of the Offer. Such severance benefit shall be
based on the terminated employee's number of whole years
(rounded up or down to the nearest whole year) of contin-
uous service with the Company and/or the Surviving Corpo-
ration, shall be calculated as follows, and shall be re-
duced by withholding and employment taxes, if required by
law to be withheld:

Length of Service Amount of Severance Benefit

less than 10 years 1 week's gross pay for each
whole year of service, with a
minimum severance benefit of 2
weeks' gross pay (or, if great-
er, gross pay for the number of
additional business days re-
maining until the expiration of
the notification period re-
quired in connection with the
Headquarters Closing Notices
(as defined in Section 5.15
hereof)).

10 years or more 2 weeks' gross pay for each
whole year of service, with a
maximum severance benefit of 26
weeks' gross pay

The term "gross pay" shall mean the employees' average weekly
gross wages or salary, before deductions or withholdings of
any kind whatsoever, received from the Company and/or the
Surviving Corporation during the last full calendar month
immediately prior to the date of termination. The severance
benefit described above will be provided, if applicable, upon
the giving by the severed employee of a full release of
claims in form and substance satisfactory to Parent. Any

severance payment shall be applied first to any pay or bene-
fits in lieu of notice that may become due pursuant to the
WARN Act.

Section 5.7 No Solicitation. Neither the Company
nor any of its Subsidiaries or affiliates shall (and the
Company shall use its best efforts to cause its officers,
directors, employees, representatives and agents, including,
but not limited to, investment bankers, attorneys and accoun-
tants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with,
or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of
its affiliates or representatives) concerning any merger,
tender offer, exchange offer, sale of assets, sale of shares
of capital stock or debt securities or similar transactions
involving the Company or any Subsidiary, division or operat-
ing or principal business unit of the Company (an "Acquisi-
tion Proposal"). The Company further agrees that it will
immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with
respect to any of the foregoing. Notwithstanding the forego-
ing, the Company may, directly or indirectly, provide access
and furnish information concerning its business, properties
or assets to any corporation, partnership, person or other
entity or group pursuant to appropriate confidentiality
agreements, and may negotiate and participate in discussions
and negotiations with such entity or group concerning an
Acquisition Proposal (x) if such entity or group has submit-
ted a bona fide written proposal to the Board of Directors of
the Company relating to any such transaction and (y) if, in
the opinion of the Board of Directors of the Company, after
consultation with independent legal counsel to the Company,
the failure to provide such information or access or to
engage in such discussions or negotiations would be inconsis-
tent with their fiduciary duties to the Company's sharehold-
ers under applicable law. Furthermore, nothing contained in
this Section 5.7 shall prohibit the Company or its Board of
Directors from taking and disclosing to the Company's share-
holders a position with respect to a tender offer by a third
party pursuant to Rules l4d-9 and l4e-2(a) promulgated under
the Exchange Act or from making such disclosure to the Com-
pany's shareholders which, in the judgment of the Board of
Directors with the advice of outside counsel, may be required
under applicable law. The Company will immediately notify
Parent of any such proposal, or if an inquiry is made, and
will keep Parent fully apprised of all developments with
respect to any such Acquisition Proposal.

Section 5.8 Brokers or Finders. Each of Parent and
the Company represents, as to itself, its Subsidiaries and
its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commis-

sion or similar fee in connection with any of the transac-
tions contemplated by this Agreement except Peter J. Solomon
Company Limited and Wasserstein Perella, whose fees and ex-
penses will be paid by the Company in accordance with the
Company's agreements with such firms (copies of which have
been delivered by the Company to Parent prior to the date of
this Agreement), and each of Parent and the Company agrees to
indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to
any other fees, commissions or expenses asserted by any
person on the basis of any act or statement alleged to have
been made by such party or its affiliates.

Section 5.9 Additional Agreements. Subject to the
terms and conditions herein provided, each of the parties
hereto agrees to use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws
and regulations, or to remove any injunctions or other imped-
iments or delays, legal or otherwise, to consummate and make
effective the Merger and the other transactions contemplated
by this Agreement. In case at any time after the Effective
Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and
directors of the Company and Parent shall use all reasonable
efforts to take, or cause to be taken, all such necessary
actions.

Section 5.10 Convertible Debentures. Promptly after
acceptance by the Purchaser of Shares for payment pursuant to
the Offer, if so requested by Parent, the Company shall
provide any notice required pursuant to Article 3 of the
Indenture in order to effect a redemption by the Company of
the Convertible Debentures. The Company shall cause such
redemption of the Convertible Debentures, if so requested by
Parent, to occur on the date specified by Parent, which date
shall not be less than 30 nor more than 60 days after the
date notices of such redemption are mailed to debenture-
holders of the Company. In addition, if so requested by
Parent, the Company shall take all actions prescribed under
Article 10 of the Indenture required to terminate the Com-
pany's obligations under the Indenture.

Section 5.11 Publicity. The initial press release
with respect to the execution of this Agreement shall be a
joint press release acceptable to Parent and the Company.
Thereafter, so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates
shall issue or cause the publication of any press release or
other announcement with respect to the Merger, this Agreement
or the other transactions contemplated hereby without the
prior consultation of the other party, except as may be
required by law or by any listing agreement with a national
securities exchange.

Section 5.12 Notification of Certain Matters. The
Company shall give prompt notice to Parent and Parent shall
give prompt notice to the Company, of (i) the occurrence, or
non-occurrence of any event the occurrence, or non-occurrence
of which would cause any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Effective Time and (ii) any mate-
rial failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this
Section 5.12 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.

Section 5.13 Directors' and Officers' Insurance and
Indemnification. For six years after the Effective Time,
Parent shall, or shall cause the Surviving Corporation to,
indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of the Company and
its Subsidiaries (each an "Indemnified Party") against all
losses, claims, damages, liabilities, fees and expenses
(including reasonable fees and disbursements of counsel and
judgments, fines, losses, claims, liabilities and amounts
paid in settlement (provided that any such settlement is
effected with the written consent of the Parent or the Sur-
viving Corporation)) arising out of actions or omissions
occurring at or prior to the Effective Time to the full
extent permitted under Michigan law or the Company's Restated
Articles of Incorporation, By-Laws or indemnification agree-
ments in effect at the date hereof, including provisions
relating to advancement of expenses incurred in the defense
of any action or suit; provided that, in the event any claim
or claims are asserted or made within such six year period,
all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such
claims; provided further, that any determination required to
be made with respect to whether an Indemnified Party's con-
duct complies with the standards set forth under Michigan
law, the Company's Restated Articles of Incorporation or By-
Laws or such agreements, as the case may be, shall be made by
independent counsel mutually acceptable to Parent and the
Indemnified Party and; provided further, that nothing herein
shall impair any rights or obligations of any present or
former directors or officers of the Company. Parent or the
Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance policy ("D&O
Insurance") for a period of not less than two years after the
Effective Date; provided, that the Parent may substitute
therefor policies of substantially similar coverage and
amounts containing terms no less advantageous to such former
directors or officers; provided, further, if the existing D&O
Insurance expires, is terminated or cancelled during such
period, Parent or the Surviving Corporation will use all

reasonable efforts to obtain substantially similar D&O Insur-
ance; provided further, however, that in no event shall the
Company be required to pay aggregate premiums for insurance
under this Section in excess of 100% of the aggregate premi-
ums paid by the Company in 1994 (on an annualized basis for
such purpose) ("1994 Premiums"). In the event that, but for
the last proviso of the immediately preceding sentence,
Parent or the Surviving Corporation would be required to
expend more than 100% of 1994 Premiums, Parent or the Sur-
viving Corporation shall nonetheless purchase the maximum
amount of such insurance obtainable by payment of annual
premiums equal to 100% of 1994 Premiums.

Section 5.14 WARN Act. The Company agrees that it
shall, on behalf of Parent, within five calendar days of the
date hereof, issue such notices (the "Headquarters Closing
Notices") as are required under the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") or any
similarly applicable state or local law, in connection with
Parent's intended closing of the Company's current headquar-
ters (the "Headquarters Closing") located at 5400 Perry
Drive, Pontiac, Michigan 48343-6021, on or about the Effec-
tive Time (the "Headquarters Closing Date"). The Headquar-
ters Closing Notices shall comply in form and substance with
the WARN Act and any similarly applicable state or local law,
as well as such regulations as have been promulgated there-
under. The Headquarters Closing Notices shall be given
sufficiently in advance of the Headquarters Closing Date so
that Parent shall not be liable under the WARN Act or any
similarly applicable state or local law for any penalty or
payment in lieu of notice to any employee or governmental
entity. Parent and the Company shall cooperate in the prepa-
ration and giving of such notices, and no such notices shall
be given until they have been approved by Parent.

ARTICLE VI

CONDITIONS

Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party
to effect the Merger shall be subject to the satisfaction on
or prior to the Closing Date of each of the following condi-
tions:

(a) Shareholder Approval. This Agreement
shall have been approved and adopted by the requisite vote of
the holders of Company Common Stock, if required by applica-
ble law and the Restated Articles of Incorporation, in order
to consummate the Merger;

(b) Statutes; Consents. No statute, rule,

order, decree or regulation shall have been enacted or pro-
mulgated by any foreign or domestic government or any govern-
mental agency or authority of competent jurisdiction which
prohibits the consummation of the Merger and all foreign or
domestic governmental consents, orders and approvals required
for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and shall be in
effect at the Effective Time;

(c) Injunctions. There shall be no order or
injunction of a foreign or United States federal or state
court or other governmental authority of competent juris-
diction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and

(d) Purchase of Shares in Offer. Parent, the
Purchaser or their affiliates shall have purchased shares of
Company Common Stock pursuant to the Offer.

ARTICLE VII

TERMINATION

Section 7.1 Termination. Anything herein or else-
where to the contrary notwithstanding, this Agreement may be
terminated and the Merger contemplated herein may be aban-
doned at any time prior to the Effective Time, whether before
or after shareholder approval thereof:

(a) By the mutual consent of the Board of
Directors of Parent and the Board of Directors of the Compa-
ny.

(b) By either of the Board of Directors of
the Company or the Board of Directors of Parent:

(i) if shares of Company Common Stock shall
not have been purchased pursuant to the Offer on or
prior to June 1, 1995; provided, however, that the right
to terminate this Agreement under this Section 7.1(b)(i)
shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of Parent or the
Purchaser, as the case may be, to purchase shares of
Company Common Stock pursuant to the Offer on or prior
to such date; or

(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the
parties hereto shall use their reasonable efforts to
lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated

by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.

(i) if, prior to the purchase of shares of
Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have (A) withdrawn, or
modified or changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer,
this Agreement or the Merger in order to approve and
permit the Company to execute a definitive agreement
providing for the acquisition of the Company, by merger,
consolidation or otherwise, and (B) determined, after
consultation with independent legal counsel to the
Company, that the failure to take such action as set
forth in the preceding clause (A) would be inconsistent
with its fiduciary duties to the Company's shareholders
under applicable law; or

(ii) if, prior to the purchase of Company
Common Stock pursuant to the Offer, Parent or the Pur-
chaser breaches or fails in any material respect to
perform or comply with any of its material covenants and
agreements contained herein or breaches its representa-
tions and warranties in any material respect; or

(iii) if Parent or the Purchaser shall have
terminated the Offer, or the Offer shall have expired,
without Parent or the Purchaser, as the case may be,
purchasing any shares of Company Common Stock pursuant
thereto; provided that the Company may not terminate
this Agreement pursuant to this Section 7.1(c)(iii) if
the Company is in material breach of this Agreement; or

(iv) if, due to an occurrence that if occur-
ring after the commencement of the Offer would result in
a failure to satisfy any of the conditions set forth in
Annex A hereto, Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the
initial public announcement of the Offer; provided, that
the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iv) if the Company is in material
breach of this Agreement.

(d) By the Board of Directors of Parent:

(i) if, due to an occurrence that if occur-
ring after the commencement of the Offer would result in
a failure to satisfy any of the conditions set forth in
Annex A hereto, Parent, the Purchaser, or any of their
affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the

initial public announcement of the Offer; provided that
Parent may not terminate this Agreement pursuant to this
Section 7.1(d)(i) if Parent is in material breach of
this Agreement; or

(ii) if (A) prior to the purchase of shares
of Company Common Stock pursuant to the Offer, the Board
of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer,
this Agreement or the Merger or shall have recommended
an Acquisition Proposal or offer, or shall have executed
an agreement in principle (or similar agreement) or
definitive agreement providing for a tender offer or
exchange offer for any shares of capital stock of the
Company, or a merger, consolidation or other business
combination with a person or entity other than Parent,
the Purchaser or their affiliates (or the Board of
Directors of the Company resolves to do any of the
foregoing), or (B) it shall have been publicly disclosed
or Parent or the Purchaser shall have learned that any
person, entity or "group" (as that term is defined in
Section 13(d)(3) of the Exchange Act) (an "Acquiring
Person"), other than Parent or its affiliates or any
group of which any of them is a member, shall have ac-
quired beneficial ownership (determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of more than
19.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition
of stock, the formation of a group or otherwise, or
shall have been granted an option, right, or warrant,
conditional or otherwise, to acquire beneficial owner-
ship of more than 19.9% of any class or series of capi-
tal stock of the Company (including the Shares); or

(iii) if Parent or the Purchaser, as the case
may be, shall have terminated the Offer, or the Offer
shall have expired without Parent or the Purchaser, as
the case may be, purchasing any shares of Company Common
Stock thereunder, provided that Parent may not terminate
this Agreement pursuant to this Section 7.1(d)(iii) if
it or the Purchaser has failed to purchase shares of
Company Common Stock in the Offer in violation of the
material terms thereof.

Section 7.2 Effect of Termination. In the event of
the termination of this Agreement as provided in Section 7.1,
written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liabil-
ity on the part of the Parent or the Company except (A) for
fraud or for material breach of this Agreement and (B) as set
forth in this Section 7.2 and Section 8.1.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Fees and Expenses. (a) Except as
contemplated by this Agreement, including Sections 8.1(b) and
8.1(c) hereof, all costs and expenses incurred to connection
with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such
expenses.

(b) If (w) the Board of Directors of the
Company shall terminate this Agreement pursuant to Section
7.1(c)(i) hereof, (x) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(ii)(A)
hereof, (y) the Board of Directors of Parent shall terminate
this Agreement pursuant to Section 7.1(d)(ii)(B) and within
one (1) year of such termination, the Acquiring Person shall
acquire or beneficially own a majority of the then outstand-
ing shares of Company Common Stock or shall have obtained
representation on the Company's Board of Directors or shall
enter into a definitive agreement with the Company with
respect to an Acquisition Proposal or similar business combi-
nation or (z) the Board of Directors of Parent shall termi-
nate this Agreement pursuant to Section 7.1(d)(i) or Section
7.1(d)(iii) hereof, in each case due to a (I) a material
breach of the representations and warranties of the Company
set forth in this Agreement other than as the result of an
act of God or (II) a material breach of, or failure to per-
form or comply with, any material obligation, agreement or
covenant contained in this Agreement, including but not
limited to the covenants contained in Section 5.1 hereof, by
the Company, then in any such case as described in clause
(w), (x), (y) or (z) (each such case of termination being
referred to as a "Trigger Event"), the Company shall pay to
Parent (not later than two business days after termination of
this Agreement) an amount equal to $3 million.

(c) Upon the termination of this Agreement
due to the occurrence of a Trigger Event, the Company agrees
that it shall promptly assume and pay, or reimburse Parent
for, all reasonable fees and expenses incurred, or to be
incurred by Parent, the Purchaser and their affiliates (in-
cluding the fees and expenses of legal counsel, accountants,
financial advisors, other consultants, financial printers and
financing sources) in connection with the Offer, the Merger
and the consummation of the transactions contemplated by this
Agreement, in an amount not to exceed $1 million in the
aggregate.

Section 8.2 Amendment and Modification. Subject to
applicable law, this Agreement may be amended, modified and

supplemented in any and all respects, whether before or after
any vote of the shareholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action
taken by their respective Boards of Directors (which in the
case of the Company shall include approvals as contemplated
in Section 1.3(b)), at any time prior to the Closing Date
with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the
shareholders of the Company, no such amendment, modification
or supplement shall reduce or change the Merger Consider
ation.

Section 8.3 Nonsurvival of Representations and War-
ranties. None of the representations and warranties in this
Agreement or in any schedule, instrument or other document
delivered pursuant to this Agreement shall survive the Effec-
tive Time.

Section 8.4 Notices. All notices and other commu-
nications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (which is con-
firmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses
(or at such other address for a party as shall be specified
by like notice):

(a) if to Parent or the Purchaser, to:

Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5952

with a copy to:

Nancy A. Lieberman, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001

and

(b) if to the Company, to:

Perry Drug Stores, Inc.
5400 Perry Drive
P.O. Box 436021
Pontiac, Michigan 48343-6021
Attention: General Counsel
Telephone No.: (810) 334-1300

Telecopy No.: (810) 647-7753

with a copy to:

Frank K. Zinn, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telephone No.: (312) 568-6969
Telecopy No.: (313) 568-6915

Section 8.5 Interpretation. When a reference is
made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated.
Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available"
in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom
such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of
similar import, unless the context otherwise requires, shall
be deemed to refer to December 23, 1994. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set
forth in Rule l2b-2 of the Exchange Act.

Section 8.6 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effec-
tive when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counter-
part.

Section 8.7 Entire Agreement; No Third Party Benefi
ciaries; Rights of Ownership. This Agreement and the Confi-
dentiality Agreement (including the documents and the instru-
ments referred to herein and therein): (a) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as
provided in Sections 5.6 and 5.13 are not intended to confer
upon any person other than the parties hereto any rights or
remedies hereunder.

Section 8.8 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restric-
tions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.

Section 8.9 Governing Law. This Agreement shall be

governed and construed in accordance with the laws of the
State of Delaware without giving effect to the principles of
conflicts of law thereof.

Section 8.10 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by opera-
tion of law or otherwise) without the prior written consent
of the other parties, except that the Purchaser may assign,
in its sole discretion, any or all of its rights, interest
and obligations hereunder to Parent or to any direct or
indirect wholly owned Subsidiary of Parent. Subject to the
preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.

IN WITNESS WHEREOF, Parent, the Purchaser and the
Company have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date
first written above.

RITE AID CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: President and Chief
Operating Officer

LAKE ACQUISITION CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: Vice President

PERRY DRUG STORES, INC.

By:/s/ Jack A. Robinson
Name: Jack A. Robinson
Title: Chairman and Chief
Executive Officer

ANNEX A

CONDITIONS TO THE TENDER OFFER

Notwithstanding any other provisions of the Offer,
and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of the Merger Agree-
ment), the Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations
of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of
the Offer), pay for, and may delay the acceptance for payment
of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate the Offer
as to any Shares not then paid for, if (i) any applicable
waiting period under the HSR Act has not expired or terminat-
ed, (ii) the Minimum Condition has not been satisfied, (iii)
the Rights Agreement shall not have been amended in a manner
which renders the Rights inoperative with respect to any
acquisition of Shares by Parent or the Purchaser, or (iv) at
any time on or after December 23, 1994 and before the time of
payment for any such Shares, any of the following events
shall occur or shall be determined by the Purchaser to have
occurred:

(a) there shall have been any action taken,
or any statute, rule, regulation, judgment, order or injunc-
tion promulgated, entered, enforced, enacted, issued or
applicable to the Offer or the Merger by any domestic or
foreign federal or state governmental regulatory or adminis-
trative agency or authority or court or legislative body or
commission which directly or indirectly (l) prohibits, or
imposes any material limitations on, Parent's or the Pur-
chaser's ownership or operation (or that of any of their
respective Subsidiaries or affiliates) of all or a material
portion of their or the Company's businesses or assets, or
compels Parent or the Purchaser or their respective Subsid-
iaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or
Parent and their respective Subsidiaries, in each case taken
as a whole, (2) prohibits, or makes illegal the acceptance
for payment, payment for or purchase of Shares or the consum-
mation of the Offer or the Merger, (3) results in the delay
in or restricts the ability of the Purchaser, or renders the
Purchaser unable, to accept for payment, pay for or purchase
some or all of the Shares, (4) imposes material limitations
on the ability of the Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's share-
holders, or (5) otherwise materially adversely affects the

consolidated financial condition, businesses or results of
operations of the Company and its Subsidiaries, taken as a
whole, provided that Parent shall have used all reasonable
efforts to cause any such judgment, order or injunction to be
vacated or lifted;

(b) there shall have occurred (1) any general
suspension of trading in, or limitation on prices for, secu-
rities on the New York Stock Exchange for a period in excess
of three hours (excluding suspensions or limitations result-
ing solely from physical damage or interference with such
exchanges not related to market conditions), (2) a decla-
ration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not
mandatory), (3) a commencement of a war, armed hostilities or
other international or national calamity directly or indi-
rectly involving the United States, (4) any limitation
(whether or not mandatory) by any foreign or United States
governmental authority on the extension of credit by banks or
other financial institutions, (5) any decline in either the
Dow Jones Industrial Average or the Standard & Poor's Index
of 500 Industrial Companies by an amount in excess of 20%
measured from the close of business on December 23, 1994 or
(6) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or
worsening thereof;

(c) the representations and warranties of the
Company set forth in the Merger Agreement shall not be true
and correct in any material respect as of the date of consum-
mation of the Offer as though made on or as of such date,
except (i) for changes specifically permitted by the Merger
Agreement and (ii) those representations and warranties that
address matters only as of a particular date are true and
correct as of such date, or the Company shall have breached
or failed in any material respect to perform or comply with
any material obligation, agreement or covenant required by
the Merger Agreement to be performed or complied with by it;

(d) the Merger Agreement shall have been
terminated in accordance with its terms;

(e) (i) it shall have been publicly disclosed
or Parent or the Purchaser shall have otherwise learned that
any person, entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent or its affiliates or
any group of which any of them is a member, shall have ac-
quired beneficial ownership (determined pursuant to Rule 13d-
3 promulgated under the Exchange Act) of more than 19.9% of
any class or series of capital stock of the Company (includ-
ing the Shares), through the acquisition of stock, the forma-
tion of a group or otherwise, or shall have been granted an
option, right or warrant, conditional or otherwise, to ac-
quire beneficial ownership of more than 19.9% of any class or

series of capital stock of the Company (including the
Shares); or (ii) any person or group shall have entered into a
definitive agreement or agreement in principle with the
Company with respect to a merger, consolidation or other
business combination with the Company; or

(f) the Company's Board of Directors shall
have withdrawn, or modified or changed in a manner adverse to
Parent or the Purchaser (including by amendment of the Sched-
ule 14D-9) its recommendation of the Offer, the Merger Agree-
ment, or the Merger, or recommended another proposal or
offer, or shall have resolved to do any of the foregoing;

which in the sole judgment of Parent or the Purchaser, in any
such case, and regardless of the circumstances (including any
action or inaction by Parent or the Purchaser giving rise to
such condition) makes it inadvisable to proceed with the
Offer or with such acceptance for payment or payments.

The foregoing conditions are for the sole benefit
of the Purchaser and Parent and may be waived by Parent or
the Purchaser, in whole or in part at any time and from time
to time in the sole discretion of Parent or the Purchaser.
The failure by Parent or the Purchaser at any time to exer-
cise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time
to time.

Exhibit 99.(c)(2)

CONFORMED COPY

SHAREHOLDERS AGREEMENT

AGREEMENT, dated as of December 23, 1994 and
reexecuted as of December 29, 1994, among Rite Aid Corpo-
ration, a Delaware corporation ("Parent"), Lake Acqui-
sition Corporation, a Delaware corporation and a direct
wholly owned subsidiary of Parent ("Purchaser"), Mr. Jack
A. Robinson ("Mr. Robinson") and Mr. Jack A. Robinson,
the co-trustee, agent, nominee, grantor and beneficiary
(respectively, the "Trustee", "Agent", "Nominee", "Grant-
or" and "Beneficiary") under The Jack A. and Aviva Robin-
son Charitable Remainder Unitrust Agreement (the
"Trust"), dated December 23, 1994, by and between Jack A.
Robinson, as grantor, and Jack A. Robinson and three
other individuals, as trustees (Mr. Robinson and the
Trustee are collectively referred to herein as the
"Shareholder").

W I T N E S S E T H:

WHEREAS, immediately prior to the execution of
this Agreement, Parent, Purchaser and Perry Drug Stores,
Inc., a Michigan corporation (the "Company"), have en-
tered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the
"Merger Agreement"; capitalized terms used and not de-
fined herein have the respective meanings ascribed to
them in the Merger Agreement), pursuant to which Purchas-
er will be merged with and into the Company (the "Merg-
er");

WHEREAS, in furtherance of the Merger, Parent
and the Company desire that as soon as practicable (and
not later than five business days) after the execution
and delivery of the Merger Agreement, Purchaser shall
commence a cash tender offer (the "Offer") to purchase at
a price of $11.00 per share all outstanding shares of
Company Common Stock (as defined in Section 1 hereof) in-
cluding all of the Shares (as defined in Section 2 here-
of) owned beneficially by the Shareholder; and

WHEREAS, as an inducement and a condition to
entering into the Merger Agreement, Parent has required
that the Shareholder agree, and the Shareholder has
agreed, to enter into this Agreement;

NOW, THEREFORE, in consideration of the forego-
ing and the mutual premises, representations, warranties,
covenants and agreements contained herein, the parties
hereto, intending to be legally bound hereby, agree as
follows:

1. Definitions. For purposes of this Agree-
ment:

(a) "Beneficially Own" or "Beneficial Owner-
ship" with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), including
pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting
of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meanings
of Section 13(d)(3) of the Exchange Act. Notwithstanding
the foregoing, for the purposes of this Agreement, the
Shareholder will not be deemed to Beneficially Own those
securities owned by or in trust for the Shareholder's
children or grandchildren (other than Shares held in the
Trust).

(b) "Company Common Stock" shall mean at any
time the common stock, $.05 par value, of the Company,
including the associated preferred stock purchase rights
issued pursuant to the Rights Agreement, dated as of
February 4, 1987, as amended, between the Company and
National Bank of Detroit, as Rights Agent.

(c) "Person" shall mean an individual, corpo-
ration, partnership, joint venture, association, trust,
unincorporated organization or other entity.

2. Tender of Shares.

(a) The Shareholder hereby agrees to validly
tender (or cause the record owner of such shares to
tender), and not to withdraw, pursuant to and in accor-
dance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursu-
ant to Section 1.1 of the Merger Agreement and Rule 14d-2
under the Exchange Act, 1,072,998 shares of Company
Common Stock (of which 982,090 are held by the Trustee)
(the "Existing Shares", and together with any shares of
Company Common Stock acquired by the Shareholder in any
capacity after the date hereof and prior to the termi-
nation of this Agreement whether upon the exercise of
options, warrants or rights, the conversion or exchange
of convertible or exchangeable securities, or by means of

purchase, dividend, distribution, gift, bequest, inheri-
tance or as successor in interest in any capacity (in-
cluding a fiduciary capacity) or otherwise, the
"Shares"), Beneficially Owned by the Shareholder. The
Shareholder hereby acknowledges and agrees that the
Parent's and the Purchaser's obligation to accept for
payment and pay for Shares in the Offer, including the
Shares Beneficially Owned by such Shareholder, is subject
to the terms and conditions of the Offer. The parties
agree that the Shareholder will, for all Shares tendered
by Shareholder in the Offer and accepted for payment and
paid for by Purchaser, receive the same per Share consid-
eration paid to other shareholders who have tendered into
the Offer.

(b) The transfer by the Shareholder of the
Shares to Purchaser in the Offer shall pass to and uncon-
ditionally vest in Purchaser good and valid title to the
Shares, free and clear of all claims, liens, restric-
tions, security interests, pledges, limitations and
encumbrances whatsoever.

(c) The Shareholder hereby agrees to permit
Parent and Purchaser to publish and disclose in the Offer
Documents and, if approval of the Company's shareholders
is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the
SEC) their identity and ownership of Company Common Stock
and the nature of their commitments, arrangements and
understandings under this Agreement.

3. Provisions Concerning Company Common Stock.
The Shareholder hereby agrees that during the period
commencing on the date hereof and continuing until the
first to occur of the Effective Time or termination of
the Merger Agreement in accordance with its terms, at any
meeting of the holders of Company Common Stock, however
called, or in connection with any written consent of the
holders of Company Common Stock, the Shareholder shall
vote (or cause to be voted) the Shares held of record or
Beneficially Owned by the Shareholder, whether issued,
heretofore owned or hereafter acquired, (i) in favor of
the Merger, the execution and delivery by the Company of
the Merger Agreement and the approval of the terms there-
of and each of the other actions contemplated by the
Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; (ii) against
any action or agreement that would result in a breach in
any respect of any covenant, representation or warranty
or any other obligation or agreement of the Company under
the Merger Agreement or this Agreement (after giving
effect to any materiality or similar qualifications
contained therein); and (iii) except as otherwise agreed
to in writing in advance by Parent, against the following

actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (A) any extraor-
dinary corporate transaction, such as a merger, consoli-
dation or other business combination involving the Compa-
ny or its Subsidiaries; (B) a sale, lease or transfer of
a material amount of assets of the Company or its Subsid-
iaries, or a reorganization, recapitalization, dissolu-
tion or liquidation of the Company or its Subsidiaries;
(C)(1) any change in a majority of the persons who con-
stitute the board of directors of the Company; (2) any
change in the present capitalization of the Company or
any amendment of the Company's Restated Articles of
Incorporation or By-laws; (3) any other material change
in the Company's corporate structure or business; or (4)
any other action which, in the case of each of the mat-
ters referred to in clauses C(1), (2), (3) or (4), is
intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely
affect the Merger and the transactions contemplated by
this Agreement and the Merger Agreement. The Shareholder
shall not enter into any agreement or understanding with
any person or entity the effect of which would be incon-
sistent or violative of the provisions and agreements
contained in this Section 3. Notwithstanding anything to
the contrary contained in this Agreement, Mr. Robinson
shall be free to act in his capacity as a director of the
Company and discharge his fiduciary duties as a director.

4. Option. In order to induce Parent and Pur-
chaser to enter into the Merger Agreement, the Share-
holder hereby grants to Parent an irrevocable option (a
"Stock Option") to purchase the Shares from the Share-
holder (the "Option Shares") at a purchase price per
share equal to $11.00 (the "Purchase Price"). If (i) the
Offer is terminated, abandoned or withdrawn by Parent or
Purchaser (whether due to the failure of any of the
conditions thereto or otherwise), or (ii) the Merger
Agreement is terminated in accordance with its terms, the
Stock Option shall, in any such case, become exercisable,
in whole but not in part, upon the first to occur of any
such event and remain exercisable in whole but not in
part until the date which is 90 days after the date of
the occurrence of such event (the "90 Day Period"), so
long as: (i) all waiting periods under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), required for the purchase of the Option
Shares upon such exercise shall have expired or been
waived, and (ii) there shall not be in effect any prelim-
inary or final injunction or other order issued by any
court or governmental, administrative or regulatory
agency or authority or legislative body or commission
prohibiting the exercise of the Stock Option pursuant to
this Agreement; provided that if all HSR Act waiting
periods shall not have expired or been waived or there

shall be in effect any such injunction or order, in each
case on the expiration of the 90 Day Period, the 90 Day
Period shall be extended until 5 business days after the
later of (A) the date of expiration or waiver of all HSR
Act waiting periods and (B) the date of removal or lift-
ing of such injunction or order; provided that this
Agreement shall terminate if, after one year following
the commencement of the original 90 Day Period, (A) all
HSR Act waiting periods shall not have expired or been
waived or (B) there shall be in effect any such injunc-
tion or order, and neither Parent nor Purchaser has
exercised the Option. In the event that Parent wishes to
exercise the Stock Option, Parent shall send a written
notice (the "Notice") to the Shareholder identifying the
place and date (not less than two nor more than 20 busi-
ness days from the date of the Notice) for the closing of
such purchase. If within 12 months following the exer-
cise of the Stock Option by Parent, Parent shall sell,
transfer or otherwise dispose of any or all of the Option
Shares to a third party (or realize cash proceeds in
respect of such Shares as a result of a distribution to
shareholders of the Company following the sale of sub-
stantially all of the Company's assets) in connection
with a transaction whereby the third party is acquiring
the entire equity interest in the Company pursuant to a
merger, tender offer, exchange offer, sale of substan-
tially all of the Company's assets or a similar business
combination (a "Subsequent Sale") at a per share price
(or equivalent per Share cash proceeds, in the case of a
sale of substantially all assets) in excess of $13.00
(the "Subsequent Sale Price"), then Parent shall promptly
pay to the Shareholder an amount equal to (A) 25% of the
excess of the Subsequent Sale Price over $13.00 multi-
plied by the number of Option Shares sold in the Subse-
quent Sale, plus (B) an additional 25% of the excess
(which together with the percentage set forth in the
preceding clause (A) aggregates 50% of the excess) (if
any) of the Subsequent Sale Price over $14.00 multiplied
by the number of Option Shares sold in the Subsequent
Sale.

5. Other Covenants, Representations and War-
ranties. The Shareholder hereby represents and warrants
to Parent as follows:

(a) Ownership of Shares. The Shareholder is
the record and Beneficial Owner of the Shares (except for
77,500 of the Shares held in the Shareholder's brokerage
account, as to which the Shareholder is the Beneficial
Owner only). On the date hereof, the Existing Shares
constitute all of the Shares owned of record or Benefi-
cially Owned by the Shareholder. The Shareholder has
sole voting power and sole power to issue instructions
with respect to the matters set forth in Sections 2 and 3

hereof, sole power of disposition, sole power of conver-
sion, sole power to demand appraisal rights and sole
power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Exist-
ing Shares with no limitations, qualifications or re-
strictions on such rights, subject to applicable securi-
ties laws and the terms of this Agreement, except that
80,705 Shares are pledged to Michigan National Bank (the
"Bank") to secure a loan (the "Loan") in the amount of
approximately $400,000 made to Mr. Robinson.

(b) Power; Binding Agreement. The Trustee is
a trustee of a valid charitable remainder trust created
under the laws of the State of Michigan. The Shareholder
has the legal capacity, power and authority to enter into
and perform all of its obligations under this Agreement.
The execution, delivery and performance of this Agreement
by the Shareholder will not violate any other agreement
to which the Shareholder is a party including, without
limitation, any voting agreement, proxy arrangement,
pledge agreement, shareholders agreement or voting trust.
This Agreement has been duly and validly executed and
delivered by the Shareholder and constitutes a valid and
binding agreement of the Shareholder, enforceable against
the Shareholder in accordance with its terms except to
the extent such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting credi-
tors rights. There is no beneficiary or holder of a
voting trust certificate or other interest of any trust
of which the Shareholder is a trustee whose consent is
required for the execution and delivery of this Agreement
or the consummation by such Shareholder of the transac-
tions contemplated hereby. No action has been taken with
respect to the Shares since the funding of the Trust and
no other action will be taken with respect to the Shares
except as contemplated herein.

tion) under any of the terms, conditions or provisions of
any note, loan agreement, bond, mortgage, indenture, li-
cense, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind
to which the Shareholder is a party or by which the
Shareholder or any of its properties or assets may be
bound, or (3) violate any order, writ, injunction, de-
cree, judgment, order, statute, rule or regulation appli-
cable to the Shareholder or any of its properties or assets.

(d) No Encumbrances. Except as applicable in
connection with the transactions contemplated by Sections
2 and 5(g) hereof, the Shares and the certificates repre-
senting such Shares are now, and at all times during the
term hereof will be, held by the Shareholder, or by a
nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except
for any such encumbrances or proxies arising hereunder.

(e) No Finder's Fees. Other than existing
financial advisory and investment banking arrangements
and agreements with Peter J. Solomon Company Limited, no
broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connec-
tion with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Shareholder.

(f) No Solicitation. The Shareholder shall
not, in the capacity as a shareholder or otherwise (in-
cluding in the case of Mr. Robinson as an officer and/or
director of the Company), directly or indirectly, solicit
(including by way of furnishing information) or respond
to any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of
Parent) concerning any merger, tender offer, exchange
offer, sale of assets, sale of shares of capital stock or
debt securities or similar transactions involving the
Company or any Subsidiary, division or operating or
principal business unit of the Company, except as permit-
ted by Sections 1.2(a) and 5.7 of the Merger Agreement.
If the Shareholder receives any such inquiry or proposal,
then the Shareholder shall promptly inform Parent of the
existence thereof in the same manner set forth in Section
5.7 of the Merger Agreement. The Shareholder will imme-
diately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the forego-
ing.

(g) Restriction on Transfer, Proxies and Non-
Interference. Except as applicable in connection with

the transactions contemplated by Section 2 hereof, the
Shareholder shall not, directly or indirectly: (i) offer
for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any con-
tract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, trans-
fer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares or any interest
therein; (ii) except as contemplated by this Agreement,
grant any proxies or powers of attorney, deposit the
Shares into a voting trust or enter into a voting agree-
ment with respect to the Shares; or (iii) take any action
that would make any representation or warranty of the
Shareholder contained herein untrue or incorrect or have
the effect of preventing or disabling the Shareholder
from performing its obligations under this Agreement.
Notwithstanding the foregoing, the Shareholder may (be-
fore or after tendering Shares in the Offer) transfer all
or part of its interests in all or some of the Shares to
a charitable organization, grantor retained annuity
trust, charitable remainder trust or similar entity, as
long as such recipient agrees in writing to be bound by
the terms of this Agreement.

(h) Reliance by Parent. The Shareholder
understands and acknowledges that Parent is entering
into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon the Shareholder's execution
and delivery of this Agreement.

(i) Further Assurances. From time to time, at
the other party's request and without further consider-
ation, each party hereto shall execute and deliver such
additional documents
and take all such further lawful action as may be neces-
sary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions
contemplated by this Agreement.

1. Stop Transfer. The Shareholder agrees
with, and covenants to, Parent that the Shareholder shall
not request that the Company register the transfer (book-
entry or otherwise) of any certificate or uncertificated
interest representing any of the Shares, unless such
transfer is made in compliance with this Agreement (in-
cluding the provisions of Section 2 hereof). In the
event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock divi-
dend, split-up, recapitalization, combination, exchange
of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such
stock dividends and distributions and any shares into
which or for which any or all of the Shares may be
changed or exchanged.

2. Termination. Except as otherwise provided
herein, including, but not limited to, Section 4 hereof,
the covenants and agreements contained herein with re-
spect to the Shares shall terminate upon the termination
of the Merger Agreement in accordance with its terms.

3. Confidentiality. The Shareholder recog-
nizes that successful consummation of the transactions
contemplated by this Agreement may be dependent upon
confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure
thereof, the Shareholder hereby agrees not to disclose or
discuss such matters with anyone not a party to this
Agreement (other than its counsel and advisors, if any)
without the prior written consent of Parent, except for
filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its
counsel advises are necessary in order to fulfill its
obligations imposed by law, in which event such Share-
holder shall give notice of such disclosure to Parent as
promptly as practicable so as to enable Parent to seek a
protective order from a court of competent jurisdiction
with respect thereto.

4. Termination of Pledge.

(a) The parties hereto acknowledge that 80,705
of the Shares (the "Pledged Shares") are pledged to the
Bank (the "Pledge") to secure the Loan and the represen-
tations and warranties contained herein, to the extent
inconsistent with such Pledge, are qualified by reference
to such Pledge. The Shareholder agrees to terminate the
Pledge within 10 calendar days after commencement of the
Offer and to take all actions necessary to eliminate any
pledge, lien, encumbrance or security interest on the
Pledged Shares by such tenth calendar day.

(b) In the event Parent purchases Shares
pursuant to the Offer and the Shareholder has not ten-
dered the Pledged Shares because the Pledge was not
terminated as required by Section 9(a) above, the parties
agree that such Shares will be acquired in the Merger.

(c) In the event that the Shareholder shall
have breached this Agreement by failing to comply with
the provisions of Section 9(a), the parties agree that
Parent may, in its sole discretion, pay the Loan in order
to release the Shares from the Pledge, and Parent shall
deduct from the Purchase Price upon exercise of the Stock
Option the sum of (i) the amount paid to satisfy (in
whole or in part) the Loan, (ii) interest on such amount
at the prime rate of the Bank calculated from the date of
payment of the Loan until receipt of the Pledged Shares

by Parent, and (iii) any transaction costs in connection
therewith (including attorney's fees and expenses).

5. Miscellaneous.

(a) Entire Agreement. This Agreement and the
Merger Agreement constitute the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect
to the subject matter hereof.

(b) Binding Agreement. The Shareholder agrees
that this Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person
or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or other-
wise, including, without limitation, the Shareholder's
heirs, distributees, guardians, administrators, execu-
tors, legal representatives, or successors or other
transferees (for value or otherwise) and any other suc-
cessors in interest. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the per-
formance of all obligations under this Agreement of the
transferor.

(c) Assignment. This Agreement shall not be
assigned by operation of law or otherwise without the
prior written consent of the other party, provided that
Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall
relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.

(d) Amendments, Waivers, Etc. This Agreement
may not be amended, changed, supplemented, waived or
otherwise modified or terminated, except upon the execu-
tion and delivery of a written agreement executed by the
parties hereto.

(e) Notices. All notices, requests, claims,
demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have
been duly received if given) by hand delivery or telecopy
(with a confirmation copy sent for next day delivery via
courier service, such as Federal Express), or by any
courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be
delivered to the respective parties at the following
addresses:

If to Shareholder
or Mr. Robinson: Mr. Jack A. Robinson
1589 Kirkway
Bloomfield Hills, MI 48013
Telephone No.:
Telecopy No.:
copy to:
Ira J. Jaffe, Esq.
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
Suite 2400
One Woodward Avenue
Detroit, Michigan 48228
Telephone No.: (313) 961-8380
Telecopy No.: (313) 961-8358

If to Parent: Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011
Attention: General Counsel
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5952

copy to: Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
Attention: Nancy A. Lieberman, Esq.

or to such other address as the person to whom notice is
given may have previously furnished to the others in
writing in the manner set forth above.

(f) Severability. Whenever possible, each
provision or portion of any provision of this Agreement
will be interpreted in such manner as to be effective and
valid under applicable law but if any provision or por-
tion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in
such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of
any provision had never been contained herein.

it would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees
that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance
of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.

(h) Remedies Cumulative. All rights, powers
and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or
remedy by such party.

(i) No Waiver. The failure of any party
hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance
by any other party hereto with its obligations hereunder,
and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.

(j) No Third Party Beneficiaries. This Agree-
ment is not intended to be for the benefit of, and shall
not be enforceable by, any person or entity who or which
is not a party hereto.

(k) Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the
State of Delaware, without giving effect to the princi-
ples of conflicts of law thereof.

(l) Jurisdiction. Each party hereby irrevoca-
bly submits to the exclusive jurisdiction of the Court of
Chancery in the State of Delaware or the United States
District Court for the Southern District of New York or
any court of the State of New York located in the City of
New York in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conve-
niens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for
the purpose referred to in this paragraph (l) and shall
not be deemed to be a general submission to the jurisdic-
tion of said Courts or in the States of Delaware or New
York other than for such purposes. Each party hereto
hereby waives any right to a trial by jury in connection
with any such action, suit or proceeding.

(m) Descriptive Headings. The descriptive
headings used herein are inserted for convenience of
reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.

(n) Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed to
be an original, but all of which, taken together, shall
constitute one and the same Agreement.

IN WITNESS WHEREOF, Parent, the Shareholder and
Mr. Robinson have caused this Agreement to be duly exe-
cuted as of the day and year first above written.

RITE AID CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: President and Chief
Operating Officer

LAKE ACQUISITION CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: Vice President

By:/s/ Jack A. Robinson
Jack A. Robinson, Trustee,
Agent and Nominee

By:/s/ Jack A. Robinson
Jack A. Robinson, Beneficiary

By:/s/ Jack A. Robinson
Jack A. Robinson, Grantor

/s/ Jack A. Robinson
Jack A. Robinson

Exhibit 99.(c)(3)

CONFORMED COPY

SHAREHOLDERS AGREEMENT

AGREEMENT, dated as of December 23, 1994, among
Rite Aid Corporation, a Delaware corporation ("Parent"),
Lake Acquisition Corporation, a Delaware corporation and
a direct wholly owned subsidiary of Parent ("Purchaser"),
Mrs. Aviva Robinson ("Mrs. Robinson") and Mrs. Aviva
Robinson, the trustee, grantor and beneficiary (respec-
tively, the "Trustee", "Grantor" and "Beneficiary") under
the Trust Agreement (the "Trust"), dated as of March 12,
1991, by and between Aviva Robinson, as grantor, and
Aviva Robinson, as trustee, (Mrs. Robinson and the Trust-
ee are collectively referred to herein as the "Sharehold-
er").

W I T N E S S E T H:

WHEREAS, as an inducement and a condition to
entering into the Merger Agreement, Parent has required
that the Shareholder agree, and the Shareholder has
agreed, to enter into this Agreement;

follows:

1. Definitions. For purposes of this Agree-
ment:

(c) "Person" shall mean an individual, corpo-
ration, partnership, joint venture, association, trust,
unincorporated organization or other entity.

2. Tender of Shares.

(a) The Shareholder hereby agrees to validly
tender (or cause the record owner of such shares to
tender), and not to withdraw, pursuant to and in accor-
dance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursu-
ant to Section 1.1 of the Merger Agreement and Rule 14d-2
under the Exchange Act, 42,286 shares of Company Common
Stock (the "Existing Shares", and together with any
shares of Company Common Stock acquired by the Share-
holder in any capacity after the date hereof and prior to
the termination of this Agreement whether upon the exer-
cise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by
means of purchase, dividend, distribution, gift, bequest,
inheritance or as successor in interest in any capacity
(including a fiduciary capacity) or otherwise, the "
Shares"), Beneficially Owned by the Shareholder. The
Shareholder hereby acknowledges and agrees that the

Parent's and the Purchaser's obligation to accept for
payment and pay for Shares in the Offer, including the
Shares Beneficially Owned by such Shareholder, is subject
to the terms and conditions of the Offer. The parties
agree that the Shareholder will, for all Shares tendered
by Shareholder in the Offer and accepted for payment and
paid for by Purchaser, receive the same per Share consid-
eration paid to other shareholders who have tendered into
the Offer.

ny or its Subsidiaries; (B) a sale, lease or transfer of
a material amount of assets of the Company or its Subsid-
iaries, or a reorganization, recapitalization, dissolu-
tion or liquidation of the Company or its Subsidiaries;
(C)(1) any change in a majority of the persons who con-
stitute the board of directors of the Company; (2) any
change in the present capitalization of the Company or
any amendment of the Company's Restated Articles of
Incorporation or By-laws; (3) any other material change
in the Company's corporate structure or business; or (4)
any other action which, in the case of each of the mat-
ters referred to in clauses C(1), (2), (3) or (4), is
intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially adversely
affect the Merger and the transactions contemplated by
this Agreement and the Merger Agreement. The Shareholder
shall not enter into any agreement or understanding with
any person or entity the effect of which would be incon-
sistent or violative of the provisions and agreements
contained in this Section 3.

the commencement of the original 90 Day Period, (A) all
HSR Act waiting periods shall not have expired or been
waived or (B) there shall be in effect any such injunc-
tion or order, and neither Parent nor Purchaser has
exercised the Option. In the event that Parent wishes to
exercise the Stock Option, Parent shall send a written
notice (the "Notice") to the Shareholder identifying the
place and date (not less than two nor more than 20 busi-
ness days from the date of the Notice) for the closing of
such purchase. If within 12 months following the exer-
cise of the Stock Option by Parent, Parent shall sell,
transfer or otherwise dispose of any or all of the Option
Shares to a third party (or realize cash proceeds in
respect of such Shares as a result of a distribution to
shareholders of the Company following the sale of sub-
stantially all of the Company's assets) in connection
with a transaction whereby the third party is acquiring
the entire equity interest in the Company pursuant to a
merger, tender offer, exchange offer, sale of substan-
tially all of the Company's assets or a similar business
combination (a "Subsequent Sale") at a per share price
(or equivalent per Share cash proceeds, in the case of a
sale of substantially all assets) in excess of $13.00
(the "Subsequent Sale Price"), then Parent shall promptly
pay to the Shareholder an amount equal to (A) 25% of the
excess of the Subsequent Sale Price over $13.00 multi-
plied by the number of Option Shares sold in the Subse-
quent Sale, plus (B) an additional 25% of the excess
(which together with the percentage set forth in the
preceding clause (A) aggregates 50% of the excess) (if
any) of the Subsequent Sale Price over $14.00 multiplied
by the number of Option Shares sold in the Subsequent
Sale.

5. Other Covenants, Representations and War-
ranties. The Shareholder hereby represents and warrants
to Parent as follows:

(a) Ownership of Shares. The Shareholder is
the record and Beneficial Owner of the Shares. On the
date hereof, the Existing Shares constitute all of the
Shares owned of record or Beneficially Owned by the
Shareholder. The Shareholder has sole voting power and
sole power to issue instructions with respect to the
matters set forth in Sections 2 and 3 hereof, sole power
of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of
the matters set forth in this Agreement, in each case
with respect to all of the Existing Shares with no limi-
tations, qualifications or restrictions on such rights,
subject to applicable securities laws and the terms of
this Agreement.

(b) Power; Binding Agreement. The Trustee is

a trustee of a valid inter-vivos trust created under the
laws of the State of Michigan. The Shareholder has the
legal capacity, power and authority to enter into and
perform all of its obligations under this Agreement. The
execution, delivery and performance of this Agreement by
the Shareholder will not violate any other agreement to
which the Shareholder is a party including, without limi-
tation, any voting agreement, proxy arrangement, pledge
agreement, shareholders agreement or voting trust. This
Agreement has been duly and validly executed and deliv-
ered by the Shareholder and constitutes a valid and bind-
ing agreement of the Shareholder, enforceable against the
Shareholder in accordance with its terms except to the
extent such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting credi-
tors rights. There is no beneficiary or holder of a
voting trust certificate or other interest of any trust
of which the Shareholder is a trustee whose consent is
required for the execution and delivery of this Agreement
or the consummation by such Shareholder of the transac-
tions contemplated hereby.

(c) No Conflicts. Except for (i) filings
under the HSR Act and the Exchange Act, (A) no filing
with, and no permit, authorization, consent or approval
of, any state or federal public body or authority is
necessary for the execution of this Agreement by the
Shareholder and the consummation by the Shareholder of
the transactions contemplated hereby and (B) none of the
execution and delivery of this Agreement by the Share-
holder, the consummation by the Shareholder of the trans-
actions contemplated hereby or compliance by the Share-
holder with any of the provisions hereof shall (1) con-
flict with or result in any breach of any applicable
organizational documents applicable to the Shareholder,
(2) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a
default (or give rise to any third party right of termi-
nation, cancellation, material modification or accelera-
tion) under any of the terms, conditions or provisions of
any note, loan agreement, bond, mortgage, indenture, li-
cense, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind
to which the Shareholder is a party or by which the
Shareholder or any of its properties or assets may be
bound, or (3) violate any order, writ, injunction, de-
cree, judgment, order, statute, rule or regulation appli-
cable to the Shareholder or any of its properties or as-
sets.

term hereof will be, held by the Shareholder, or by a
nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except
for any such encumbrances or proxies arising hereunder.

(f) No Solicitation. The Shareholder shall
not, in the capacity as a shareholder or otherwise, di-
rectly or indirectly, solicit (including by way of fur-
nishing information) or respond to any inquiries or the
making of any proposal by any person or entity (other
than Parent or any affiliate of Parent) concerning any
merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or
similar transactions involving the Company or any Subsid-
iary, division or operating or principal business unit of
the Company, except as permitted by Sections 1.2(a) and
5.7 of the Merger Agreement. If the Shareholder receives
any such inquiry or proposal, then the Shareholder shall
promptly inform Parent of the existence thereof in the
same manner set forth in Section 5.7 of the Merger Agree-
ment. The Shareholder will immediately cease and cause
to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with
respect to any of the foregoing.

(g) Restriction on Transfer, Proxies and Non-
Interference. Except as applicable in connection with
the transactions contemplated by Section 2 hereof, the
Shareholder shall not, directly or indirectly: (i) offer
for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any con-
tract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, trans-
fer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares or any interest
therein; (ii) except as contemplated by this Agreement,
grant any proxies or powers of attorney, deposit the
Shares into a voting trust or enter into a voting agree-
ment with respect to the Shares; or (iii) take any action
that would make any representation or warranty of the
Shareholder contained herein untrue or incorrect or have
the effect of preventing or disabling the Shareholder
from performing its obligations under this Agreement.

Notwithstanding the foregoing, the Shareholder may (be-
fore or after tendering Shares in the Offer) transfer all
or part of its interests in all or some of the Shares to
a charitable organization, grantor retained annuity
trust, charitable remainder trust or similar entity, as
long as such recipient agrees in writing to be bound by
the terms of this Agreement.

(i) Further Assurances. From time to time, at
the other party's request and without further consider-
ation, each party hereto shall execute and deliver such
additional documents and take all such further lawful
action as may be necessary or desirable to consummate
and make effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.

6. Stop Transfer. The Shareholder agrees
with, and covenants to, Parent that the Shareholder shall
not request that the Company register the transfer (book-
entry or otherwise) of any certificate or uncertificated
interest representing any of the Shares, unless such
transfer is made in compliance with this Agreement (in-
cluding the provisions of Section 2 hereof). In the
event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock divi-
dend, split-up, recapitalization, combination, exchange
of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such
stock dividends and distributions and any shares into
which or for which any or all of the Shares may be
changed or exchanged.

7. Termination. Except as otherwise provided
herein, including, but not limited to, Section 4 hereof,
the covenants and agreements contained herein with re-
spect to the Shares shall terminate upon the termination
of the Merger Agreement in accordance with its terms.

8. Confidentiality. The Shareholder recog-
nizes that successful consummation of the transactions
contemplated by this Agreement may be dependent upon
confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure
thereof, the Shareholder hereby agrees not to disclose or
discuss such matters with anyone not a party to this
Agreement (other than its counsel and advisors, if any)
without the prior written consent of Parent, except for

filings required pursuant to the Exchange Act and the
rules and regulations thereunder or disclosures its
counsel advises are necessary in order to fulfill its
obligations imposed by law, in which event such Share-
holder shall give notice of such disclosure to Parent as
promptly as practicable so as to enable Parent to seek a
protective order from a court of competent jurisdiction
with respect thereto.

9. Miscellaneous.

of delivery. All communications hereunder shall be
delivered to the respective parties at the following
addresses:

If to Shareholder
or Mrs. Robinson: Mrs. Aviva Robinson
1589 Kirkway
Bloomfield Hills, MI 48013
Telephone No.:
Telecopy No.:
copy to:
Ira J. Jaffe, Esq.
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
Suite 2400
One Woodward Avenue
Detroit, Michigan 48228
Telephone No.: (313) 961-8380
Telecopy No.: (313) 961-8358

If to Parent: Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011
Attention: General Counsel
Telephone No.: (717) 761-2633
Telecopy No.: (717) 975-5952

copy to: Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
Attention: Nancy A. Lieberman, Esq.

or to such other address as the person to whom notice is
given may have previously furnished to the others in
writing in the manner set forth above.

(g) Specific Performance. Each of the parties
hereto recognizes and acknowledges that a breach by it of
any covenants or agreements contained in this Agreement
will cause the other party to sustain damages for which
it would not have an adequate remedy at law for money
damages, and therefore each of the parties hereto agrees
that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance
of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.

(j) No Third Party Beneficiaries. This Agree-
ment is not intended to be for the benefit of, and shall
not be enforceable by, any person or entity who or which
is not a party hereto.

(k) Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the
State of Delaware, without giving effect to the princi-
ples of conflicts of law thereof.

York other than for such purposes. Each party hereto
hereby waives any right to a trial by jury in connection
with any such action, suit or proceeding.

(n) Counterparts. This Agreement may be exe-
cuted in counterparts, each of which shall be deemed to
be an original, but all of which, taken together, shall
constitute one and the same Agreement.

IN WITNESS WHEREOF, Parent, the Shareholder and
Mrs. Robinson have caused this Agreement to be duly exe-
cuted as of the day and year first above written.

RITE AID CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: President and Chief
Operating Officer

LAKE ACQUISITION CORPORATION

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: Vice President

By:/s/ Aviva Robinson
Aviva Robinson, Trustee

By:/s/ Aviva Robinson
Aviva Robinson, Beneficiary

By:/s/ Aviva Robinson
Aviva Robinson, Grantor

/s/ Aviva Robinson
Aviva Robinson

Exhibit 99.(c)(4)

CONFORMED COPY

CONSULTING AGREEMENT

CONSULTING AGREEMENT, dated as of December 23, 1994,
between Rite Aid Corporation, a Delaware corporation (the
"Company"), and Jack A. Robinson (the "Executive").

WHEREAS, the Executive is currently employed by
Perry Drug Stores, Inc. ("Perry") as President, Chief
Executive Officer and Chairman of the Board of Directors
of Perry;

WHEREAS, pursuant to the Agreement and Plan of
Merger by and among the Company, Lake Acquisition Corpo-
ration, a Delaware Corporation and a wholly owned subsid-
iary of the Company (the "Subsidiary"), and Perry, dated
as of December 23, 1994 (the "Merger Agreement"), the
Subsidiary will commence a tender offer (the "Offer") for
all outstanding shares of Common Stock, par value $.05
per share (the "Shares"), of the Company and will there-
after merge with Perry in a merger and thereafter the
surviving corporation will be referred to as the "Employ-
er" hereunder; and

WHEREAS, the Company desires to induce the Executive
after the consummation of the Offer (the "Effective
Date") to act as a consultant to the Company and the
Executive desires to commit himself to act as a consul-
tant to the Company.

NOW THEREFORE, in order to effect the foregoing, the
Company and the Executive wish to enter into a consulting
agreement upon the terms and subject to the conditions
set forth below. Accordingly, in consideration of the
premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:

1. Term and Services to be Provided. Com-
mencing on the Effective Date and continuing until the
tenth anniversary thereof (the "Term"), the Executive
agrees to provide consulting services to the Company from
time to time at the reasonable request of the Company.
Such consulting services shall consist of advising the
Company and the Employer with respect to general business
matters, issues and strategies relating to the Company's
business, including issues concerning real estate and
community, governmental and industry relations. For one
year following the Effective Time, the Executive will

serve as President of Rite Aid of Michigan, Inc. Such
services shall be rendered from the Detroit, Michigan
metropolitan area, and the Executive shall not be re-
quired to travel substantially to render such services.
In the event that the Offer is not consummated prior to
June 1, 1995 (or if the Offer or Merger Agreement is
earlier terminated), this Consulting Agreement shall be
cancelled and shall be of no force or effect.

2. Compensation.

(a) During the Term, the Company shall
pay the Executive consulting fees at the rate of $225,000
per annum, payable in arrears on a semi-monthly basis.

(b) In addition to the cash compensation
specifically provided under this Consulting Agreement,
during the Term, the Company shall provide or make avail-
able to the Executive and his spouse at the Company's ex-
pense the same medical, health and life insurance plans
or coverage as the Executive currently enjoys, or plans
or programs providing the Executive and his spouse with
at least substantially equivalent benefits.

(c) Commencing on the Effective Date
until the second anniversary thereof, the Company shall
provide the Executive with the same perquisites that
Perry currently provides to him; provided, however, that
the Company's obligation to provide the Executive with
one of the two cars currently provided to him by Perry
and the accompanying driver shall expire on the first
anniversary of the Effective Date.

(d) Commencing on the Effective Date
until the second anniversary thereof, the Company shall
provide the Executive with office space in the Detroit,
Michigan metropolitan area and related support services
that, in the Company's and the Executive's mutual reason-
able judgment, are adequate for the performance of his
duties hereunder.

(e) Commencing on the Effective Date
until the fifth anniversary thereof, the Company shall
pay all reasonable registration, travel and lodging ex-
penses incurred by the Executive and his spouse related
to the Executive's serving as one of the representatives
of the Company at the National Association of Chain Drug
Stores ("NACDS") annual convention and at up to three
mid-year meetings of the NACDS (or its board of direc-
tors) per calendar year.

(f) Any payments made hereunder shall be
made subject to applicable federal, state and local
withholding obligations. In addition to the compensation

described in Section 2(a) of this Consulting Agreement,
the Company, promptly following receipt of appropriate
documentation, shall reimburse the Executive for the rea-
sonable ordinary and necessary business expenses that he
incurs in connection with rendering services under this
Consulting Agreement. Except as otherwise provided in
this Section 2(f) and in this Consulting Agreement, all
payments and other benefits hereunder (including pursuant
to Section 3 hereof) shall be made without set-off for
any reason whatever.

3. Termination.

(a) Death. The Executive's consulting
relationship with the Company hereunder shall terminate
upon his death, provided that, if the Executive dies
during the Term, the Company shall pay to the beneficiary
as shall be designated by the Executive by written notice
to the Company, the compensation provided in Section 2(a)
hereof, that would have been paid to Executive hereunder
for the remainder of the Term. Such compensation shall
be paid in semi-monthly installments of substantially
equal amounts. In addition, the Company shall provide to
the Executive's spouse the benefits provided in Section
2(b) hereof for the remainder of the Term.

(b) Disability. If, as a result of the
Executive's incapacity due to physical or mental illness,
Executive shall be unable to perform the consulting
services described herein for a continuous period of six
months, the Company may terminate the Executive's con-
sulting relationship with the Company. In such event,
the Executive shall receive the compensation provided in
Section 2(a) hereof in semi-monthly installments of
substantially equal amounts and the Executive and his
spouse shall receive the benefits provided in Section
2(b) hereof for the remainder of the Term.

4. Noncompetition; Confidentiality.

(a) The Executive agrees that during the
Term and for five years following termination of his
services as a consultant hereunder, he will not:

(i) directly or indirectly, either
as owner, partner, officer, employee, agent or
consultant or in any other capacity, engage in or be
employed in any way by any business that is competi-
tive with the business of the Company and/or the
Employer (and their subsidiaries and affiliates)
then being conducted in any locality or region in
North America;

(ii) whether for his own account or

for the account of any other person, willfully and
intentionally interfere with the relationship of the
Company and/or the Employer (or any of their subsid-
iaries or affiliates) with any person who at any
time during the Term was an employee, customer or
supplier of, or in the habit of dealing with, the
Company, the Employer and/or any of their subsidiar-
ies or affiliates;

provided, however, that the Executive may own up to five
percent of any class of stock of a publicly-traded compa-
ny.

(b) The Executive recognizes and acknowl-
edges that, either during or after the Term, the Execu-
tive will not, except as may otherwise be required by
law, directly or indirectly, willfully or knowingly dis-
close or make available to any person, firm, corporation,
association or other entity for any reason or purpose
whatsoever, or willfully or knowingly use or cause to be
used in any manner adverse to the interests of the Em-
ployer or the Company any Confidential Information (as
defined below). The Executive agrees that, upon termina-
tion of services as a consultant of the Company, all
Confidential Information in his possession that is in
written or other tangible form (together with all copies
or duplicates thereof) shall forthwith be returned to the
Company and shall not be retained by the Executive or
furnished to any third party, either by sample, facsimi-
le, film, audio or video cassettes, electronic data,
verbal communication or any other means of communication;
provided, however, that the Executive shall not be obli-
gated to treat as confidential, or return to the Company
copies of, any Confidential Information that (1) was
publicly known at the time of disclosure to the Execu-
tive, (2) becomes publicly known or available thereafter
other than by any means in violation of this Consulting
Agreement or (3) is lawfully disclosed to the Executive
by a third party.

(c) In the event that the Executive is
requested or required (by oral questions, interrogato-
ries, requests for information or documents, subpoena,
Civil Investigative Demand or similar process) to dis-
close any Confidential Information, it is agreed that the
Executive will provide the Company with prompt notice of
such request(s) so that it may seek an appropriate pro-
tective order and/or waive the Executive's compliance
with the provisions of this Consulting Agreement. It is
further agreed that if, in the absence of a protective
order or the receipt of a waiver hereunder, the Executive
is nonetheless, in the reasonable opinion of his counsel,
compelled to disclose information concerning the Company
to any court or governmental agency or authority or to a

civil litigant or any other party or else stand liable
for contempt or suffer other censure or penalty, the
Executive may disclose such information to such tribunal
without liability hereunder.

(d) As used in this Consulting Agreement
the term "Confidential Information" means:

(i) information disclosed to Execu-
tive or known by the Executive as a consequence of
or through his relationship with the Employer or the
Company not generally known in the pharmaceutical
industry, advertising, public affairs, lobbying, or
public relations businesses, about the Employer or
the Company or the Employer's or the Company's cli-
ents, advertising methods, public relations methods,
business methods, organization, procedures or fi-
nances, including, without limitation, information
of or relating to the pharmaceutical industry,
advertising programs, advertising copy, advertising
techniques, art work, designs, contracts, arrange-
ments, research, trade secrets, information regard-
ing trademarks or other intellectual property
rights, customer lists, product and service lines,
marketing data and any related or other technical,
corporate or trade information; and

(ii) information disclosed to the
Executive or known by the Executive as a consequence
of or through his relationship with the Employer or
the Company, not generally known in the businesses
in which the Employer's or the Company's clients are
or may be engaged, about the products, processors,
and services of the Employer's or the Company's
clients, including, without limitation, information
of or relating to the pharmaceutical industry, pub-
licity, publications, media, research, development,
inventions, manufacture, purchase, engineering,
designs, methods, processes, analytical results and
any related or other technical, corporate, profes-
sional or trade information.

(e) The Executive understands that the
agreements contained in this Section 4 are necessary to
protect, among other things, the trade secrets, propri-
etary information, confidential information, customer and
supplier lists and know-how by preventing the Executive
from engaging in activities that would inherently create
a risk of the Executive engaging in unfair trade practic-
es.

5. Remedies; Cessation of Payment Obligation.

(a) In the event of a claimed breach by the

Executive of the terms of this Consulting Agreement, the
Company shall, after giving the Executive notice and a
reasonable opportunity to cure such claimed breach, be
entitled to institute legal proceedings to obtain damages
for any such breach, or to enforce the specific perfor-
mance of Section 4 of this Consulting Agreement by the
Executive and to enjoin the Executive from any further
violation of Section 4. Only after the successful adju-
dication resulting in a final, nonappealable judgment in
favor of the Company or the Employer to the effect that
the Executive has breached this Consulting Agreement,
then all rights of the Executive under this Consulting
Agreement shall immediately terminate and neither the
Employer nor the Company shall thereafter have any obli-
gation to pay any amounts to the Executive in connection
with the obligations of the Employer or the Company under
this Consulting Agreement or otherwise and the Company
shall be entitled to exercise such remedies cumulatively
or in conjunction with all other rights and remedies
provided by law or in equity. The Executive acknowledg-
es, however, that the remedies at law for any breach by
him of the provisions of Section 4 may be inadequate and
that the Company shall be entitled to injunctive relief
against him in the event of any breach.

(b) In the event that, prior to the purchase
of Shares pursuant to the Offer, the Shares that are
pledged to Michigan National Bank to secure the loan
referenced in Section 9 of the Shareholders Agreement by
and among the Company, the Subsidiary and the Executive,
dated as of December 23, 1994, are not released from such
pledge or are subject to any lien, encumbrance or securi-
ty, the Company, in its sole discretion, shall be enti-
tled to cease payment under this Consulting Agreement,
and to withhold any amounts otherwise due hereunder until
such time as all such Shares are delivered to the Company
free and clear of all pledges, liens, security interests
and encumbrances.

6. Litigation Expenses. In the event of any
litigation in any action to enforce a right under this
Consulting Agreement, each party hereto shall bear its
own expenses.

7. Notice. For the purposes of this Con-
sulting Agreement, notices, demands and all other commu-
nications provided for in this Consulting Agreement shall
be in writing and shall be deemed to have been duly given
when delivered or (unless otherwise specified) mailed by
United States certified mail, return receipt requested,
postage prepaid, addressed as follows:

If to the Executive:

Jack A. Robinson
1589 Kirkway
Bloomfield Hills, MI 48013

with a copy to:

Ira J. Jaffe, Esq.
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, MI 48226

If to the Employer or the Company:

Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011
Attn: General Counsel

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Nancy A. Lieberman, Esq.

or to such other address as any party may have furnished
to the others in writing in accordance herewith, except
that notices of change of address shall be effective only
upon receipt.

8. Consultant's Independence and Discretion.

(a) Nothing herein contained shall be
construed to constitute the parties hereto as partners or
as joint venturers, or either as agent of the other, or
as employer and employee. By virtue of the relationship
described herein, the Executive's relationship to the
Company during the Term shall only be that of an indepen-
dent contractor and the Executive shall perform all
services pursuant to this Consulting Agreement as an
independent contractor.

(b) Subject only to such specific limita-
tions as are contained in this Consulting Agreement, the
manner, means, details or methods by which the Executive
performs his obligations under this Consulting Agreement
shall be solely within his discretion.

9. Modifications; Waiver Discharge. This
Consulting Agreement is entered into between the Company
and the Executive for the benefit of each of the Company
and the Executive and for the benefit of the Employer.
No provisions of this Consulting Agreement may be modi-

fied, waived or discharged unless such waiver, modifica-
tion or discharge is agreed to in writing signed by the
Executive and the Company's Chief Executive Officer or
such other officer as may be specifically designated by
the Board of Directors of the Company. No waiver by any
party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision
of this Consulting Agreement to be performed by such
other party shall be deemed a waiver of similar or dis-
similar provisions or conditions at the same or at any
prior or subsequent time.

10. Validity. The invalidity or u
nenforceability of any provision or provisions of this
Consulting Agreement shall not affect the validity or
enforceability of any other provision of this Consulting
Agreement, which shall remain in full force and effect;
provided, however, that if any one or more of the terms
contained in Section 4 hereto shall for any reason be
held to be excessively broad with regard to time, dura-
tion, geographic scope or activity, that term shall not
be deleted but shall be reformed and construed in a
manner to enable it to be enforced to the extent compati-
ble with applicable law.

11. Entire Agreement. This Consulting Agree-
ment sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein
and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warran-
ties whether oral or written, by any officer, employee or
representative of any party hereto, and any prior agree-
ment of the parties hereto in respect of the subject
matter contained herein is hereby terminated. No agree-
ments or representations, oral or otherwise, expressed or
implied, with respect to the subject matter hereof have
been made by either party that are not set forth express-
ly in this Consulting Agreement.

12. Assignment. This Consulting Agreement may
not be assigned by the Executive, but may be assigned by
the Company to any successor to its business and will
inure to the benefit and be binding upon any such succes-
sor.

13. Counterparts. This Consulting Agreement
may be executed in several counterparts, each of which
shall be deemed to be an original but all of which to-
gether will constitute one and the same instrument.

14. Headings. The headings contained herein
are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Consulting
Agreement.

15. Governing Law. The validity, interpreta-
tion, construction and performance of this Consulting
Agreement shall be governed by the laws of the State of
Michigan without regard to principles of conflicts of
laws.

IN WITNESS WHEREOF, the parties have executed
this Consulting Agreement on the date and year first
above written.

Rite Aid Corporation

By:/s/ Martin L. Grass
Name: Martin L. Grass
Title: President and Chief
Operating Officer

/s/ Jack A. Robinson
Jack A. Robinson

Exhibit 99.(c)(5)

[Letterhead of Peter J. Solomon Company Limited]

CONFIDENTIALITY AGREEMENT

December 14, 1994

PERSONAL AND CONFIDENTIAL

Mr. Martin L. Grass
President and Chief Operating Officer
Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011

Dear Martin:

In connection with your consideration of a possible transaction with
Perry Drug Stores, Inc. (the "Company"), you will receive certain
information from Peter J. Solomon Company Limited ("PJS") and the Company.
Such information is either non-public, confidential or proprietary in
nature. As a condition to your being furnished this information, you agree
to treat all information concerning the Company which is furnished to you
by or on behalf of the Company together with all analyses, compilations,
studies or other documents, whether prepared by you or your agents,
representatives (including attorneys, accountants and financial advisors)
or employees, which contain or reflect such information (all of which is
herein collectively referred to as the "Confidential Information") in
accordance with the terms of this letter agreement. The term "Confidential
Information" does not include information which (i) is already in your
possession in written form, provided that such information is not known by
you to be subject to another confidentiality agreement with or other
obligation of confidentiality or secrecy to, the Company, (ii) is or
becomes generally available to the public other than as a result of a
disclosure by you, your directors, officers, employees, agents or
representatives, or (iii) becomes available to you from a source other than
the Company, or its agents or representatives, or PJS; provided that such
source is not known by you to be bound by a confidentiality agreement or
other obligation of confidentiality or secrecy.

You hereby agree that the Confidential Information will not be used by
you in any way detrimental to the Company. You also agree that you will
not contact, either directly or indirectly, any director, officer or
employee of the Company, any supplier or direct competitor of the Company,
or any other party to discuss the business or assets or a potential
transaction with or concerning the Company, without first obtaining the
written consent of the Company. You also agree for a period of two years

from the date hereof, not to solicit or hire any of the employees of the
Company with whom you have had contact during the period of your
investigation of the Company, without the prior written consent of the
Company. You further agree that the Confidential Information will be used
solely for the purpose set forth above, and that such information will be
kept confidential by you and your agents and representatives; provided,
however, that (i) any such information may be disclosed to your directors,
officers, employees, agents and representatives who need to know such
information for the purpose of evaluating any such possible transaction (it
being understood that such directors, officers, employees, agents and
representatives shall be informed by you of the confidential nature of such
information), and (ii) any disclosure of such information may be made to
which the Company or PJS consents in writing. You shall be responsible for
any breach of this letter agreement by your directors, officers, employees,
agents or representatives.

In consideration of our furnishing you with Confidential Information,
you also agree that for a period of one year from the date of this letter
agreement, neither you nor any of your directors, officers, employees,
agents or representatives will, without the prior written consent of the
Company:

(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of the
Company or any subsidiary thereof, or of any successor to or
person in control of the Company, or any assets of the Company or
any subsidiary or division thereof or of any such successor or
controlling person;

(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in
the rules of the Securities and Exchange Commission), or seek to
advise or influence any person or entity with respect to the
voting of any voting securities of the Company;

(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or its securities
or assets;

(d) seek or propose to influence or control the Company's management
or policies (or request permission to do so); or

(e) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, in connection with any of the foregoing.

You will promptly advise the Company of any inquiry or proposal made
to you with respect to any of the foregoing. The above notwithstanding,
none of the restrictions in subparagraphs (a), (b), (c), (d) or (e) will
apply in the event that any third party makes an offer to purchase the
assets of, or a controlling interest in the stock of, the Company.

In the event that you or any of your directors, officers, employees,
agents and representatives to whom any Confidential Information is
disclosed is required by law to disclose any Confidential Information, it
is agreed that you will provide the Company with prompt notice thereof so
that the Company may seek an appropriate protective order and/or waive your
or such person's compliance with the provisions hereof, but if in the
absence of a protective order or the receipt of a waiver hereunder, you or
such person is nonetheless, in the opinion of counsel, compelled to
disclose Confidential Information or else stand liable for contempt or
suffer other censure or penalty, you or such other person may disclose such
information as is legally required to be disclosed without penalty
hereunder. You will cooperate with the Company in its efforts to obtain
any appropriate protective order.

In addition, without the prior written consent of the Company, you
will not, and will direct your directors, officers, employees, agents and
representatives not to, disclose to any person either the fact that
discussions or negotiations are taking place concerning a possible
transaction with the Company, or any of the terms, conditions, or other
facts with respect to such transaction, including the status thereof. The
term "person" as used in this letter shall be broadly interpreted to
include without limitation any corporation, company, group, partnership, or
individual.

You understand that the Company has engaged PJS to solicit proposals
for a possible transaction with the Company and to advise the Company in
connection with such proposals. You further acknowledge and agree that the
Company expressly reserves the right in its sole discretion, for any reason
or no reason, at any time and in any respect, with or without notice to any
party, to reject any and all proposals, to terminate discussions with any
or all prospective parties, to negotiate with any party with respect to any
transaction involving the Company, and to consummate any such transaction.

Upon request of the Company or PJS, you shall promptly redeliver to
the Company or PJS the Confidential Information and will not retain any
copies, extracts or other reproductions in whole or in part of such written
material. All documents, memoranda, notes, and other writings whatsoever,
prepared by you or your agents or representatives based on the information
contained in the Confidential Information shall be destroyed and you will
certify as to such destruction upon request.

Although we have endeavored to includein the Confidential Information
material known to us which we believe to be relevant for purpose of your
investigation, you understand that we do not make any representation or
warranty as to the accuracy or completeness of the Confidential
Information. You agree that you shall assume full responsibility for all
conclusions you derive from the Confidential Information and that neither
the Company, PJS, nor any of their affiliates, shall have any liability to
you or any of your agents or representatives resulting from your use of the
Confidential Information. You agree that you shall be entitled to rely
solely on the representations and warranties made to you in a final
purchase agreement regarding a transaction that is executed by the Company.

You agree that the Company shall be entitled to equitable relief,

including injunction, in the event of a breach of this agreement. It is
further understood and agreed that no failure or delay by the Company, in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise of any right, power, or privilege.

The Company reserves the rights to assign all rights underthis
agreement to any entity that consummates a transaction involving the
Company, including without limitation, the right to enforce all of the
terms of this agreement.

This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York.

This agreement represents the entire agreement between the parties on
the subject hereof and all prior agreements and understanding, whether oral
or written, are superseded in their entirety by the terms hereof.

If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this letter, whereupon this letter will
constitute our agreement with respect to the subject matter.

Very truly yours,

PERRY DRUG STORES, INC.

By: /s/ Peter J. Solomon

Peter J. Solomon Company Limited
Financial Advisor

CONFIRMED AND AGREED TO:
RITE AID CORPORATION

By: /s/ Martin L. Grass

Title: President and Chief Operating Officer

Date: