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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) JANUARY 16, 1997
RITE AID CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-5742 23-1614034
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
30 HUNTER LANE, CAMP HILL, PENNSYLVANIA 17011
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717) 761-2633
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ITEM 5. OTHER EVENTS
On December 12, 1996, Rite Aid Corporation (the "Company") acquired
Thrifty PayLess Holdings, Inc. ("Thrifty PayLess") pursuant to a merger of
Thrifty PayLess into the Company (the "Merger"). In connection with the Merger,
the Company entered into an agreement (the "Stockholder Agreement") with Kmart
Corporation ("Kmart"), pursuant to which, among other things, the Company
granted Kmart certain registration rights with respect to the 6,904,764 shares
of common stock, par value $1.00 per share, of the Company ("Common Stock") that
Kmart acquired as a result of the Merger.
Pursuant to its obligations under the Stockholder Agreement, the
Company filed a Registration Statement (File No. 333-19553) with the Securities
and Exchange Commission relating to the 6,904,764 shares of Common Stock owned
by Kmart.
On January 16, 1997, the Company entered into a Pricing Agreement and
an Underwriting Agreement with Kmart and Morgan Stanley & Co. Incorporated
pursuant to which Kmart, as selling stockholder, will sell 6,904,764 shares of
Common Stock.
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by Kmart.
ITEM 7. FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
1.1 -- Pricing Agreement, dated January 16, 1997, among Rite Aid
Corporation, Kmart Corporation and Morgan Stanley & Co.
Incorporated.
1.2 -- Underwriting Agreement, dated January 16, 1997, among
Rite Aid Corporation, Kmart Corporation and Morgan
Stanley & Co. Incorporated.
4.1 -- Stockholder Agreement, dated as of October 13, 1996,
between the Company and Kmart Corporation (previously
filed as Exhibit 2.3 to the Company's Registration
Statement (File No. 333-14759) and incorporated herein by
reference).
-2-
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
RITE AID CORPORATION
By: /s/ Richard Varmecky
----------------------------------------------
Richard Varmecky, Vice President and Treasurer
Date: January 16, 1997
-3-
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
------- -------
1.1 -- Pricing Agreement, dated January 16, 1997, among Rite Aid
Corporation, Kmart Corporation and Morgan Stanley & Co.
Incorporated.
1.2 -- Underwriting Agreement, dated January 16, 1997, among Rite Aid
Corporation, Kmart Corporation and Morgan Stanley & Co.
Incorporated.
4.1 -- Stockholder Agreement, dated as of October 13, 1996, between the
Company and Kmart Corporation (previously filed as Exhibit 2.3 to
the Company's Registration Statement (File No. 333-14759) and
incorporated herein by reference).
<PAGE>
EXHIBIT 1.1
ANNEX 1
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
January 16, 1997
Ladies and Gentlemen:
Kmart Corporation, a Michigan corporation (the "Selling Stockholder"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated January 16, 1997 (the "Underwriting Agreement"),
to sell to the Underwriters named in Schedule I hereto (the "Underwriters") the
number of shares of Common Stock, $1.00 par value, of Rite Aid Corporation, a
Delaware corporation (the "Company"), specified in Schedule II hereto (the
"Designated Securities"). Each of the provisions of the Underwriting Agreement
is incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty that refers to the
Prospectus in Sections 2 and 3 of the Underwriting Agreement shall be deemed to
be a representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of each of the Underwriters of the
Designated Securities pursuant to Section 13 of the Underwriting Agreement and
the address of the Representatives referred to in such Section 13 are set forth
at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Selling Stockholder
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Selling Stockholder, at the time
and place and at the
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2
purchase price to the Underwriters set forth in Schedule II hereto, the number
of Designated Securities set forth opposite the name of such Underwriter in
Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon acceptance hereof by you, on behalf
of each of the Underwriters, this letter and such acceptance hereof, including
the provisions of the Underwriting Agreement incorporated herein by reference,
shall constitute a binding agreement between each of the Underwriters, the
Selling Stockholder and the Company. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is or will be pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company and the Selling Stockholder for examination
upon request.
RITE AID CORPORATION,
by /s/ Franklin C. Brown
--------------------------------
Name: Franklin C. Brown
Title: Executive Vice President
KMART CORPORATION,
by /s/ Michael J. Viola
--------------------------------
Name: Michael J. Viola
Title: Vice President and Treasurer
Accepted as of the
date hereof:
Morgan Stanley & Co. Incorporated
by /s/ Richard Steinman
___________________________
Name: Richard Steinman
Title: Principal
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SCHEDULE I
Underwriter Number of Shares to be Purchased
- ----------- --------------------------------
Morgan Stanley & Co. Incorporated . . 6,904,764
Total . . . . . . . . . . . . . . . . 6,904,764
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SCHEDULE II
Number of Designated Securities: 6,904,764 shares
Price to Public: N/A
Purchase Price by Underwriters: $37.555 per share
Specified Funds for Payment of
Purchase Price: Immediately available funds
(by wire transfer)
Time of Delivery: January 22, 1997
Closing Location: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Names and Addresses
of Representatives: Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Address for Notices, etc.: c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
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EXHIBIT 1.2
EXECUTION COPY
RITE AID CORPORATION
Common Stock
____________________
Underwriting Agreement
----------------------
January 16, 1997
To the Underwriters
to be named in the applicable
Pricing Agreement
supplemental hereto
Ladies and Gentlemen:
From time to time Kmart Corporation, a Michigan corporation (the
"Selling Stockholder"), proposes to enter into one or more Pricing Agreements
(each a "Pricing Agreement") in the form of Annex I hereto, with such additions
and deletions as the parties thereto may determine, and, subject to the terms
and conditions stated herein and therein, to issue and sell to the firms named
in Schedule I to the applicable Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the securities
specified therein) the number of shares of Common Stock, $1.00 par value (the
"Common Stock"), of Rite Aid Corporation, a Delaware corporation (the
"Company"), specified in Schedule II to such Pricing Agreement (with respect to
such Pricing Agreement, the "Designated Securities").
The terms and rights of any particular sale of Designated Securities
shall be as specified in the applicable Pricing Agreement.
1. Particular sales of Designated Securities may be made from time to
time to the Underwriters of such Designated Securities, for whom the firms
designated as representatives of the Underwriters of such Designated Securities
in the applicable Pricing Agreement will act as representatives (the
"Representatives"). The term "Representatives" also refers to a single firm
acting as sole representative of the Underwriters and to Underwriters who act
without any firm being designated as their representative. Except as
incorporated by reference into a Pricing Agreement, this Underwriting Agreement
shall not be construed as an obligation of the Selling Stockholder to sell any
shares of Common Stock or as an obligation of any of the Underwriters to
purchase any shares of Common Stock. The obligation
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2
of the Selling Stockholder to sell any shares of Common Stock shall be evidenced
by the Pricing Agreement with respect to the Designated Securities specified
therein. Each Pricing Agreement shall specify, among other things, the number of
shares of Common Stock being sold, the initial public offering price of such
Designated Securities, the purchase price to the Underwriters of such Designated
Securities, the names of the Underwriters of such Designated Securities, the
names of the Representatives of such Underwriters, and shall set forth the date,
time and manner of delivery of such Designated Securities and payment therefor.
A Pricing Agreement shall be in the form of an executed writing (which may be in
counterparts), and may be evidenced by an exchange of telegraphic communications
or any other rapid transmission device designated to produce a written record of
communications transmitted. The obligations of the Underwriters under this
Agreement and each Pricing Agreement shall be several and not joint.
2. The Company represents and warrants to, and agrees with, each of
the Underwriters and the Selling Stockholder that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 333-19553)
relating to the Designated Securities that may be sold pursuant to the
applicable Pricing Agreement and the offering thereof from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended (the
"Act"); such registration statement and any post-effective amendment
thereto, in the form heretofore delivered or to be delivered to the
Representatives (with exhibits thereto) for delivery to each of the other
Underwriters (without exhibits thereto), has been declared effective by the
Commission in such form; no other document with respect to such
registration statement or document incorporated by reference therein has
been filed or transmitted for filing with the Commission prior to the
effective date of such registration statement; and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or, to the knowledge of the
Company, threatened by the Commission. Any preliminary prospectus in
relation to the applicable Designated Securities included in such
registration statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is hereinafter
called a "Preliminary Prospectus"; the various parts of such registration
statement, including all exhibits thereto, as amended at the time such part
of the registration statement became effective are hereinafter collectively
called the "Registration Statement"; the prospectus relating to the
applicable Designated Securities, in the form in which it has most recently
been filed or transmitted for filing with the Commission on or prior to the
date of this Agreement, is hereinafter called the "Prospectus"; any
reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to the
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3
applicable form under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or Prospectus, as the
case may be, shall be deemed to include any documents filed after such date
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or Prospectus,
as the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any reference to the
Prospectus as amended or supplemented shall be deemed to refer to the
Prospectus as amended or supplemented in relation to the applicable
Designated Securities in the form in which it is first filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
6(a) hereof, including any documents incorporated by reference therein as
of the date of such filing;
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary or make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter of the applicable Designated Securities through the
Representatives, or by the Selling Stockholder, for use in the Prospectus
as amended or supplemented relating to such Designated Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration
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4
Statement and any amendment thereto and as of the applicable filing date as
to the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
(i) in the case of the Registration Statement, not misleading and (ii) in
the case of the Prospectus, in light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter of the applicable Designated Securities through the
Representatives, or by the Selling Stockholder, for use in the Prospectus
as amended or supplemented relating to such Designated Securities;
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware;
(e) The Designated Securities to be sold pursuant to the applicable
Pricing Agreement have been duly authorized and validly issued, are fully
paid and nonassessable and are free of any preemptive or similar rights;
and such Designated Securities conform, in all material respects, to the
description thereof contained in the Prospectus as amended or supplemented
with respect to such Designated Securities;
(f) The compliance by the Company with all of the provisions of this
Agreement and the applicable Pricing Agreement, and the consummation of the
transactions herein and therein contemplated will not (1) conflict with or
result in a breach or violation by the Company of any of the terms or
provisions of, or constitute a default by the Company under, any indenture,
mortgage, deed of trust, loan agreement or other similar agreement or
instrument to which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is subject,
except, in all such cases, for such conflicts, breaches, violations or
defaults as would not have a material adverse effect on the financial
condition of the Company and its subsidiaries taken as a whole, and (2)
result in any violation of (A) the provisions of the Restated Certificate
of Incorporation or By-Laws of the Company or (B) any statute, order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties, which order, rule
or regulation is applicable to the Company; provided, however, that in the
case of clause (B) of this paragraph 2(f), this representation, warranty
and agreement shall not extend to such violations as would not have a
material adverse effect on the financial condition of the Company and its
subsidiaries taken as a whole;
(g) No consent, approval, authorization, order, registration, filing
or qualification of or with any court or governmental agency or body is
required
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5
for the consummation by the Company of the transactions contemplated by
this Agreement and the applicable Pricing Agreement, except such as have
been, or will have been obtained prior to the "Time of Delivery" (as
defined in Section 5) of the applicable Designated Securities, under the
Act and such consents, approvals, authorizations, orders, registrations,
filings or qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of such
Designated Securities by the Underwriters, and except those which, if not
obtained, will not have a material adverse effect on the financial
condition of the Company and its subsidiaries taken as a whole;
(h) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and title to all personal property owned
by them, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(i) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement and the applicable Pricing
Agreement have been duly and validly authorized by the Company, and this
Agreement and such Pricing Agreement have been duly executed and delivered
by the Company and constitute the valid and binding agreements of the
Company, enforceable against the Company in accordance with their terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws and subject to the qualification that the
enforceability of the Company's obligations hereunder and under such
Pricing Agreement may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally, and by general equitable principles;
and
(j) Except as previously disclosed to you in writing, no holder of
any security of the Company has any right (except as has been satisfied or
waived) to require registration of shares of Common Stock or any other
security of the Company because of the filing of the Registration Statement
or consummation of the transactions contemplated by this Agreement and the
applicable Pricing Agreement.
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6
3. The Selling Stockholder represents and warrants to, and agrees
with, the Company and each of the Underwriters that:
(a) The Selling Stockholder is the lawful owner of the Designated
Securities to be sold by the Selling Stockholder hereunder and under the
applicable Pricing Agreement and upon sale and delivery of, and payment
for, such Designated Securities, as provided herein and therein, the
Selling Stock holder will transfer the ownership interest in such
Designated Securities, free and clear of all liens, encumbrances, equities
and claims whatsoever;
(b) This Agreement and the applicable Pricing Agreement have been
duly authorized, executed and delivered by or on behalf of such Selling
Stockholder.
(c) The Selling Stockholder has not taken and will not take, directly
or in directly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the applicable Designated
Securities and has not effected any sales of shares of Common Stock which,
if effected by the issuer, would be required to be disclosed in response to
Item 701 of Regulation S-K;
(d) No consent, approval, authorization or order of, filing with, or
qualification of or with any court or governmental agency or body is
required to be obtained or made by the Selling Stockholder for the sale of
the applicable Designated Securities, except such as have been, or will
have been obtained and made under the Act and the Exchange Act prior to the
Time of Delivery for such Designated Securities, and such consents,
approvals, authorizations, orders, registrations, filings or qualifications
as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of such Designated Securities by the
Underwriters; and
(e) The sale of the applicable Designated Securities and the
compliance by the Selling Stockholder with all of the provisions of this
Agreement and the applicable Pricing Agreement, and the consummation of the
transactions herein and therein contemplated will not (1) result in a
breach or violation by the Selling Stockholder of any of the terms or
provisions of, or constitute a default by the Selling Stockholder under,
any material agreement or instrument to which the Selling Stockholder is a
party or by which the Selling Stockholder is bound or to which any of the
material property or material assets of the Selling Stockholder is subject,
other than, any violations that would not individually or in the aggregate
affect the
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7
Selling Stockholder's ability to consummate the transactions contemplated
by or perform its obligations under this Agreement, and (2) result in any
violation of (A) the provisions of the Certificate of Incorporation or By-
Laws of the Selling Stockholder or (B) any statute, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Selling Stockholder or any of its properties, which order, rule or
regulation is applicable to the Selling Stockholder.
In respect of any statements in or omissions from the Registration
Statement, the Preliminary Prospectus or the Prospectus or any supplement
thereto made in reliance upon and in conformity with information furnished in
writing to the Company by the Selling Stockholder specifically for use in
connection with the preparation thereof, the Selling Stockholder hereby makes
the same representations and warranties to each Underwriter as the Company makes
to such Underwriter and the Selling Stockholder under subparagraphs (b) and (c)
of Section 2. It is understood and agreed that the only written information
furnished to the Company by the Selling Stockholder specifically for use in the
Registration Statement is that set forth (i) in the first sentence of the first
paragraph of the cover page of the Prospectus and the first sentence of the
third paragraph of the cover page of the Prospectus, (ii) under the caption
"Selling Stockholder" in the Prospectus (except for the column containing the
word "Percentage"), (iii) under the caption "Plan of Distribution" and (iv) in a
separate "blood letter" to be delivered by the Selling Stockholder at the Time
of Delivery relating solely to the prospectus supplement pertaining to the
applicable Designated Securities.
4. Upon the execution of the applicable Pricing Agreement, the
several Underwriters propose to offer the Designated Securities for sale upon
the terms and conditions set forth in the Prospectus as amended or supplemented.
5. The Designated Securities to be purchased by each Underwriter
pursuant to the applicable Pricing Agreement, in definitive form to the extent
practicable, and registered in such names as the Representatives may request
upon at least forty-eight hours' prior notice to the Selling Stockholder, shall
be delivered by or on behalf of the Selling Stockholder to the Representatives
for the account of such Underwriter, against payment by such Underwriter or on
its behalf of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Selling Stockholder or, if so requested by
the Selling Stockholder, by wire transfer to a bank account designated by the
Selling Stockholder and specified in Schedule II to such Pricing Agreement, all
at the place and time and date specified in such Pricing Agreement or at such
other place and time and date as the Representatives, the Company and the
Selling Stockholder may agree upon in writing, such time and date being herein
called the "Time of Delivery" for such Designated Securities.
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8
6. The Company agrees with each of the Underwriters of the Designated
Securities and the Selling Stockholder:
(a) To prepare the Prospectus as amended and supplemented in relation
to such Designated Securities and to file such Prospectus pursuant to Rule
424(b) under the Act not later than the Commission's close of business on
the second business day following the execution and delivery of the
applicable Pricing Agreement or, if applicable, such other time as may be
required by Rule 424(b); to advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or Prospectus as
amended or supplemented after the date of the applicable Pricing Agreement
and prior to the Time of Delivery for such Designated Securities, and
afford the Representatives a reasonable opportunity to comment on any such
proposed amendment or supplement; to advise the Representatives of any such
amendment or supplement promptly after such Time of Delivery for so long as
the delivery of a prospectus is required under the Act in connection with
the offering or sale of such Designated Securities; to file promptly all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act for so long as the delivery of a prospectus
is required under the Act in connection with the offering or sale of such
Designated Securities, and during such same period to advise the
Representatives, promptly after the Company receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed with the Commission; for so long as the delivery
of a prospectus is required under the Act in connection with the offering
or sale of such Designated Securities, to advise the Representatives
promptly of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any prospectus relating to such
Designated Securities, of the suspension of the qualification of such
Designated Securities for offering or sale in any jurisdiction or of the
initiation or, if known to the Company, threatening of any proceeding for
any such purpose, or of any request by the Commission for amending or
supplementing the Registration Statement or Prospectus; and, in the event
of the issuance of any such stop order or of any such order preventing or
suspending the use of any prospectus relating to such Designated Securities
or suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) Promptly from time to time to endeavor to take such action as the
Representatives may reasonably request to qualify such Designated
Securities for offering and sale under the securities laws of such
jurisdictions as the Representatives may reasonably request and such other
jurisdictions as the Company and the Representatives may agree and to
comply with
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9
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of such Designated Securities, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction, and provided further that in connection therewith the Company
shall not be required to qualify such Designated Securities for offering
and sale under the securities laws of any such jurisdiction for a period in
excess of nine months after the initial time of issue of the Prospectus as
amended or supplemented relating to such Designated Securities;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented in such quantities as the Representatives may from
time to time reasonably request, and, if the delivery of a prospectus is
required at any time in connection with the offering or sale of such
Designated Securities and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act or the Exchange Act, to notify the
Representatives and to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of
any amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance; provided, however,
that in case any Underwriter is required under the Act to deliver a
prospectus in connection with the offering or sale of such Designated
Securities at any time more than nine months after the date of the
applicable Pricing Agreement, the costs of such preparation and furnishing
such amended or supplemented Prospectus shall be borne by the Underwriters
of such Designated Securities;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)),
an earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158); and
(e) To otherwise comply with the provisions of Section 7 of the
Registration Rights Agreement attached as Appendix A to the Stockholder
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10
Agreement dated as of October 13, 1996, between the Company and the Selling
Stockholder.
7. The Company covenants and agrees to pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel
and accountants in connection with the registration of the Designated Securities
under the Act and all other expenses in connection with the Company's
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and, subject to the proviso of Section 6(c), the Prospectus and
amendments and supplements thereto and the mailing and delivery of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or otherwise
producing any Agreement among Underwriters, this Agreement, the applicable
Pricing Agreement, any Blue Sky and Legal Investment Memoranda and any other
documents in connection with the offering, purchase, sale and delivery of the
Designated Securities; (iii) subject to the proviso of Section 6(b), all
expenses in connection with the qualification of the Designated Securities for
offering and sale under state securities laws as provided in Section 6(b)
hereof, including the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) any filing fees incident to any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Designated Securities; (v) any cost of preparing
certificates for the Designated Securities; (vi) the fees and expenses of any
transfer agent and registrar for the Designated Securities; and (vii) all other
costs and expenses incident to the performance of the Company's obligations
hereunder which are not otherwise specifically provided for in this Section. It
is understood, however, that, except as provided in this Section, Section 9 and
Section 12 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel and any advertising expenses
connected with any offers they may make. It is further understood that,
notwithstanding the foregoing, the Selling Stockholder will pay (i) the fees,
disbursements and expenses of counsel for the Selling Stockholder and (ii) all
underwriting discounts and commissions and transfer taxes, if any, and other
fees, costs and expenses of the Selling Stockholder relating to the sale or
disposition of the Designated Securities.
8. The obligations of the Underwriters of the Designated Securities
under the applicable Pricing Agreement shall be subject, in the discretion of
the Representatives, to the condition that all representations and warranties
and other statements of the Company and the Selling Stockholder in or
incorporated by reference in such Pricing Agreement are, at and as of the Time
of Delivery for such Designated Securities, true and correct, the condition that
the Company and the
<PAGE>
11
Selling Stockholder shall have performed in all material respects all of their
respective obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus as amended or supplemented in relation to such
Designated Securities shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 6(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or, to the knowledge of the Company,
threatened by the Commission;
(b) Cravath, Swaine & Moore, counsel for the Underwriters, shall have
furnished to the Representatives such opinion or opinions, dated the Time
of Delivery for the Designated Securities, with respect to the
incorporation of the Company, the Designated Securities, the Registration
Statement, the Prospectus as amended or supplemented and other related
matters as the Representatives may reasonably request, and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Franklin Brown, Executive Vice President and Chief Legal Officer
of the Company, or Elliot S. Gerson, Senior Vice President and Assistant
Chief Legal Counsel of the Company, shall have furnished to the
Representatives his written opinion, dated the Time of Delivery for such
Designated Securities, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware;
(ii) The Company has corporate power and corporate authority to
own, lease and operate its properties and conduct its business as
described in the Prospectus;
(iii) To the best of his knowledge, the Company is qualified to
do business, and is in good standing, as a foreign corporation under
the laws of each jurisdiction in which such qualification is required
or, if not so qualified and in good standing in any such jurisdiction,
such failure to be so qualified and in good standing, as of the date
of such opinion, will not have a material adverse effect on the
financial condition of the Company and its subsidiaries taken as a
whole;
<PAGE>
12
(iv) Each Significant Subsidiary (as defined in Rule 405 of
Regulation C under the Act) of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the state of its incorporation, has corporate power and
corporate authority to own, lease and operate its properties and
conduct its business as described in the Prospectus, and, to the best
of his knowledge and information, is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which it owns or leases substantial properties or in
which the conduct of its business requires such qualification; all of
the issued and outstanding capital stock of each such Significant
Subsidiary has been duly authorized and validly issued and is fully
paid and non-assessable, and all of such capital stock, to the best of
his knowledge and information, is owned by the Company free and clear
of any pledge, lien, encumbrance, claim or equity.
(v) To the best of his knowledge and other than as set forth or
contemplated in the Prospectus, there are no legal or governmental
proceedings pending or threatened involving the Company or any of its
subsidiaries of a character required to be disclosed in the
Registration Statement or Prospectus which are not adequately
disclosed in the Registration Statement or Prospectus;
(vi) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement and such Pricing
Agreement have been duly and validly authorized by the Company, and
this Agreement and such Pricing Agreement have been duly executed and
delivered by the Company and constitute the valid and binding
agreements of the Company, enforceable against the Company in
accordance with their terms, except as rights to indemnity and
contribution hereunder may be limited by federal or state securities
laws and subject to the qualification that the enforceability of the
Company's obligations hereunder and under such Pricing Agreement may
be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally, and by general equitable principles;
(vii) The Designated Securities have been duly authorized and
validly issued, are fully paid and nonassessable and are free of any
preemptive or similar rights; and the Designated Securities conform in
all material respects to the description thereof in the Prospectus as
amended or supplemented with respect to such Designated Securities;
<PAGE>
13
(viii) The compliance by the Company with all of the provisions
of this Agreement and such Pricing Agreement, and the consummation of
the transactions herein and therein contemplated will not (1) conflict
with or result in a breach or violation by the Company of any of the
terms or provisions of, or constitute a default by the Company under,
any indenture, mortgage, deed of trust, loan agreement or other
similar agreement or instrument known to him to which the Company is a
party or by which the Company is bound or to which any of the property
or assets of the Company is subject, except, in all such cases, for
such conflicts, breaches, violations or defaults as would not have a
material adverse effect on the financial condition of the Company and
its subsidiaries taken as a whole, and (2) result in any violation of
(A) the provisions of the Restated Certificate of Incorporation or By-
Laws of the Company or (B) any statute, order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its properties which
order, rule or regulation is applicable to the Company, except with
respect to clause (B) of this paragraph (vii)(2), such violations as
would not have a material adverse effect on the financial condition of
the Company and its subsidiaries taken as a whole;
(ix) The documents incorporated by reference in the Prospectus
as amended or supplemented (other than the financial statements and
related notes, the financial statement schedules and the other
financial data included therein or omitted therefrom, as to which he
need express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder;
(x) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by this Agreement and such Pricing Agreement, except for
such consents, approvals, authorizations, orders, registrations or
qualifications as have been obtained under the Act and such as may be
required under state securities or Blue Sky laws in connection with
the purchase and sale and distribution of such Designated Securities
by the Underwriters, and except those which, if not obtained, will not
have a material adverse effect on the financial condition of the
Company and its subsidiaries taken as a whole; and
<PAGE>
14
(xi) Except as described in such opinion letter, no holder of
any security of the Company has any right (except as has been
satisfied or waived) to require registration of shares of Common Stock
or any other security of the Company because of the filing of the
Registration Statement or consummation of the transactions
contemplated by this Agreement and such Pricing Agreement.
In addition, he shall state that nothing has been brought to his
attention that would cause him to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the Company
prior to the Time of Delivery for such Designated Securities (other than the
financial statements and related notes, the financial statement schedules and
the other financial data included therein or omitted therefrom, as to which he
need express no view), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date or at such
Time of Delivery, the Prospectus as amended or supplemented or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related notes, the financial
statement schedules and the other financial data included therein or excluded
therefrom, as to which he need express no view) contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; he shall also state that he does not know of any
contract or other document (i) of a character required to be filed as an exhibit
to the Registration Statement or to any of the documents incorporated by
reference into the Prospectus as amended or supplemented or (ii) required to be
incorporated by reference into the Prospectus as amended or supplemented, which
is not so filed or incorporated, as the case may be.
In rendering this opinion required by subsection (c) of this Section,
such counsel may rely (A) as to any matter to which you consent (which consent
shall not be unreasonably withheld), to the extent specified in his opinion,
upon the opinions of other counsel whom such counsel believes to be reliable,
provided that such counsel shall state that he and you are justified in relying
on such opinions and (B) as to matters of fact, upon certificates of officers
and representatives of the Company and of public officials, and will not be
required to verify independently the accuracy or completeness of information or
documents furnished to him with respect to the Registration Statement or the
Prospectus.
(d) Jones, Day, Reavis & Pogue, special counsel for the Company,
shall have furnished to the Representatives their written opinion, dated
the
<PAGE>
15
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) Such Designated Securities conform in all material respects
to the description thereof in the Prospectus as amended or
supplemented with respect to such Designated Securities; and
(ii) The Registration Statement and the Prospectus as amended or
supplemented and any further amendments and supplements thereto made
by the Company prior to the Time of Delivery for such Designated
Securities (other than the financial statements and related notes, the
financial statement schedules and the other financial data included
therein or omitted therefrom, as to which such counsel need express no
opinion) as of their respective effective or issue dates appeared to
be appropriately responsive in all material respects with the
requirements of the Act and the rules and regulations thereunder.
In addition, such counsel shall state that nothing has been brought to
the attention of such counsel that would cause such counsel to believe that, as
of its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to the Time of Delivery for such Designated
Securities (other than the financial statements and related notes, the financial
statement schedules and the other financial data included therein or omitted
therefrom, as to which such counsel need express no view), contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that, as of its date or at such Time of Delivery, the Prospectus as amended or
supplemented or any further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial statements and related
notes, the financial statement schedules and the other financial data included
therein or excluded therefrom, as to which such counsel need express no view)
contained or contains an untrue statement or a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
In rendering the opinion required by subsection (d) of this Section,
Jones, Day, Reavis & Pogue may rely upon or may assume the accuracy of matters
(A) involving the application of laws of any jurisdiction other than the United
States or New York and as to any other matter to which you consent (which
consent shall not be unreasonably withheld), to the extent specified in such
opinion, upon the opinions of other counsel whom such counsel believes to be
reliable, provided that such counsel shall state that such counsel and you are
justified in relying on such opinions and (B) of fact upon certificates of
officers and representatives of the Company and of public officials, and will
not be required to verify independently the
<PAGE>
16
accuracy or completeness of information or documents furnished to such counsel
with respect to the Registration Statement or the Prospectus.
(e) The Selling Stockholder shall have furnished to the
Representatives the opinion (reasonably satisfactory to the
Representatives) of (x) Anthony N. Palizzi, General Counsel for the Selling
Stockholder, to the effect set forth in clauses (i), (iii), (iv) and (v),
below and (y) Skadden, Arps, Slate Meagher & Flom LLP, counsel for the
Selling Stockholder, to the effect set forth in clauses (ii), (iii) and
(iv), below; each dated the Time of Delivery for such Designated
Securities:
i) The Selling Stockholder has the corporate power and
corporate authority to sell, assign, transfer and deliver such
Designated Securities as of such Time of Delivery.
ii) Assuming that Morgan Stanley & Co. Incorporated, as the
agent for the Underwriters (the "Agent"), acquired its interest in
such Designated Securities in good faith and without notice of any
adverse claims, upon delivery of such Designated Securities to the
Agent endorsed to the Agent or in blank in the State of New York, the
Agent acquired all of the Selling Stockholder's rights in such
Designated Securities and acquired its interest in such Designated
Securities free of any adverse claims (within the meaning of Section
8-302 of the Uniform Commercial Code as in effect on the date hereof
in the State of New York).
iii) No consent, approval, authorization or order of, or filing
with, any Governmental Authority pursuant to Applicable Laws, other
than the federal securities laws, is required to be obtained or made
by the Selling Stockholder through the date of this opinion for the
consummation of the transactions contemplated by this Agreement or in
connection with the sale of the Designated Securities.
iv) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this
Agreement by the Selling Stockholder through the date of such opinion
will not contravene any provision of (A) any provision of any
Applicable Law; provided that we express no opinion with respect to
the information contained in, or the accuracy, completeness or
correctness of the Prospectus or the Registration Statement or the
compliance thereof as to form with the Act and the rules and
regulations thereunder, or (B) to such counsel's knowledge, any order
of any Governmental Authority having jurisdiction over the Selling
Stockholder or any of its properties, or (C) the Certificate of
Incorporation of By-Laws of the Selling Stockholder or (D) any
<PAGE>
17
agreement, indenture or other instrument material to the conduct of
the business of the Selling Stockholder and its subsidiaries, taken as
a whole, to which the Selling Stockholder is a party or by which the
Selling Stockholder is bound or to which any of the properties of the
Selling Stockholder is subject, except, in the case of this clause
(D), for such conflicts, breaches, defaults or violations that would
not have a material adverse effect on the Selling Stockholder and
would not impair the Selling Stockholder's ability to consummate the
transactions contemplated hereby; provided, however, that the orders
to which such counsel's opinion relates may be limited to those
specified in a certificate attached to such opinion.
v) This Agreement and such Pricing Agreement have been duly
authorized, executed and delivered by the Selling Stockholder. As
used in such opinion, (a) the term "Applicable Laws" means only those
laws of the State of New York (for the opinion to be rendered by
Skadden, Arps, Slate, Meagher & Flom LLP), the State of Michigan (for
the opinion rendered by Mr. Palizzi) and of the United States of
America that, in such counsel's experience, are normally applicable to
transactions of the type contemplated by this Agreement, each as in
effect on the date of such opinion (except for state securities laws
and the rules and regulations of the National Association of
Securities Dealers, Inc.); (b) the term "Governmental Authorities"
means any New York (for the opinion to be rendered by Skadden, Arps,
Slate, Meagher & Flom LLP), Michigan (for the opinion rendered by Mr.
Palizzi) or federal executive, legislative, judicial, administrative
or regulatory body under Applicable Laws. With respect to matters
covered by clause (iv), Skadden, Arps, Slate, Meagher & Flom LLP may
limit its comments to matters covered by clauses (A) and (B) thereof.
In rendering the opinion required by subsection (e) of this Section, such
counsel may rely upon or may assume the accuracy of matters (A) involving
the application of laws of any jurisdiction other than the United States or
Michigan and as to any other matter to which you consent (which consent
shall not be unreasonably withheld), to the extent specified in such
opinion, upon the opinions of other counsel whom such counsel believes to
be reliable, provided that such counsel shall state that such counsel and
you are justified in relying on such opinions and (B) of fact upon
certificates of officers and representatives of the Selling Stockholder and
of public officials, and will not be required to verify independently the
accuracy or completeness of information or documents furnished to such
counsel with respect to the Registration Statement or the Prospectus.
<PAGE>
18
(f) On the date of such Pricing Agreement and at the Time of Delivery
for such Designated Securities, KPMG Peat Marwick shall have furnished to
the Representatives a letter, dated the effective date of the Registration
Statement or the date of the most recent report filed with the Commission
containing financial statements and incorporated by reference in the
Registration Statement, if the date of such report is later than such
effective date, and a letter dated such Time of Delivery, respectively, in
form and substance satisfactory to the Representatives, and with respect to
such letter dated such Time of Delivery, as to such other matters as the
Representatives may reasonably request and in form and substance
satisfactory to the Representatives;
(g) Since the respective dates as of which information is given in
the Prospectus as amended or supplemented there shall not have been any
material adverse change in the financial position, stockholders' equity or
results of operations of the Company and its subsidiaries considered as a
whole, otherwise than as set forth or contemplated in the Prospectus as
amended or supplemented, the effect of which, in any such case described
above, is in the reasonable judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of such Designated Securities on the terms
and in the manner contemplated in the Prospectus as amended or
supplemented;
(h) On or after the date of such Pricing Agreement, no downgrading
shall have occurred in the rating accorded the Company's debt securities by
either the Standard & Poor's Corporation or Moody's Investors Service,
Inc., no threat shall have been made of such downgrading or of placing the
Company under special surveillance by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Act), no notice shall have been given of any intended or
potential downgrading in any such rating or of a possible change in any
such rating that does not indicate the direction of the possible change;
and the Company shall not have knowledge of any facts or circumstances that
are likely to cause such downgrading, threatened downgrading or the placing
of the Company under special surveillance;
(i) On or after the date of such Pricing Agreement, there shall not
have occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange; (ii) a
general moratorium on commercial banking activities in New York declared by
either Federal or New York State authorities; or (iii) the outbreak or
material escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in clauses (i), (ii) or (iii), in the
reasonable judgment of the Representatives, makes it impracticable or
inadvisable to proceed with the
<PAGE>
19
public offering or the delivery of such Designated Securities on the terms
and in the manner contemplated by the Prospectus as amended or
supplemented;
(j) The Company shall have furnished or caused to be furnished to the
Representatives at the Time of Delivery for such Designated Securities a
certificate or certificates of the President or a Vice President of the
Company and of the principal financial officer of the Company as to the
accuracy of the representations and warranties of the Company herein at and
as of such Time of Delivery, as to the performance by the Company of all of
its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (g) of this
Section and as to such other matters as the Representatives may reasonably
request; and
(k) The Selling Stockholder shall have furnished or caused to be
furnished to the Representatives at the Time of Delivery for such
Designated Securities a certificate or certificates of the President or a
Vice President of the Selling Stockholder and of the principal financial
officer of the Selling Stockholder as to the accuracy of the
representations and warranties of the Selling Stockholder herein at and as
of such Time of Delivery, as to the performance by the Selling Stockholder
of all of its obligations hereunder to be performed at or prior to such
Time of Delivery and as to such other matters as the Representatives may
reasonably request.
9. (a) The Company will indemnify and hold harmless the Selling
Stockholder, its officers, directors, agents, and each person who controls the
Selling Stockholder (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), against any losses, claims, damages or liabilities, joint
or several, to which such party may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any violation by the Company (or its
officers, directors, agents or controlling persons) of any federal or state law,
rule or regulation applicable to the Company and relating to any action required
or inaction by such party in connection with or relating to the Registration
Statement, or (ii) an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the applicable Designated
Securities, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (x) in the case
of the Registration Statement, not misleading and (y) in the case of any
Prospectus, in light of the circumstances in which they were made, not
misleading, and will reimburse such indemnified party for any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim as such expenses are
incurred;
<PAGE>
20
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the applicable Designated
Securities, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by such indemnified
party for inclusion therein; and provided, further, that the Company shall not
be liable to any indemnified party under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus or any preliminary
prospectus supplement to the extent that any such loss, claim, damage or
liability of such indemnified party results from the fact that any Underwriter
sold the Designated Securities to a person to whom there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the Prospectus
(excluding documents incorporated by reference) or of the Prospectus as then
amended or supplemented (excluding documents incorporated by reference) in any
case where such delivery is required by the Act if the Company has previously
furnished copies thereof to such Underwriter and the loss, claim, damage or
liability of such indemnified party results from an untrue or alleged untrue
statement or omission or alleged omission of a material fact contained in the
Preliminary Prospectus or any preliminary prospectus supplement which was
corrected in the Prospectus (or the Prospectus as amended or supplemented). The
Company will indemnify the Underwriters, their officers, directors, agents, and
each person who controls the Underwriters (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) to the same extent (and subject to
the same limitations and provisos) as provided above, but only with respect to
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of the circumstances set forth in clause (ii) above.
(b) The Selling Stockholder will indemnify and hold harmless the
Company, its officers, directors, agents, and each person who controls the
Company (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act), against any losses, claims, damages or liabilities to which such
party may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any violation by such party of any federal or state law, rule
or regulation relating to action required of or inaction by such party in
connection with its offer and sale of the Designated Securities and (ii) an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Designated Securities, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (x) in the case of the Registration Statement, not misleading
and (y) in the case of any Prospectus, in
<PAGE>
21
light of the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Designated Securities, or any amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by the Selling Stockholder for inclusion therein; and will reimburse the
indemnified party for any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim as such expenses are incurred. The Selling Stockholder will indemnify
the Underwriters, their officers, directors, agents, and each person who
controls the Underwriters (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) to the same extent (and subject to the same
limitations and provisos) as provided above, but only with respect to losses,
claims, damages or liabilities (or actions in respect thereof) arising out of
the circumstances set forth in clause (ii) above.
(c) Each Underwriter will indemnify and hold harmless the Company and
the Selling Stockholder and any of their officers, directors, agents, and
controlling persons (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act), against any losses, claims, damages or liabilities to
which such party may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Designated Securities, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (i) in the case of
the Registration Statement, not misleading and (ii) in the case of any
Prospectus, in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented and any other
prospectus relating to the Designated Securities, or any amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by such Underwriters through the Representatives for
inclusion therein; and will reimburse the indemnified party for any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
<PAGE>
22
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. In no event
shall any indemnifying party be liable for the fees and expenses of more than
one counsel (in addition to local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. In no event shall an indemnifying party be
liable with respect to any action or claim settled without its written consent.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the indemnifying party on the one hand and the indemnified party on the other
from the offering of the Designated Securities to which such loss, claim, damage
or liability (or action in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party is not entitled to receive the
indemnification provided for in subsection (a) above because of the second
proviso thereof or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. Notwithstanding the foregoing,
as between the Company and the Selling Stockholder, contribution shall be in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and indemnified
<PAGE>
23
party on the other in connection with the actions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholder on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the Company and the
Selling Stockholder bear to the total underwriting discounts and commissions
received by such Underwriters. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party on the one hand or the
indemnified party on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, including the extent to which such losses, claims, damages or
liabilities (or actions in respect thereof) with respect to any Preliminary
Prospectus or any preliminary prospectus supplement result from the fact that
any Underwriter sold the Designated Securities to a person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the Prospectus (excluding documents incorporated by reference) or of the
Prospectus as then amended or supplemented (excluding documents incorporated by
reference), if the Company has previously furnished copies thereof to such
Underwriter. The Company, the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (e) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Designated Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages (other
than amounts paid or incurred without the consent of the indemnifying party as
provided in this Section 9) which such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The obligations
of the Company and the Selling Stockholder in this subsection (e) to contribute
are several and not joint. The obligations of the Underwriters of the Designated
Securities in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations with respect to such Designated
Securities and not joint. No
<PAGE>
24
indemnifying party will be liable for contribution with respect to any action or
claim settled without its written consent.
(f) In no event will the Selling Stockholder be liable or required to
contribute any amount under this Section 9 or otherwise in respect of any untrue
or alleged untrue statement or omission or alleged omission for amounts in
excess of the amount by which the total price at which the applicable Designated
Securities were offered to the public exceeds the amount of any damages which
the Selling Stockholder has otherwise been required to pay by reason of such
untrue statement or omission.
(g) The provisions of this Section 9 will be in addition to any
liability which any indemnifying party may have to any indemnified party and
will survive the termination of this Agreement.
10. (a) If any Underwriter shall default in its obligation to
purchase the Designated Securities which it has agreed to purchase under the
applicable Pricing Agreement, the Representatives may in their discretion
arrange for themselves or another party or other parties to purchase such
Designated Securities on the terms contained herein. If within thirty-six hours
after such default by any Underwriter the Representatives do not arrange for the
purchase of such Designated Securities, then the Selling Stockholder shall be
entitled to a further period of thirty-six hours within which to procure another
party or other parties reasonably satisfactory to the Representatives to
purchase such Designated Securities on such terms. In the event that, within
the respective prescribed period, the Representatives notify the Selling
Stockholder and the Company that they have so arranged for the purchase of such
Designated Securities, or the Selling Stockholder notifies the Representatives
and the Company that it has so arranged for the purchase of such Designated
Securities, the Representatives or the Selling Stockholder shall have the right
to postpone the Time of Delivery for such Designated Securities for a period of
not more than seven days in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus as amended or
supplemented, or in any other documents or arrangements, and the Company agrees
to file promptly any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to the applicable Pricing Agreement.
(b) If, after giving effect to any arrangements for the purchase of
the Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Selling Stockholder as provided in subsection (a) above,
the aggregate number of such Designated Securities which remains unpurchased
does not exceed one-tenth of the aggregate number of the Designated Securities
to
<PAGE>
25
be sold pursuant to the applicable Pricing Agreement, then the Selling
Stockholder shall have the right to require each nondefaulting Underwriter to
purchase the number of Designated Securities which such Underwriter agreed to
purchase under such Pricing Agreement and, in addition, to require each
nondefaulting Underwriter to purchase its pro rata share (based on the number of
Designated Securities which such Underwriter agreed to purchase under such
Pricing Agreement) of the Designated Securities of such defaulting Underwriter
or Underwriters for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Selling Stockholder as provided in subsection (a) above,
the aggregate number of Designated Securities which remains unpurchased exceeds
one-tenth of the aggregate number of the Designated Securities to be sold
pursuant to the applicable Pricing Agreement, as referred to in subsection (b)
above, or if the Selling Stockholder shall not exercise the right described in
subsection (b) above to require nondefaulting Underwriters to purchase
Designated Securities of a defaulting Underwriter or Underwriters, then such
Pricing Agreement shall thereupon terminate, without liability on the part of
any nondefaulting Underwriter, the Selling Stockholder or the Company, except
for the expenses to be borne by the Company, the Selling Stockholder and the
Underwriters as provided in Section 7 hereof and the indemnity and contribution
agreements in Section 9 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
11. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholder and the
several Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any officer or director or
controlling person of any Underwriter, the Company, or any officer or director
or controlling person of the Company, or the Selling Stockholder or any officer
or director or controlling person of the Selling Stockholder, and shall survive
delivery of and payment for the applicable Designated Securities.
12. If any Pricing Agreement shall be terminated pursuant to Section
10 hereof, the Company and the Selling Stockholder shall not then be under any
liability to any Underwriter with respect to the Designated Securities covered
by such Pricing Agreement except as provided in Section 7 and Section 9 hereof;
but, if for any other reason the Designated Securities are not delivered by or
on behalf of the Selling Stockholder as provided herein, the Selling Stockholder
will reimburse the Underwriters through the Representatives for all reasonable
out-of-pocket expenses approved in writing by the Representatives, including
reasonable fees and disbursements of counsel, reasonably incurred by the
Underwriters in
<PAGE>
26
making preparations for the purchase, sale and delivery of such Designated
Securities, but the Selling Stockholder shall then be under no further liability
to any Underwriter with respect to such Designated Securities except as provided
in Section 7 and Section 9 hereof.
13. In all dealings hereunder, the Representatives of the
Underwriters of the applicable Designated Securities shall act on behalf of each
of such Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by such Representatives jointly or by such of the Representatives,
if any, as may be designated for such purpose in the applicable Pricing
Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
applicable Pricing Agreement; if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth in
the Registration Statement, Attention: Chief Legal Officer; and if to the
Selling Stockholder shall be delivered or sent by mail, telex or facsimile
transmission to Kmart Corporation, 3100 West Big Beaver Road, Troy, Michigan
48084-3163, Attention: General Counsel; provided, however, that any notice to an
Underwriter pursuant to Section 9(d) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company and the Selling Stockholder by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
14. This Agreement and each Pricing Agreement shall be binding upon,
and inure solely to the benefit of, the Underwriters, the Company, the Selling
Stockholder and, to the extent provided in Section 9 and Section 11 hereof, the
officers, directors and agents of the Company, the Underwriters or the Selling
Stockholder and each person who controls the Company, any Underwriter or the
Selling Stockholder and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or any such Pricing Agreement. No
purchaser of any Designated Securities from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
15. Time shall be of the essence for each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
16. This Agreement and each Pricing Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
<PAGE>
27
17. This Agreement and each Pricing Agreement may be executed by any
one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same instrument.
Very truly yours,
RITE AID CORPORATION,
by: /s/ Franklin C. Brown
-------------------------
Name: Franklin C. Brown
Title: Executive Vice President
KMART CORPORATION,
by: /s/ Michael J. Viola
-------------------------
Name: Michael J. Viola
Title: Vice President and Treasurer
Accepted as of the
date hereof:
Morgan Stanley & Co. Incorporated
by /s/ Richard Steinman
-------------------------
Name: Richard Steinman
Title: Principal
