<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
REGISTRATION NO. 333-39699
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
RITE AID CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 23-1614034
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
30 HUNTER LANE,
CAMP HILL, PENNSYLVANIA 17011,
(717) 761-2633
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ELLIOT S. GERSON, ESQ.
RITE AID CORPORATION
30 HUNTER LANE,
CAMP HILL, PENNSYLVANIA 17011,
(717) 761-2633
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPY TO:
STACY J. KANTER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE, NEW YORK, NEW YORK 10022, (212) 735-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, (the "Securities Act") other than securities offered only in
connection with dividend or interest reinvestment plans, please check the
following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated Notes of
Rite Aid Corporation........... $650,000,000 100%(1)(2) $650,000,000(1)(2) $196,969.70
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Common Stock of Rite Aid
Corporation (3)................ 8,993,400(3) -- -- --
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Total........................... $650,000,000 100% $ $196,969.70(4)
</TABLE>
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(i) of the Securities Act.
(2) Exclusive of accrued interest and distributions, if any.
(3) Such shares of Company Common Stock are issuable upon conversion of the
Convertible Notes registered hereunder. This Registration Statement also
covers such shares as may be issuable pursuant to anti-dilution
adjustments.
(4) Previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 30, 1997.
PROSPECTUS
LOGO $650,000,000
RITE AID CORPORATION
5.25% CONVERTIBLE SUBORDINATED NOTES DUE SEPTEMBER 15, 2002
-----------
This Prospectus relates to the 5.25% Convertible Subordinated Notes due
September 15, 2002 (the "Notes"), and the shares of common stock, par value
$1.00 per share (the "Company Common Stock"), of Rite Aid Corporation, a
Delaware corporation (the "Company"), issuable upon conversion of the Notes.
The Notes were issued and sold (the "Original Offering") on September 10, 1997
and September 16, 1997 (together, the "Original Offering Date") to the Initial
Purchasers (as defined herein) and were simultaneously sold by the Initial
Purchasers in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), in the United States
to persons reasonably believed by the Initial Purchasers to be qualified
institutional buyers as defined in Rule 144A under the Securities Act, and
outside the United States to non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act.
The Notes and the Company Common Stock issuable upon conversion of the Notes
(collectively the "Offered Securities") may be offered and sold from time to
time by the holders named herein or by their transferees, pledgees, donees or
their successors (collectively, the "Selling Holders") pursuant to this
Prospectus. The Offered Securities may be sold by the Selling Holders from time
to time directly to purchasers or through agents, underwriters or dealers. See
"Selling Holders" and "Plan of Distribution". If required, the names of any
such agents or underwriters involved in the sale of the Offered Securities and
the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
of the net proceeds from the sale of the Offered Securities and will pay all
underwriting discounts, selling commissions and transfer taxes, if any,
applicable to any such sale. The Company is responsible for payment of all
other expenses incident to the registration of the Offered Securities. The
Selling Holders and any broker-dealers, agents or underwriters that participate
in the distribution of the Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Offered Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" for a description of
indemnification arrangements.
Each Note is convertible at the option of the holder thereof into shares of
Company Common Stock at a conversion rate of 13.836 shares of Company Common
Stock for each Note (equivalent to $72.275 per share of Company Common Stock),
subject to adjustment in certain circumstances. The Company Common Stock is
quoted on the New York Stock Exchange ("NYSE") under the symbol "RAD". On
December 29, 1997, the last reported sale price of the Company Common Stock on
the NYSE Composite Tape was $56.375.
Interest on the Notes is payable semiannually on March 15 and September 15 of
each year, commencing on March 15, 1998. The Notes may be redeemed at the
option of the Company on or after September 15, 2000, in whole or in part at
the redemption prices set forth herein. See "Description of Notes--Optional
Redemption". The Notes are not entitled to any sinking fund.
In the event of a Change in Control (as defined in the Indenture), each
holder of Notes may require the Company to repurchase its Notes, in whole or in
part, for cash or, at the Company's option, Common Stock (valued at 95% of the
average closing prices for the five trading days immediately preceding and
including the third trading day prior to the repurchase date) at a repurchase
price of 100% of the principal amount of Notes to be repurchased, plus accrued
interest to the repurchase date. See "Description of Notes--Repurchase at
Option of Holders Upon a Change in Control".
The Notes are general unsecured obligations subordinated in right of payment
to all existing and future Senior Debt (as defined in the Indenture) of the
Company and effectively subordinated in right of payment to all indebtedness
and other liabilities of the Company's subsidiaries. As of November 29, 1997,
the aggregate amount of outstanding Senior Debt of the Company was
approximately $2.0 billion. The Indenture will not restrict the Company or its
subsidiaries from incurring additional Senior Debt or other indebtedness. See
"Description of Notes--Subordination".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
THE COMPANY
Rite Aid Corporation, incorporated in 1968, is one of the largest retail
drugstore chains in the United States. As of November 29, 1997, Rite Aid
operated 3,981 drugstores, averaging within a range of approximately 7,200 to
20,000 square feet per store in size, in 31 eastern and western states and the
District of Columbia and employed over 75,000 associates. Pharmacy service
forms the core of Rite Aid's business, with prescriptions accounting for 50.6%
of drugstore sales in the 39-week period ended November 29, 1997. Rite Aid's
drugstores cater to convenience, offering a full selection of health and
personal care products, seasonal merchandise and a large private label product
line. Express mail with complementary services and one-hour photo departments
have been added in select locations. Rite Aid's Eagle Managed Care Corp.
subsidiary markets prescription plans and sells other managed health care
services to employers, health maintenance organizations and government-
sponsored employee benefit programs.
On December 12, 1996, Rite Aid acquired Thrifty PayLess Holdings, Inc.
("Thrifty PayLess"), which was one of the largest drugstore retailers in the
western United States with over 1,000 stores in 10 states, pursuant to a
merger of Thrifty PayLess into Rite Aid (the "Thrifty PayLess Merger"). On
August 27, 1997 the Company completed its acquisitions of K&B Incorporated,
("K&B") and Harco, Inc. ("Harco"). K&B, based in New Orleans, Louisiana ,
operates 186 stores in Louisiana, Alabama, Mississippi, Texas, Tennessee and
Florida. It was the 13th largest drugstore chain in the U.S. with sales of
$580 million for fiscal year 1996. Harco headquartered in Tuscaloosa, Alabama,
operates 146 stores in Alabama, Mississippi and Florida. It was the 17th
largest drugstore chain in the U.S. with sales of $258 million in fiscal year
1996.
Rite Aid is in the process of integrating the Thrifty PayLess stores with
its operations. Rite Aid has completed the installation of its point-of-sale
system in each Thrifty PayLess store. Rite Aid is also near completion of the
conversion of all Thrifty PayLess pharmacies to its proprietary pharmacy
system. Rite Aid expects the elimination of duplicative overhead expenses and
the combined Company's enhanced purchasing efficiencies to result in cost
savings of approximately $75.0 million in the fiscal year ending February 28,
1998. In the first half of calendar year 1998, Rite Aid expects to begin
renaming Thrifty PayLess stores "Rite Aid". Shortly after the completion of
the Thrifty PayLess Merger, Rite Aid divested Bi-Mart Corporation, a warehouse
merchandising operation.
Rite Aid expects to rename all K&B and Harco stores "Rite Aid" and integrate
them with Rite Aid's operations. Rite Aid expects to eliminate duplicative
overhead expenses and believes that there are other cost-saving opportunities
presented by the K&B and Harco acquisitions, due to the increased scale of
operations and geographic diversity resulting from the K&B and Harco
acquisitions. In addition, the application of Rite Aid's systems and
technology to the K&B and Harco operations should result in greater
efficiencies.
Rite Aid's strategy is to operate drugstores in large, fast-growing
metropolitan areas. Of the 60 largest metropolitan statistical areas ("MSAs")
in the United States, Rite Aid operates in 33 and is the largest or second
largest for retail drugstore prescription sales in 23 of those MSAs. In June
1997, consistent with Rite Aid's strategy of maintaining a leading market
share position in each of its operating territories, Rite Aid completed the
termination of its operations in North Carolina and South Carolina, selling
approximately 186 stores.
On September 15, 1997, Rite Aid commenced the redemption of (the "6 3/4%
Notes Redemption") all of its outstanding 6 3/4% Convertible Subordinated
Notes due 2006 (the "6 3/4% Notes"). Substantially all of 6 3/4% Notes were
converted to shares of Rite Aid common stock prior to the close of the 6 3/4%
Notes Redemption period on October 15, 1997.
Rite Aid is a Delaware corporation with its principal executive offices
located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011. The telephone number
of Rite Aid at such offices is (717) 761-2633.
2
<PAGE>
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from the sale of the
Offered Securities. The Company will not receive any proceeds from the sale of
the Offered Securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
each of the last five fiscal years and for the 39-week period ended November
29, 1997.
<TABLE>
<CAPTION>
YEAR ENDED
39 WEEKS ENDED --------------------------------------------
NOVEMBER 29, MARCH 1, MARCH 2, MARCH 4, FEB. 26, FEB. 27,
1997 1997 1996 1995 1994 1993
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 2.60 2.56 3.08 3.78 1.66 3.97
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent earnings from continuing operations before income taxes plus
interest expense on indebtedness, amortization of debt discount and premium
and the portion of rent expense deemed representative of an interest factor.
Fixed charges include interest on indebtedness (whether expensed or
capitalized), amortization of debt discount and premium and the portion of
rent expense deemed representative of an interest factor.
DESCRIPTION OF NOTES
The Notes were issued under an Indenture, dated as of September 10, 1997
(the "Indenture"), between the Company and Harris Trust and Savings Bank, as
Trustee (the "Trustee"), copies of which are available for inspection at the
Corporate Trust Office of the Trustee in Chicago, Illinois. In addition, the
Trustee will maintain an office or agency in the Borough of Manhattan, The
City of New York, where Notes may be surrendered for registration of transfer
or exchange, for payment or where notices and demands to or upon the Trustee
may be served. Wherever particular defined terms of the Indenture (including
the Notes and the various forms thereof) are referred to, such defined terms
are incorporated herein by reference (the Notes and various terms relating to
the Notes being referred to in the Indenture as "Securities"). References in
this section to the "Company" are solely to Rite Aid Corporation and not to
its subsidiaries. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, the detailed provisions of the Notes and
the Indenture, including the definitions therein of certain terms.
GENERAL
The Notes are unsecured subordinated obligations of the Company, are limited
to $650,000,000 aggregate, and will mature on September 15, 2002. Payment in
full of the principal amount of the Notes will be due on September 15, 2002.
The Notes bear interest at the rate of 5.25% per annum from September 10,
payable semiannually on March 15 and September 15 of each year, commencing on
March 15, 1998. Interest payable per $1,000 principal amount of Notes for the
period from September 10, 1997 to March 15, 1998 will be $26.98.
The Notes are convertible into shares of Common Stock at the conversion
price stated on the cover page hereof, subject to adjustment upon the
occurrence of certain events described under "--Conversion Rights", at any
time on or after September 15, 2000, prior to the close of business on the
maturity date, unless previously redeemed or repurchased.
The Notes are redeemable under the circumstances and at the redemption
prices set forth below under "--Optional Redemption", plus accrued interest to
the redemption date. The Notes are also subject to repurchase by the Company
at the option of the Holders, as described below under "--Repurchase Option of
Holders Upon Change in Control".
3
<PAGE>
FORM AND DENOMINATION
Except as provided below, the Notes are represented by one or more global
Notes in definitive, fully registered form without interest coupons
(collectively, the " Global Notes") and will be deposited with the Trustee as
custodian for DTC and registered in the name of a nominee of DTC.
The Company initially appointed the Trustee at its corporate trust office as
paying agent, transfer agent, registrar and conversion agent for the Notes. In
such capacities, the Trustee will be responsible for, among other things, (i)
maintaining a record of the aggregate holdings of Notes and accepting Notes
for exchange and registration of transfer, (ii) ensuring that payments of
principal, premium, if any, and interest in respect of the Notes received by
the Trustee from the Company are duly paid to DTC or its nominees, (iii)
transmitting to the Company any notices from holders, (iv) accepting
conversion notices and related documents, and transmitting the relevant items
to the Company and (v) delivering certificates for Common Stock issued in
conversion of the Notes.
The Company will cause each transfer agent to act as a registrar and will
cause to be kept at the office of each transfer agent a register in which,
subject to such reasonable regulations as it may prescribe, the Company will
provide for the registration of the Notes and registration of transfers of the
Notes. The Company may vary or terminate the appointment of any paying agent,
transfer agent or conversion agent, or appoint additional or other such agents
or approve any change in the office through which any such agent acts,
provided that there shall at all times be a paying agent, a transfer agent and
a conversion agent in the Borough of Manhattan, The City of New York, New
York. The Company will cause notice of any resignation, termination or
appointment of the Trustee or any paying agent, transfer agent or conversion
agent, and of any change in the office through which any such agent will act,
to be provided to Holders of the Notes.
GLOBAL NOTES
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
Upon the issuance of the Global Notes, DTC credited, on its internal system,
the respective principal amount of the individual beneficial interests
represented by such Global Notes to the accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of beneficial
interests in the Global Notes will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respects to interests of participants) and the records of
participants (with respect to interest of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Unless DTC notifies the Company that it is unwilling
or unable to continue as depository for a Global Note, or ceases to be a
"Clearing Agency" registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or announces an intention permanently to cease
business or does in fact do so, or an Event of Default has occurred and is
continuing with respect to a Global Note, owners of beneficial interests in a
Global Note will not be entitled to have any portions of such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in definitive form and will not be considered the owners or
Holders of the Global Note (or any Notes presented thereby) under the
Indenture or the Notes. In addition, no beneficial owner of an interest in a
Global Note will be able to transfer that interest except in accordance with
DTC's applicable procedures (in addition to those under the Indenture referred
to herein). In the event that owners of beneficial interests in a Global Note
become entitled to receive Notes in definitive form, such Notes will be issued
only in registered form in denominations of $1,000 and integral multiples
thereof.
4
<PAGE>
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither
the Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Subject to the following considerations, beneficial interests in the Global
Notes will trade in DTC's Same-Day Funds Settlement System, and secondary
market trading activity in such interests will therefore settle in immediately
available funds. The Company expects that DTC or its nominee, upon receipt of
any payment of principal or interest in respect of a Global Note representing
any Notes held by it or its nominee, will immediately credit participants'
accounts with payment in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Notes for such Notes as shown
on the records of DTC or its nominee. The Company also expects that payments
by participants to owners of beneficial interest in such Global Notes held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in "street name". Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregated principal amount of the Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default (as defined below) under the Notes,
DTC reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code, as amended, and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the
need for physical transfer and delivery of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Notes among
participants of DTC they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Trustee nor any of their respective agents will have
any responsibility for the performance by DTC, its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing
the records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the reasons set forth above under "--Global Notes" (as the case may be) is
closed for business for 14 continuous days or announces an intention to cease
or permanently ceases business, the Company will issue certificates for the
Notes in definitive, fully registered, non-global form without interest
coupons in exchange for the Global Notes, as the case may be.
5
<PAGE>
The holder of a Note in non-global form may transfer such Note, subject to
compliance with the provisions of such legend, by surrendering it at the
office or agency maintained by the Company for such purpose in the Borough of
Manhattan, the City of New York, which initially will be the office of the
Trustee. Upon the transfer, exchange or replacement of Notes bearing the
legend, or upon specific request for removal of the legend on a Note, the
Company will deliver only Notes that bear such legend, or will refuse to
remove such legend, as the case may be, unless there is delivered to the
Company such satisfactory evidence, which may include an opinion of counsel,
as may reasonably be required by the Company that neither the legend nor the
restrictions on transfer set forth therein are required to ensure compliance
with the provisions of the Securities Act. Before any Note in non-global form
may be transferred to a person who takes delivery in the form of an interest
in any Global Note, the transferor will be required to provide the Trustee
with a Global Note Certificate, as the case may be.
Notwithstanding any statement herein, the Company and the Trustee reserve
the right to impose such transfer, certification, exchange or other
requirements, and to require such restrictive legends on certificates
evidencing Notes, as they may determine are necessary to ensure compliance
with the securities laws of the United States and the States therein and any
other applicable laws, to ensure that the Shelf Registration Statement or
amendment covering the Notes and the Common Stock is declared effective by the
Commission or as DTC may require.
CONVERSION RIGHTS
The Holder of any Note has the right, at the Holder's option, to convert any
portion of the principal amount of a Registered Note that is an integral
multiple of $1,000, into shares of Common Stock at any time prior to the close
of business on the maturity date, unless previously redeemed or repurchased at
a conversion rate of 13.836 shares per $1,000 principal amount of Notes
(equivalent to a conversion price of $72.275 per share) (subject to adjustment
as described below). The right to convert a Note called for redemption or
delivered for repurchase will terminate at the close of business on the
redemption date or repurchase date for such Note.
The right of conversion attaching to any Note may be exercised by the Holder
by delivering the Note at the specified office of the Conversion Agent,
accompanied by a duly signed and completed notice of conversion, a copy of
which may be obtained from the Conversion Agent. The conversion date will be
the date on which the Note and the duly signed and completed notice of
conversion are so delivered, unless otherwise provided by such notice. As
promptly as practicable on or after the conversion date, the Company will
issue and deliver to the Trustee a certificate or certificates for the number
of full shares of Common Stock issuable upon conversion, together with payment
in lieu of any fraction of a share or, at the Company's option, rounded up to
the next whole number of shares; such certificate, and payment, if any, will
be sent by the Trustee to the Conversion Agent for delivery to the Holder. Any
Note surrendered for conversion during the period from the close of business
on any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date (except Notes called for redemption on a Redemption Date
or to be repurchased on a Repurchase Date and as a result, the right to
convert such Notes with respect to which the Holder has exercised redemption
or repurchase rights would terminate during such period) must be accompanied
by payment in New York Clearing House Funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of such Notes being surrendered for conversion.
In the case of any Note which has been converted after any Regular Record Date
but before the next Interest Payment Date, interest the Stated Maturity of
which is on such Interest Payment Date shall be payable on such Interest
Payment Date notwithstanding such conversion, and such interest shall be paid
to the Holder of such Note on such Regular Record Date. As a result of the
foregoing provisions, Holders that surrender Notes for conversion on a date
that is not an Interest Payment Date will not receive any interest for the
period from the Interest Payment Date next preceding the date of conversion to
the date of conversion or for any later period, even if the Notes are
surrendered after a notice of redemption (except for the payment of interest
on Notes called for redemption on a Redemption Date or to be repurchased on a
Repurchase Date for which the right to convert such Notes would terminate
during the period between a Regular Record Date and the Interest Payment Date
to which it relates).
6
<PAGE>
No other payment or adjustment for interest, or for any dividends in respect
of Common Stock, will be made upon conversion. Holders of Common Stock issued
upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record time before the close of business on
the conversion date. No fractional shares will be issued upon conversion but,
in lieu thereof, the Company will calculate an appropriate amount to be paid
in cash based on the market price of Common Stock at the close of business on
the day of conversion. Such market price will be calculated by the Company and
shall be deemed to be the average of the daily Closing Prices per share for
the five consecutive Trading Days selected by the Company commencing not more
than 10 Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex" date with respect to an issuance or
distribution requiring such computation. The term "ex" date, when used with
respect to any issuance or distribution, means the first date on which the
Common Stock trades without the right to receive such issuance or
distribution. "Closing Price Per Share" means, for any day, the last reported
sales price per share on the NYSE. A "Trading Day" is any day on which the
NYSE is open for business.
A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock
in a name other than that of the Holder of the Note. Certificates representing
shares of Common Stock will not be issued or delivered unless the person
requesting such issue has paid to the Company the amount of any such tax or
duty or has established to the satisfaction of the Company that such tax or
duty has been paid.
The conversion rate is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock
of rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (determined as
provided in the Indenture) of Common Stock, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock,
cash or assets (including securities, but excluding those dividends, rights,
options, warrants and distributions referred to above, dividends and
distributions paid exclusively in cash and distributions upon mergers or
consolidations to which the next succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the next succeeding paragraph applies) to all holders
of Common Stock in an aggregate amount that, combined together with (i) other
such all-cash distributions made within the preceding 12 months in respect of
which no adjustment has been made and (ii) any cash and the fair market value
of other consideration payable in respect of any tender offer by the Company
or any of its subsidiaries for Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 12.5% of the
Company's market capitalization (being the product of the then current market
price of the Common Stock and the number of shares of Common Stock then
outstanding) on the record date for such distribution, and (f) the successful
completion of a tender offer made by the Company or any of its subsidiaries
for Common Stock which involves an aggregate consideration that, together with
(i) any cash and other consideration payable in a tender offer by the Company
or any of its subsidiaries for Common Stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustment has been made and (ii) the aggregate amount of any such all-cash
distributions referred to in (e) above to all holders of Common Stock within
the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 12.5% of the Company's market
capitalization on the expiration of such tender offer. The Company reserves
the right to make such increases in the conversion rate in addition to those
required in the foregoing provisions as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend or
distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock will not be taxable to the recipients. No adjustment of
the conversion rate will be required to be made until the cumulative
adjustments amount to 1.0% or more of the conversion rate. The Company shall
compute any adjustments to the conversion price pursuant to this paragraph and
will give notice to the Holders of the Notes of any adjustments.
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<PAGE>
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all
or substantially all of the assets of the Company, each Note then outstanding
will, without the consent of the Holder of any Note or coupon, become
convertible only into the kind and amount of securities, cash and other
property, if any, receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock into which such Note was
convertible immediately prior thereto (assuming such holder of Common Stock
failed to exercise any rights of election and that such Note was then
convertible).
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (e.g., distribution of evidences of indebtedness
or assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes. See
"Certain U.S. Federal Income Tax Consequences".
SUBORDINATION
The payment of the principal of, premium, if any and interest on, the Notes
and coupons will be subordinated in right of payment to the extent set forth
in the Indenture to the prior payment in full of all Senior Debt of the
Company. "Senior Debt" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of
any bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts (including collection expenses, attorney's fees and late
charges) owing with respect to, the following, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due,
outstanding at the date of execution of the Indenture or thereafter incurred,
created or assumed: (a) indebtedness of the Company for money borrowed or
evidence by bonds, debentures, notes or similar instruments, (b) reimbursement
obligations of the Company with respect to letters of credit, bankers'
acceptances and similar facilities issued for the account of the Company, (c)
every obligation of the Company issued or assumed as the deferred purchase
price of property or services purchased by the Company, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, (d) obligations of the Company as lessee under leases required to
be capitalized on the balance sheet of the lessee under U.S. generally
accepted accounting principles, (e) obligations of the Company under interest
rate and currency swaps, caps, floors, collars or similar arrangements
intended to protect the Company against fluctuations in interest or currency
exchange rates, (f) indebtedness of others of the kinds described in the
preceding clauses (a) through (e) that the Company has assumed, guaranteed or
otherwise assured the payment thereof, directly or indirectly, and/or (g)
deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness or obligation described in
the preceding clauses (a) through (f) whether or not there is any notice to or
consent of the Holders of Notes; provided, however, that the following shall
not constitute Senior Debt: (i) any particular indebtedness or obligation that
is owed by the Company to any of its direct and indirect Subsidiaries and (ii)
any particular indebtedness, deferral, renewal, extension or refunding if it
is expressly stated in the governing terms or in the assumption thereof that
the indebtedness involved is not senior in right of payment to the Notes or
that such indebtedness is pari passu with or junior to the Notes.
No payment on account of principal, premium, if any, or interest on, the
Notes or any coupon may be made if there shall have occurred (i) a default in
the payment of principal, premium, if any, or interest (including a default
under any repurchase or redemption obligation) with respect to any Senior Debt
or (ii) any other event of default with respect to any Senior Debt, permitting
the holders thereof to accelerate the maturity thereof, and such event of
default shall not have been cured or waived or shall not have ceased to exist
after written notice of such event of default shall have been given to the
Company and the Trustee by any holder of Senior Debt. Upon any acceleration of
the principal due on the Notes or payment or distribution of assets of the
Company to creditors upon any dissolution, winding up, liquidation or
reorganization, whether voluntary or involuntary, or in
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bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any and interest due on all Senior Debt must be paid in full
before the Holders of the Notes are entitled to receive any payment. By reason
of such subordination, in the event of insolvency, creditors of the Company
who are holders of Senior Debt may recover more, ratably, than the Holders of
the Notes, and such subordination may result in a reduction or elimination of
payments to the Holders of the Notes.
As of November 29, 1997, the aggregate principal amount of outstanding
Senior Debt was approximately $2.0 billion. In addition, the Notes will be
structurally subordinated to all indebtedness and other liabilities (including
trade payable and lease obligations) of the Company's subsidiaries, as any
right of the Company to receive any assets of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company itself is recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interest in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
The Indenture does not limit the Company's ability to incur Senior Debt or
any other indebtedness.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to September 15, 2000. Thereafter, the
Notes may be redeemed, in whole or in part, at the option of the Company, upon
not less than 30 nor more than 60 days' prior notice as provided under "--
Notices" below, at the redemption prices set forth below.
The redemption prices (expressed as a percentage of principal amount) are as
follows for the 12-month period beginning on September 15 of the following
years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000............................................................ 102.10%
2001............................................................ 101.05%
</TABLE>
and thereafter at a redemption price equal to 100% of the principal amount, in
each case together with accrued interest to the date of redemption.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined) occurs, each Holder of Notes shall have
the right, at the Holder's option, to require the Company to repurchase all of
such Holder's Notes, or any portion of the principal amount thereof that is
equal to $1,000 or an integral multiple of $1,000 in excess thereof, on the
date (the "Repurchase Date") that is 45 days after the date of the Company
Notice (as defined), at a price equal to 100% of the principal amount of the
Notes to be repurchased (the "Repurchase Price"), together with interest
accrued to the Repurchase Date.
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price in Common Stock, the fair market value of which
Common Stock shall be equal to 95% of the average of the closing prices of the
Common Stock for the five consecutive Trading Days ending on and including the
third Trading Day preceding the Repurchase Date, provided that payment may not
be made in Common Stock unless such shares are listed on a national securities
exchange or traded on the Nasdaq National Market at the time of payment.
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Change in Control
and of the repurchase right arising as a result thereof. The Company Notice
shall be sufficiently given to Holders of Notes if in writing and mailed,
first class postage prepaid, to each Holder of a Note affected by such event,
at the address of such Holder. The Company must also deliver a copy of the
Company Notice to the
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Trustee. To exercise the repurchase right, a Holder of Notes must deliver on
or before the 30th day after the date of the Company Notice irrevocable
written notice to the Trustee of the Holder's exercise of such right, together
with the Notes with respect to which the right is being exercised. At least
two business days prior to the Repurchase Date, the Company must publish a
notice in the manner described above specifying whether the Company will pay
the Repurchase Price in cash or in Common Stock.
A Change in Control shall be deemed to have occurred at such time after the
original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or
series of transactions, of shares of capital stock of the Company entitling
such Person to exercise 50% or more of the total voting power of all shares
of capital stock of the Company entitled to vote generally in elections of
directors, other than any such acquisition by the Company, any subsidiary
of the Company or any employee benefit plan of the Company; or
(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another person into the Company, or
any sale or transfer of all or substantially all of the assets of the
Company to another Person (other than (a) any such transaction (x) which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock and (y) pursuant to
which holders of Common Stock immediately prior to such transaction have
the entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock entitled to vote
generally in the election of directors of the continuing or surviving
person immediately after such transaction and (b) any merger which is
effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock into solely shares of common stock);
provided, however, that a Change in Control shall not be deemed to have
occurred if either (a) the closing price per share of the Common Stock for any
five Trading Days within the period of 10 consecutive Trading Days ending
immediately after the later of the Change in Control or the public
announcement of the Change in Control (in the case of a Change in Control
under clause (i) above) or ending immediately before the Change in Control (in
the case of a Change in Control under clause (ii) above) shall equal or exceed
105% of the Conversion Price of the Notes in effect on each such Trading Day,
or (b) all of the consideration (excluding cash payments for fractional
shares) in the transaction or transactions constituting the Change in Control
consists of common stock traded on a national securities exchange or quoted on
the Nasdaq National Market and as a result of such transaction or transactions
the Notes become convertible solely into such common stock. "Beneficial owner"
shall be determined in accordance with Rule 13d-3 promulgated by the
Commission under the Exchange Act, as in effect on the date of original
execution of the Indenture.
Any repurchase in connection with a Change in Control would, absent a waiver
from the holders of Senior Debt, be blocked by the subordination provisions of
the Notes. See "--Subordination". Failure by the Company to repurchase the
Notes when required would result in an Event of Default with respect to the
Notes whether or not such repurchase is permitted by the subordination
provisions. See "--Events of Default".
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving
the Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or,
directly or indirectly, convey, transfer, sell, lease or otherwise dispose of
all or substantially all of its properties and assets to any Person (other
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<PAGE>
than a wholly owned subsidiary), and the Company may not permit any Person
(other than a wholly owned subsidiary) to consolidate with or merge into the
Company or convey, transfer, sell, lease or otherwise dispose of all or
substantially all of its properties and assets to the Company, unless (a) the
Person formed by such consolidation or into which the Company is merged or the
Person to which the properties and assets of the Company are so transferred or
leased is a corporation, limited liability company, partnership or trust
organized and existing under the laws of the United States, any State thereof
or the District of Columbia and has expressly assumed the due and punctual
payment of the principal of, premium, if any, and interest on the Notes and
coupons and the performance of the other covenants of the Company under the
Indenture, (b) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or a
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, (c) if, as
a result of any such consolidation or merger or such conveyance, transfer or
lease, properties or assets of the Company would become subject to a mortgage,
pledge, lien, security interest or other encumbrance which would not be
permitted by this Indenture, the Company or such successor corporation or
Person, as the case may be, shall take such steps as shall be necessary
effectively to secure the Securities equally and ratably with (or prior to)
all indebtedness secured thereby, and (d) the Company has provided to the
Trustee an Officers' Certificate and Opinion of Counsel as provided in the
Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay any interest (including Liquidated Damages) on any Note or coupon when
due, continuing for 30 days, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (b) failure to pay the principal or
Redemption Price or Repurchase Price of any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (c)
default in the Company's obligation to provide notice of a Change in Control;
(d) failure to perform any other covenant or warranty of the Company in the
Indenture, continuing for 60 days after written notice to the Company by the
Trustee as provided in the Indenture; (e) default under any bond, debenture,
note or other evidence of Indebtedness of the Company or under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness of the Company (including the Notes),
whether such Indebtedness now exists or shall hereafter be created, which
default shall constitute a failure to pay an aggregate principal amount
exceeding $10,000,000 of such Indebtedness when due and payable after the
expiration of any applicable grace period with respect thereto and shall have
resulted in such Indebtedness in an aggregate principal amount exceeding
$10,000,000 becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such
Indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days written notice (a Notice of
Default) must be given to the Company by the Trustee or to the Company and the
Trustee as provided in the Indenture, unless remedied, cured or waived as
provided in the Indenture; and (f) certain events of bankruptcy, insolvency or
reorganization. Subject to the provisions of the Indenture relating to the
duties of the Trustee in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the Trustee,
the Holders of a majority in aggregate principal amount of the Outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee.
If an Event of Default (other than an Event of Default specified in
subsections (a), (b), and (f) above) occurs and is continuing, the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding Notes
may declare the principal amount (or specified amount) of all the Notes to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal and
any accrued interest and any unpaid Liquidated Damages thereon will become
immediately due and payable. If an Event of Default specified in subsections
(a) or (b) occurs and is continuing, the Holder of
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<PAGE>
any Outstanding Note may, by notice in writing to the Company (with a copy to
the Trustee), declare the principal of such Note to be due and payable
immediately, and upon any such declaration such principal and (subject to
Indenture) any accrued interest and Liquidated Damages thereon will become
immediately due and payable. If an Event of Default specified in subsection
(f) occurs and is continuing, the principal and any accrued interest, together
with any Liquidated Damages thereon, on all of the Notes then Outstanding
shall ipso facto become due and payable immediately without any declaration or
other Act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made but before a
judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal and interest have been
cured or waived as provided in the Indenture.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the Holders of at least 25% in aggregate
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the Outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Note for the enforcement of payment of the
principal of, premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note or of the right to convert such
Note in accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture without the consent of the Holders, (a) to
evidence the succession of another Person to the Company and the assumption by
such successor of the covenants and obligations under the Indenture and the
Notes, (b) to add to the covenants for the benefit of the Holders or to
surrender any right or power conferred upon the Company under the Indenture,
(c) to secure the Notes, (d) to modify the restrictions on, and procedures
for, resale and other transfers of the notes pursuant to law, regulation or
practice relating to the resale or transfer of restricted securities
generally, (e) to make provision with respect to the conversion rights of
Holders pursuant to the Indenture, (f) to accommodate the issuance of Notes in
book-entry or definitive form and related matters not affecting adversely the
interests of the Holders, (g) to comply with the requirements of the
Commission in order to effect and maintain the qualification of the Indenture
under the Trust Indenture Act of (h) to cure any ambiguity or correct or
supplement any provision of the Indenture, provided that such action shall not
adversely affect the interests of the Holders in any material respect. In
addition, modifications and amendments of the Indenture may be made, and
certain past defaults by the Company may be waived, with the written consent
of the Holders of not less than a majority in aggregate principal amount of
the Notes at the time Outstanding. However, no such modification or amendment
may, without the consent of the Holder of each Outstanding Note affected
thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (b) reduce the principal amount of, or
the premium, if any, or rate of interest on, any Note, (c) reduce the amount
payable upon redemption or repurchase, (d) modify the provisions with respect
to the repurchase right of the Holders in a manner adverse to the Holders, (e)
change the coin or currency of payment of principal of, premium, if any, or
interest on, any Note or coupon, (f) impair the right to institute suit for
the enforcement of any payment on or with respect to any Note or coupon, (g)
adversely affect the right to convert Notes, (h) modify the subordination
provisions in a manner adverse to the Holders of the Notes, (i) reduce the
above-stated percentage of Outstanding Notes necessary to modify or amend the
Indenture, (j) reduce the percentage of aggregate
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<PAGE>
principal amount of Outstanding Notes necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults, (k)
reduce the percentage in aggregate principal amount of Notes Outstanding
required for the adoption of a Resolution or the quorum required at any
meeting of Holders of Notes at which a Resolution is adopted, or (1) modify
the obligation of the Company to deliver information required under Rule 144A
to permit resales of Notes and Common Stock issuable upon conversion thereof
in the event the Company ceases to be subject to certain reporting
requirements under the U.S. securities laws.
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions
of the Indenture. The Holders of a majority in aggregate principal amount of
the Outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium, if any, or interest.
TRANSFER AND EXCHANGE
The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its office or agency in the City of New York.
The Company reserves the right to vary or terminate the appointment of the
security registrar or of any transfer agent or to appoint additional or other
transfer agents or to approve any change in the office through which any
security registrar or any transfer agent acts.
PURCHASE AND CANCELLATION
The Company or any subsidiary may at any time and from time to time purchase
Notes at any price in the open market or otherwise.
All Securities and coupons surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee. All Securities
so delivered to the Trustee shall be canceled promptly by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in the Indenture. Unless otherwise requested by the
Company and confirmed in writing, the Trustee shall, from time to time but not
less than once annually, destroy all canceled Securities and coupons and
deliver to the Company a certificate of destruction, which certificate shall
specify the number, principal amount and, in the case of Securities, the form
of each canceled Security and coupon so destroyed.
TITLE
The Company and the Trustee may treat the registered owner (as reflected in
the Security Register) of any Note as the absolute owner thereof (whether or
not such Note shall be overdue) for the purpose of making payment and for all
other purposes.
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses of
such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of the first such publication or on the
date of such mailing, as the case may be.
Notice of a redemption of Notes will be given at least once not less than 30
nor more than 60 days prior to the redemption date (which notice shall be
irrevocable) and will specify the redemption date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced by
the Company at the expense of the Holder upon delivery to the Trustee or to a
transfer agent outside the United States of the mutilated Notes or evidence of
the loss, theft or destruction thereof satisfactory to the Company and the
Trustee. In the case of a
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lost, stolen or destroyed Note indemnity satisfactory to the Trustee and the
Company may be required at the expense of the Holder of such Note before a
replacement Note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, which may be
imposed by the United States or the United Kingdom or any political
subdivision thereof or taxing authority thereof or therein with respect to the
issuance of the Notes. The Company will not be required to make any payment
with respect to any other tax, assessment or governmental charge imposed by
any government or any political subdivision thereof or taxing authority
therein.
GOVERNING LAW
The Indenture, the Notes and the coupons will be governed by and construed
in accordance with the laws of the State of New York, United States of
America.
THE TRUSTEE
The Trustee for the Holders of the Notes issued under the Indenture will be
Harris Trust and Savings Bank.
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity.
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DESCRIPTION OF CAPITAL STOCK
The statements set forth under this heading with respect to Rite Aid's
Restated Certificate of Incorporation (the "Rite Aid Charter"), Rite Aid's By-
laws (the "Rite Aid By-laws") and the Delaware General Corporation Law (the
"DGCL"), are brief summaries thereof and do not purport to be complete. Such
statements are subject to the detailed provisions of the Rite Aid Charter, the
Rite Aid By-laws and the DGCL.
Under the Rite Aid Charter, Rite Aid's authorized capital stock consists of
300,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock,
par value $1.00 per share ("Preferred Stock").
PREFERRED STOCK
No shares of Preferred Stock are issued or outstanding. The Board of
Directors of Rite Aid (the "Board") is authorized to issue Preferred Stock in
one or more series and to determine liquidation preferences, voting rights,
dividend rights, conversion rights and redemption rights thereof. The ability
of the Board to issue and set the terms of Preferred Stock could have the
effect of making it more difficult for a third person to acquire, or of
discouraging a third person from attempting to acquire, control of Rite Aid.
COMMON STOCK
There were 128,861,326 shares of Common Stock issued and outstanding as of
November 29, 1997, which includes shares of Common Stock issuable as a result
of the Thrifty PayLess Merger upon surrender of the certificates formerly
representing shares of Thrifty PayLess common stock. On such date, an
additional 6,532,169 shares of Common Stock were issued and held in the
treasury of Rite Aid, 8,993,400 shares were reserved for issuance pursuant to
the terms of the Notes and 9,861,676 shares of Common Stock were reserved for
issuance under Rite Aid's 1990 Omnibus Stock Incentive Plan, as amended.
The holders of Common Stock are entitled to receive ratably, from funds
legally available for the payment thereof, dividends when and as declared by
resolution of the Board, subject to any preferential dividend rights granted
to the holders of any outstanding Preferred Stock.
Each holder of Common Stock is entitled to one vote in respect of each share
of such stock. Holders of Common Stock do not have preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are
duly authorized, validly issued, fully paid and nonassessable.
CHARTER PROVISIONS
The Rite Aid Charter specifies that the Board shall be divided into three
classes, as nearly equal in number as possible, and shall consist of not less
than three nor more than 15 directors elected for three-year staggered terms.
The Rite Aid By-laws provide that the number of directors on the Board may be
fixed by the Board only, or if the number is not fixed, the number will be
seven. The number of directors may be increased or decreased by the Board
only. In the interim period between annual meetings of stockholders or of
special meetings of stockholders, vacancies and newly created directorships
may be filled by the Board. Any directors so elected will hold office until
the next election of the class to which such directors have been elected. The
Board currently consists of 11 directors.
The Rite Aid Charter requires that any mergers, consolidations, asset
dispositions and other transactions involving a beneficial owner of 10% or
more of the voting power of the then outstanding classes of stock entitled to
vote in the election of directors (the "Voting Stock") be approved, unless
certain conditions are satisfied, by the affirmative vote of the holders of
shares representing not less than 75% of the Voting Stock. These special
voting requirements do not apply if the transaction is approved by a majority
of the Continuing Directors (as defined below) or the consideration offered to
the stockholders of Rite Aid meets specified fair price standards (including
related procedural requirements as to the form of consideration and continued
payment of dividends).
15
<PAGE>
"Continuing Director" as defined in the Rite Aid Charter means a member of the
Board who was not affiliated with a Related Person (as defined below) and was
a member of the Board prior to the time that the Related Person acquired the
last shares of Common Stock entitling such Related Person to exercise, in the
aggregate, in excess of 10% of the total voting power of all classes of Voting
Stock, or any individual, corporation, partnership, person or other entity
("Person") recommended to succeed a Continuing Director by a majority of
Continuing Directors. "Related Person" as defined in the Rite Aid Charter
means any Person, affiliate or associate of such Person, which has beneficial
ownership directly or indirectly of shares of stock of Rite Aid entitling such
Person to exercise more than 10% of the total voting power of all classes of
Voting Stock.
The Rite Aid Charter also provides that any corporate action either (i)
taken at a special meeting of stockholders called by the Board, a majority of
whose members are not Continuing Directors or (ii) approved by written consent
of stockholders, shall require the approval of not less than 75% of the then
outstanding Voting Stock.
CHANGE OF CONTROL
Section 203 of the DGCL prohibits generally a public Delaware corporation,
including Rite Aid, from engaging in a Business Combination (as defined below)
with an Interested Stockholder (as defined below) for a period of three years
after the date of the transaction in which an Interested Stockholder became
such, unless: (i) the board of directors of such corporation approved, prior
to the date such Interested Stockholder became such, either such Business
Combination or such transaction; (ii) upon consummation of such transaction,
such Interested Stockholder owns at least 85% of the voting shares of such
corporation (excluding specified shares); or (iii) such Business Combination
is approved by the board of directors of such corporation and authorized by
the affirmative vote (at an annual or special meeting and not by written
consent) of at least 66 2/3% of the outstanding voting shares of such
corporation (excluding shares held by such Interested Stockholder). A
"Business Combination" includes (i) mergers, consolidations and sales or other
dispositions of 10% or more of the assets of a corporation to or with an
Interested Stockholder, (ii) certain transactions resulting in the issuance or
transfer to an Interested Stockholder of any stock of such corporation or its
subsidiaries and (iii) certain other transactions resulting in a financial
benefit to an Interested Stockholder. An "Interested Stockholder" is a person
who owns (or, if such person is an affiliate or associate of the corporation,
within a three-year period did own) 15% or more of a corporation's stock
entitled to vote generally in the election of directors and, the affiliates
and associates of such person.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain U.S. Federal income and estate
tax consequences of the ownership and disposition to initial holders of the
Notes and the Common Stock held as capital assets. For purposes of this
summary, a "U.S. Holder" is (i) a citizen or resident of the U.S., (ii) a
corporation or other entity taxable as a corporation created or organized in
the U.S. or under the laws of the U.S. or of any political subdivision
thereof, (iii) an estate or trust whose income is includible in gross income
for U.S. Federal income tax purposes regardless of its source, or (iv) an
individual or entity otherwise subject to U.S. Federal income tax on its
worldwide income on a net income basis; and a "Non-U.S. Holder" is any holder
other than a U.S. Holder. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), regulations, rulings, and decisions in
effect or available on the date of this Prospectus. All of the foregoing are
subject to change, which change may apply retroactively and could affect the
continued validity of this summary. This summary does not address all aspects
of U.S. Federal income tax law that may be relevant to holders that may be
subject to special treatment under such laws (for example, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
holders whose "functional" currency is not the U.S. dollar, or holders who
engage in certain "straddle" or "hedging" transactions). ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING
THE U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF OWNING
AND DISPOSING OF THE NOTES AND COMMON STOCK.
16
<PAGE>
TAX TREATMENT OF U.S. HOLDERS
Dividends and Sale or Disposition
A U.S. Holder will not recognize gain or loss upon the conversion of the
Notes solely into Common Stock of the Company (except with respect to cash in
lieu of fractional shares). The U.S. Holder's basis in the Common Stock
received on conversion will be the same as the U.S. Holder's adjusted tax
basis in the Notes at the time of the conversion, and a U.S. Holder's holding
period for the Common Stock will include the U.S. Holder's holding period of
the Notes that were converted.
A U.S. Holder will recognize gain or loss upon the sale, redemption,
repurchase or other taxable disposition (collectively, a "Disposition") of the
Notes or Common Stock in an amount equal to the difference between the U.S.
Holder's adjusted tax basis in the Notes or Common Stock and the amount
received therefor (other than amounts attributable to accrued but unpaid
interest on the Notes which will be treated as interest). Such gain applicable
to non--corporate U.S. Holders generally will be long-term capital gain if the
Notes or Common Stock were held for more than one year (and will be subject to
a further reduced tax rate if the Notes or Common Stock were held for more
than eighteen months).
The conversion price of the Notes is subject to adjustment under certain
circumstances. Under Section 305 of the Code and the Treasury regulations
issued thereunder, there may be a taxable constructive distribution to U.S.
Holders of Notes, resulting in ordinary income (subject to a possible
dividends received deduction for corporate holders) to the extent of the
Company's current and accumulated earnings and profits if, and to the extent
that, certain adjustments in the Conversion Price increase such U.S. Holders'
proportionate interest in the earnings and profits and assets of the Company.
Such adjustment may occur in limited circumstances (particularly an adjustment
to reflect a taxable dividend to U.S. Holders of Common Stock of the Company)
and in such a case a constructive distribution would arise, whether or not the
U.S. Holders ever convert the Notes. Generally, a U.S. Holder's tax basis in a
Note will be increased by the amount of any such constructive dividend.
TAX TREATMENT OF NON-U.S. HOLDERS
Interest and Sale or Disposition of the Notes
Payments on Notes to a Non-U.S. Holder, or gain realized on the Disposition
of the Notes by a Non-U.S. Holder, will not be subject to U.S. Federal income
or withholding tax, as the case may be, unless such income is effectively
connected with a trade or business conducted by such Non-U.S. Holder in the
U.S., provided that (A) in the case of payments of interest or principal, (i)
the Non-U.S. Holder satisfies certain certification requirements set forth in
Section 871(h) and Section 881(c) of the Code and the regulations thereunder,
(ii) the Non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power of the Company within the meaning of
Section 871(h)(3) of the Code and the regulations thereunder, (iii) the Non-
U.S. Holder is not a controlled foreign corporation that is related to the
Company through equity ownership, and (iv) the beneficial owner is not a bank
whose receipt of interest on a Note is described in Section 881(c)(3)(A) of
the Code, or, (B) in the case of gain, (i) such Non-U.S. Holder holds the
Notes as a capital asset and is not present in the U.S. for 183 days or more
in the taxable year of Disposition. A Non-U.S. Holder may also be subject to
tax pursuant to the provisions of U.S. tax law applicable to certain
expatriates.
Dividends
In general, the gross amount of dividends paid to a Non-U.S. Holder will be
subject to U.S. withholding tax at a 30% rate (or any lower rate prescribed by
an applicable U.S. tax treaty) unless the dividends are effectively connected
with a U.S. trade or business conducted by the Non-U.S. Holder within the U.S.
In determining the applicability of a tax treaty that provides for a lower
rate of withholding, dividends paid to an address in a foreign country are
presumed under current Treasury regulations to be paid to a resident of that
country. Under proposed Treasury regulations, however, a Non-U.S. Holder would
be required to file certain forms in order to claim the benefit of an
applicable treaty rate. Dividends effectively connected to a trade or business
carried on by a Non-
17
<PAGE>
U.S. Holder within the U.S. generally will not be subject to withholding (if
the Non- U.S. Holder properly files Internal Revenue Service ("IRS") Form 4224
with the payor of the dividend) and generally will be subject to U.S. Federal
income taxation at ordinary U.S. Federal income tax rates. Effectively
connected income may be subject to different treatment under an applicable tax
treaty depending on whether such dividends are attributable to a permanent
establishment of the Non-U.S. Holder in the U.S. In the case of a Non-U.S.
Holder that is a corporation, effectively connected income may be subject to
the branch profits tax (which generally is imposed upon a foreign corporation
at a rate of 30% of the deemed repatriation from the U.S. of "effectively
connected earnings and profits") except to the extent that an applicable tax
treaty provides otherwise. A Non-U.S. Holder eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
Sale or Disposition of Common Stock
Generally, a Non-U.S. Holder will not be subject to U.S. Federal income tax
on any gain realized upon the disposition of his Common Stock unless: (i) the
Company has been, or is a "U.S. real property holding corporation" for U.S.
Federal income tax purposes and certain other requirements are met, (ii) the
gain is effectively connected with the conduct of a trade or business carried
on by the Non-U.S. Holder within the U.S., or (iii) the Common Stock is
disposed of by a Non-U.S. Holder who holds the Common Stock as a capital asset
and is present in the U.S. for 183 days or more in the taxable year of
Disposition. The Company believes that it has not been, is not currently, and
based upon its current business plans, is not likely to become a U.S. real
property holding corporation. A Non-U.S. Holder may also be subject to tax
pursuant to the provisions of U.S. tax law applicable to certain expatriates.
Non-U.S. Holders should consult applicable tax treaties, which may exempt from
U.S. Federal income tax gains realized upon the Disposition of Common Stock in
certain cases.
ESTATE TAX
A Note beneficially owned by an individual who at the time of death is a
Non-U.S. Holder will not be subject to U.S. Federal estate tax provided that
(A) such individual does not actually or constructively own 10% or more of the
total combined voting power of the Company within the meaning of Section
871(h)(3) of the Code and the regulations thereunder and (B) such payments
with respect to the Note would not have been, if received at the time of such
individual's death, effectively connected with a trade or business carried on
by such individual within the U.S.
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be includible in the individual's gross estate for U.S.
Federal estate tax purposes, unless an applicable treaty provides otherwise,
and may be subject to U.S. Federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders
Under certain circumstances, a U.S. Holder who is an individual may be
subject to backup withholding (generally imposed at the rate of 31%) on
interest, dividends and principal payments made to, and the proceeds of sales
before maturity made by, certain U.S. Holders. This withholding generally
applies only if such individual U.S. Holder (i) fails to furnish his or her
taxpayer identification number ("TIN") to the U.S. financial institution or
any other person responsible for the payment of dividends on the Common Stock,
(ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he or she
has failed to properly report payments of interest and dividends and the IRS
has notified the Company that he or is subject to backup withholding, or (iii)
fails, under certain circumstances, to provide a certified statement, signed
under penalty of perjury, that the TIN provided is her or her correct number
and that he or she is not subject to backup withholding.
18
<PAGE>
Non-U.S. Holders
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld, if any, with respect to,
each Non-U.S. Holder. These information reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty or if withholding was not required because the dividends were
effectively connected with a trade or business carried on by the Non-U.S.
Holder within the U.S. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement with the tax
authorities in the country in which the Non-U.S. Holder resides or is
established.
U.S. backup withholding (generally imposed at the rate of 31% on certain
payments to persons that fail to furnish the information required under the
U.S. information reporting requirements) and information reporting generally
will not apply (i) to dividends paid on Common Stock to a Non-U.S. Holder at
an address outside of the U.S., absent actual knowledge by the payor that the
payee is not a Non-U.S. Holder, or (ii) to dividends paid to Non-U.S. Holders
that are either subject to the U.S. withholding tax (whether at 30% or at a
reduced treaty rate), or (iii) that are exempt from such withholding because
such dividends constitute effectively connected income. These information
reporting and backup withholding rules are under review by the U.S. Treasury
and their application to the Common Stock is subject to change. On October 7,
1997, the IRS issued final Treasury Regulations concerning the withholding of
tax and reporting for certain amounts paid to non-resident individuals and
foreign corporations. The Treasury Regulations, will be effective for payments
made after December 31, 1999. These Treasury Regulations generally apply
backup withholding and information reporting to dividends paid on Common Stock
to a Non-U.S. Holder at an address outside of the U.S. unless such Non-U.S.
Holder owner, under penalties of perjury, certifies, among other things, its
status as a Non-U.S. Holder or otherwise establishes an exemption. Prospective
purchasers should consult their tax advisors concerning such Treasury
Regulations and the potential effect on their ownership of the Common Stock.
The payment of the proceeds from the Disposition of Common Stock to or
through a U.S. office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder, or otherwise establishes
an exemption. The payment of the proceeds from the Disposition of Common Stock
to or through a non-U.S. office of a non-U.S. broker generally will not be
subject to backup withholding and information reporting. Unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder and
certain conditions are met or the holder otherwise establishes an exemption,
information reporting generally will apply to Dispositions through (a) a non-
U.S. office of a U.S. broker and (b) a non-U.S. office of a non-U.S. broker
that is either a "controlled foreign corporation" for U.S. Federal income tax
purposes or a person 50% or more of whose gross income from all sources for a
three year testing period was effectively connected with a U.S. trade or
business.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-U.S.
Holder's U.S. Federal income tax liability, provided that the required
information is furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, PROSPECTIVE
INVESTORS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE U.S.
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF OWNING AND
DISPOSING OF THE NOTES AND COMMON STOCK.
19
<PAGE>
SELLING HOLDERS
The Notes were originally issued by the Trust and sold by Goldman Sachs &
Co., Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and Salomon
Brothers Inc (the "Initial Purchasers"), in a transaction exempt from the
registration requirements of the Securities Act, to persons reasonably
believed by such Initial Purchasers to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act), or outside the United States
to non-U.S. persons in offshore transactions in reliance on Regulation S under
the Securities Act. The Selling Holders may from time to time offer and sell
pursuant to this Prospectus any or all of the Notes and Company Common Stock
issued upon conversion of the Notes. The term Selling Holders includes the
holders listed below and the beneficial owners of the Notes and their
transferees, pledgees, donees or other successors.
The following table sets forth information with respect to the Selling
Holders of the Notes and the respective number of Notes beneficially owned by
each Selling Holder that may be offered pursuant to this Prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SELLING HOLDER OF NOTES
-------------- ----------------
<S> <C>
Goldman Sachs & Co. .................................... $39,530,000
Salomon Brothers Asset Management Inc. ................. 18,600,000
IDS Bond Fund, Inc. .................................... 17,000,000
J.P. Morgan & Co. Incorporated.......................... 15,930,000
The TCW Group Inc. ..................................... 13,420,000
Lehman Brothers International (Europe).................. 12,500,000
Argent Classic Convertible Arbitrage Fund (Bermuda) L.P.
....................................................... 12,500,000
Swiss Reinsurance America Corporation................... 11,000,000
Lord Abbott Bond Debenture Fund, Inc. .................. 10,000,000
Allianz of America, Inc. ............................... 10,000,000
New York Life Insurance Company (NYLIC)................. 10,000,000
The Travelers Indemnity Company......................... 9,332,000
Quality Income Portfolio................................ 9,000,000
The Northwestern Mutual Life Insurance Company.......... 8,500,000
Merrill Lynch Pierce Fenner & Smith Inc. ............... 8,219,000
Chase Manhattan UATTEE For IBM Corp. Retirement Plan
Trust DTD 12/18/45..................................... 7,620,000
IL Annuity & Insurance Company.......................... 7,000,000
The Travelers Insurance Company......................... 6,001,000
Lutheran Brotherhood.................................... 6,000,000
BNY Hamilton Equity Income Fund......................... 6,000,000
State of Connecticut Combined Investment Funds.......... 5,685,000
Pacific Horizon Capital Income Fund..................... 5,300,000
Phoenix Series Fund/Phoenix Convertible Fund............ 5,175,000
OCM Convertible Trust................................... 5,105,000
Nomura Securities (Bermuda) Ltd. ....................... 4,500,000
General Electric Mortgage Insurance Corporation and
Affiliates............................................. 4,500,000
Delta Airlines Master Trust............................. 4,450,000
Bankers Trust Trustee For Chrysler Corp. Emp. #1 Pension
Plan DTD 4/1/89........................................ 4,445,000
Chrysler Corporation Master Retirement Trust............ 4,030,000
Vanguard Convertible Securities Fund, Inc. ............. 3,870,000
Westfield Insurance Company............................. 3,700,000
Argent Classic Convertible Arbitrage Fund L.P. ......... 3,500,000
Franklin Investors Securities Trust--Convertible
Securities Fund........................................ 3,500,000
Equity Income Fund...................................... 3,400,000
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SELLING HOLDER OF NOTES
-------------- ----------------
<S> <C>
The Dow Chemical Company Employees' Retirement Plan
Trust................................................... $ 3,325,000
Nicholas-Applegate Income & Growth Fund.................. 3,083,000
Delta Air Lines Master Trust............................. 3,070,000
Dreyfus Investment Grade Bond Funds, Inc.: Dreyfus Short
Term Income Fund........................................ 3,000,000
Dreyfus Income Funds: Dreyfus Strategic Income Fund...... 3,000,000
South Dakota Retirement System........................... 3,000,000
State of Oregon/SAIF Corporation......................... 3,000,000
San Diego County Convertible............................. 2,929,000
Morgan Stanley & Co. .................................... 2,903,000
State Street Bank Custodian For GE Pension Trust......... 2,635,000
Port Authority of Allegheny County Retirement and
Disability Allowance Plan for the Employees Represented
by Local 85 of the Amalgamated Transit Union............ 2,375,000
Hughes Aircraft Company Master Retirement Trust.......... 2,240,000
New York Life Insurance & Annuity Corporation (NYLIAC)... 2,000,000
State of Oregon Equity................................... 2,000,000
Champion International Corporation Master Retirement
Trust................................................... 1,925,000
Calamos Convertible Fund................................. 1,900,000
PRIM Board............................................... 1,800,000
RJR Nabisco, Inc. Defined Benefit Master Trust........... 1,800,000
State Employees' Retirement Fund of the State of
Delaware................................................ 1,745,000
Dreyfus Balanced Fund, Inc. ............................. 1,500,000
General Motors Employees Domestic Group Pension Trust,
Mellon Bank, N.A. as Trustee............................ 1,500,000
LB Series Fund, Inc.--Income Portfolio................... 1,500,000
Lutheran Brotherhood Income Fund, a Series of the
Lutheran Brotherhood Family of Funds.................... 1,500,000
SPT...................................................... 1,500,000
City of Birmingham Retirement & Relief System............ 1,500,000
Dorinco Reinsurance Company.............................. 1,400,000
Michigan Mutual Insurance Company........................ 1,300,000
The Minnesota Mutual Life Insurance Company.............. 1,255,000
Arkansas PERS............................................ 1,200,000
Associated Electric & Gas Insurance Services Limited..... 1,200,000
Physicians' Reciprocal Insurers Account #7............... 1,100,000
Combined Insurance Company of America.................... 1,070,000
Phoenix Home Life Convertible Fund....................... 1,000,000
Acamas Anstalt........................................... 1,000,000
Dreyfus Asset Allocation Fund, Inc. ..................... 1,000,000
Delaware PERS............................................ 1,000,000
Westfield Life Insurance Company......................... 800,000
Franklin Asset Allocation Fund........................... 800,000
Southern Farm Bureau Life Insurance Company.............. 800,000
Bankers Life & Casualty Insurance Co.--Convertible....... 760,000
Great American Reserve Insurance Co.--Convertible........ 760,000
Highmark Convertible Securities Fund..................... 750,000
Bancroft Convertible Fund, Inc. ......................... 750,000
Ellsworth Convertible Growth and Income Fund, Inc. ...... 750,000
Beneficial Standard Life Insurance Co.--Convertible...... 710,000
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SELLING HOLDER OF NOTES
-------------- ----------------
<S> <C>
United Food and Commercial Workers Local 1262 and
Employers Pension Fund................................. $ 700,000
San Diego City Retirement............................... 696,000
The Travelers Life & Annuity Company.................... 667,000
FSA, Inc. .............................................. 625,000
Genesee County Employees' Retirement System............. 550,000
Wake Forest University.................................. 544,000
Dreyfus Investment Grade Bond Funds, Inc.: Dreyfus
Intermediate Term Income Fund.......................... 500,000
Falcon Seaboard Investment Company, L.P. ............... 500,000
Palladin Overseas Fund Limited.......................... 500,000
The Gleneagles Fund Company............................. 500,000
Colonial Penn Life Insurance Company.................... 500,000
Colonial Penn Insurance Company......................... 500,000
Southern Farm Bureau Life Insurance..................... 500,000
Starvest Invest. Grade.................................. 475,000
Regence Washington Health............................... 450,000
Unifi, Inc. Profit Sharing Plan and Trust............... 430,000
Partner Reinsurance Company, Ltd. ...................... 405,000
Franklin & Marshall College............................. 400,000
ICI American Holdings................................... 400,000
ZENECA Holdings......................................... 400,000
American Travelers Life Insurance Co.--Convertible...... 385,000
Capitol American Life Insurance Co.--Convertible........ 385,000
Engineers Joint Pension Fund............................ 350,000
USF Convertible Fund.................................... 325,000
Todd Shipyards Corporation Retirement System............ 325,000
Physicians Life......................................... 300,000
BofA Convertible Securities Fund........................ 300,000
Calamos Growth and Income Fund.......................... 300,000
OCM Convertible Limited Partnership..................... 280,000
SwissRe Group--U.S. Employees' Savings Trust/Fixed
Income Fund............................................ 250,000
Bank of Tokyo--Mitsubishi Trust Co.--As Trustee for
Convertible Bond Fund Trust Collective Trust........... 250,000
Baptist Health.......................................... 228,000
Goldman Sachs & Co. Bank, Zurich........................ 200,000
Federated Rural Electric Insurance Company.............. 200,000
Nalco Chemical Retirement............................... 200,000
Pacific Innovation Trust Capital Income Fund............ 190,000
Employee Benefit Convertible Securities Fund............ 175,000
Lakeside Capital L.L.C. ................................ 170,000
Illinois State Bar Association Mutual Insurance
Company................................................ 150,000
Island Insurance Convertible............................ 150,000
Valley Insurance........................................ 150,000
Kettering Medical Center Funded Depreciation Account.... 140,000
The Fondren Foundation.................................. 125,000
Security Mutual Life Insurance.......................... 115,000
Wisconsin Mutual Insurance Company...................... 110,000
Utica First Insurance Company........................... 105,000
Calamos Global Growth and Income Fund................... 95,000
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
SELLING HOLDER OF NOTES
-------------- ----------------
<S> <C>
Boston Museum of Fine Art............................... $ 94,000
Nicholas-Applegate Strategic Income Fund................ 90,000
Dunham & Associates Fund II............................. 63,000
Kanawha Insurance Company............................... 50,000
Millville Mutual Insurance Company...................... 40,000
Financial American Life................................. 35,000
Dunham & Associate Fund III............................. 31,000
McMahan Securities Company, L.P. ....................... 29,000
BS Debt Income Fund--Class A............................ 12,000
First Delaware Insurance Company........................ 10,000
Anthracite Mutual Fire Insurance Company................ 5,000
Lynn Mann............................................... 2,000
Any Other Holder of Notes or Future Transferred From any
Such Holder............................................ 257,897,000
------------
Total................................................... $650,000,000
============
</TABLE>
None of the Selling Holders has, or within the past three years has had, any
position, office or other material relationship with the Company or any of
their predecessors or affiliates. Because the Selling Holders may, pursuant to
this Prospectus, offer all or some portion of the Notes or the Company Common
Stock issuable upon conversion of the Notes, no estimate can be given as to
the amount of the Notes or the Company Common Stock issuable upon conversion
of the Notes that will be held by the Selling Holders upon termination of any
such sales. In addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes since the
date on which they provided the information regarding their Notes, in
transactions exempt from the registration requirements of the Securities Act.
23
<PAGE>
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to
time offer the Offered Securities to or through underwriters, broker/dealers
or agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act and any profit on the sale of such securities and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker/dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing of options. At the time a particular
offering of the Offered Securities is made, a Prospectus Supplement, if
required, will be distributed which will set forth the aggregate amount and
type of Offered Securities being offered and the terms of the offering,
including the name or names of any underwriters, broker/dealers or agents, any
discounts, commissions and other terms constituting compensation from the
Selling Holders and any discounts, commissions or concessions allowed or
reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied
with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that the Selling
Holders will pay all underwriting discounts and selling commissions, if any.
The Selling Holders will be indemnified by the Company against certain civil
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith. The Company will be
indemnified by the Selling Holders severally against certain civil
liabilities, including certain liabilities under the Securities Act, or will
be entitled to contribution in connection therewith.
24
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the offering to which this
Prospectus relates will be passed upon for the Company by Elliot S. Gerson,
Esq., Senior Vice President and General Counsel for the Company. Nancy A.
Lieberman, a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP, serves as a director of the Company.
EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of March 1, 1997 and March 2, 1996 and for each of the years
in the three-year period ended March 1, 1997, have been incorporated by
reference herein and in the registration statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Marwick LLP covering the
March 4, 1995 consolidated financial statements refers to a change in the
method of accounting for investments.
With respect to the unaudited interim financial information of the Company
and subsidiaries for the periods ended May 31, 1997 and August 30, 1997,
incorporated by reference herein, the independent certified public accountants
have reported that they applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate reports included in the Company's quarterly reports on Form 10-Q for
the quarters ended May 31, 1997 and August 30, 1997, and incorporated by
reference herein, state that they did not audit and they do not express an
opinion on the interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their report on the unaudited interim financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
CERTAIN FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents incorporated by reference herein)
contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) and information relating to
the Company that are based on the beliefs of the management of the Company as
well as assumptions made by and information currently available to the
management of the Company. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company or the management of the Company,
identify forward-looking statements. Such statements, which include, without
limitation, the matters set forth herein under the captions "The Company,"
reflect the current views of the Company with respect to future events, the
outcome of which is subject to certain risks, including among others (i)
competition from other drugstore chains, supermarkets, membership clubs and
other retailers as well as third-party plans and mail order providers, (ii)
the continued efforts of third-party payors to reduce prescription drug costs,
and (iii) possible federal and state health care reform initiatives to reduce
governmental health costs. The forward-looking statements referred to above
are also subject to uncertainties and assumptions relating to the operations
and results of operations of the benefits of the Thrifty PayLess Merger, the
K&B acquisition and the Harco acquisition assumed by the Company. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended.
25
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy and information statements
and other information with the SEC. Such reports, proxy and information
statements and other information filed by the Company with the SEC can be
inspected and copied at the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The SEC maintains a Web site
that contains reports, proxy and information statements and other materials
that are filed through the SEC's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. This Web site can be accessed at http://www.sec.gov.
Such reports, proxy and information statements and other information can also
be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement (which
term shall encompass any amendments thereto) on Form S-3 under the Securities
Act with respect to the securities offered by this Prospectus (the
"Registration Statement"). This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are contained in exhibits
to the Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement, including the exhibits thereto, and the financial statements and
notes thereto filed or incorporated by reference as a part thereof, which are
on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements made in this Prospectus concerning the
contents of any document referred to herein are not necessarily complete, and,
in each such instance, are qualified in all respects by reference to the
applicable documents filed with the Commission. The Registration Statement and
the exhibits thereto filed by the Company with the Commission may be inspected
and copied at the locations described above.
The Company distributes to the holders of its shares of Common Stock annual
reports containing consolidated financial statements audited by an independent
accountant.
26
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated by reference
into this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended March 1,
1997;
(ii) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended May 31, 1997;
(iii) the Company's Quarterly Report on Form 10-Q for the quarterly
period ended August 30, 1997;
(iv) the Company's Annual Report to Shareholders for the fiscal year
ended March 1, 1997 (incorporated by reference into the Annual Report on
Form 10-K); and
(v) the Company's Proxy Statement for the Annual Meeting of Shareholders
held on July 9, 1997 (incorporated by reference into the Annual Report on
Form 10-K).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus but prior
to the termination of this offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document which is also incorporated herein by reference, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus except as so modified or
superseded.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated into this Prospectus by
reference, other than exhibits to such documents. Requests for such copies
should be directed to Investor Relations, Rite Aid Corporation, 30 Hunter
Lane, Camp Hill, Pennsylvania 17011, telephone number (717) 761-2633.
27
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SO-
LICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SUCH SECURITIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SO-
LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY SUBSEQUENT DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................................ 2
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Description of Notes....................................................... 3
Description of Capital Stock............................................... 15
Certain United States Federal Income Tax Considerations.................... 16
Selling Holders............................................................ 20
Plan of Distribution....................................................... 24
Legal Matters.............................................................. 25
Experts.................................................................... 25
Certain Forward-Looking Statements......................................... 25
Available Information...................................................... 26
Incorporation of Certain Information....................................... 27
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$650,000,000
RITE AID CORPORATION
5.25% CONVERTIBLE SUBORDINATED
NOTES DUE 2002
----------------
PROSPECTUS
----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses (other than the SEC filing fee) are estimated.
<TABLE>
<S> <C>
SEC registration fee............................................ $196,969
Printing and engraving expenses................................. 15,000
Legal fees and expenses......................................... 125,000
Accounting fees and expenses.................................... 12,000
Miscellaneous................................................... 51,031
--------
Total....................................................... $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
As authorized by Section 145 of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law"), each director and officer of the
Company may be indemnified by the Company against expenses (including
attorneys' fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed legal proceedings in which he is involved by
reason of the fact that he is or was a director or officer of the Company if
he acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe that
his conduct was unlawful. If the legal proceeding, however, is by or in the
right of the Company, the director or officer may not be indemnified in
respect of any claim, issue or matter as to which he shall have been adjudged
to be liable for negligence or misconduct in the performance of this duty to
the Company unless a court determines otherwise.
Article Ten of the Certificate of Incorporation of the Company provides
that, to the fullest extent permitted by law, directors of the Company will
not be liable for monetary damages to the Company or its stockholders for
breaches of their fiduciary duties.
The directors and officers of the Company and its subsidiaries are insured
(subject to certain exceptions and deductions) under liability insurance
policies carried by the Company against liabilities which they may incur in
their capacity as such including liabilities under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS
The Exhibits listed in the following Exhibit Index are filed as part of the
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Indenture, dated as of September 10, 1997, between Rite Aid
Corporation and Harris Trust and Savings Bank, as trustee.*
4.2 Form of Note (included in Exhibit 4.1 hereto)*
5.1 Opinion and Consent of Elliot J. Gerson, Esq.
10.1 Registration Rights Agreement, dated as of September 4, 1997*
12.1 Ratio of Earnings to Fixed Charges
15.1 Letter of KPMG Peat Marwick LLP regarding unaudited interim
financial information
23.1 Consent of Elliot S. Gerson (included in Exhibit 5.1 hereto)
23.3 Consent of KPMG Peat Marwick LLP
24.1 Powers of Attorney (set forth on signature page of the
Registration Statement)*
25.1 T-1*
</TABLE>
- --------
* Previously filed.
II-1
<PAGE>
B. FINANCIAL STATEMENTS AND SCHEDULES
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements of the Company.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section 305(b)(2)
of the Trust Indenture Act.
II-2
<PAGE>
(e) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrants pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF CAMP HILL, STATE OF PENNSYLVANIA, ON
DECEMBER 30, 1997.
Rite Aid Corporation
*
By __________________________________
MARTIN L. GRASS
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Chairman of the
* Board, Chief December 30,
- ------------------------------------- Executive Officer 1997
MARTIN L. GRASS and Director
President, Chief
* Operating Officer December 30,
- ------------------------------------- and Director 1997
TIMOTHY J. NOONAN
Executive Vice
* President, Chief December 30,
- ------------------------------------- Financial Officer 1997
FRANK M. BERGONZI and Chief
Accounting Officer
Vice Chairman and
* Director December 30,
- ------------------------------------- 1997
FRANKLIN C. BROWN
Director
* December 30,
- ------------------------------------- 1997
ALEX GRASS
* Director December 30,
- ------------------------------------- 1997
NANCY A. LIEBERMAN
* Director December 30,
- ------------------------------------- 1997
PHILLIP NEIVERT
II-4
<PAGE>
SIGNATURE TITLE DATE
Director
* December 30,
- ------------------------------------- 1997
LEONARD N. STERN
Director
* December 30,
- ------------------------------------- 1997
LEONARD I. GREEN
Director
* December 30,
- ------------------------------------- 1997
PRESTON ROBERT TISCH
Director
* December 30,
- ------------------------------------- 1997
WILLIAM J. BRATTON
Director
* December 30,
- ------------------------------------- 1997
GERALD TSAI, JR,
/s/ Elliot S. Gerson December 30,
*By_____________________________ 1997
NAME: ELLIOT S. GERSON
TITLE: ATTORNEY-IN-FACT
II-5
<PAGE>
Exhibit 5.1
December 30, 1997
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Rite Aid Corporation, a
Delaware corporation (the "Company"), and have acted as such in connection with
the Registration Statement on Form S-3 of the Company (Registration Number 333-
39699), filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), on November 6, 1997, and Amendment No. 1 thereto, filed with the
Commission on the date hereof (such Registration Statement, as so amended,
being herein after referred to as the "Registration Statement"), relating to
the registration by the Company of (i) $650,000,000 of the Company's 5.25%
Convertible Subordinated Notes due September 15, 2002 (the "Notes") issued
pursuant to the Indenture, dated as of September 10, 1997, by and between the
Company and Harris Trust and Savings Bank, as Trustee (the "Indenture") and (ii)
the shares of the common stock par value $1.00 per share (the "Company Common
Stock"), of the Company, issuable upon conversion of the Notes.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement; (ii) an executed copy of the Indenture; (iii) the form of the Notes;
(iv) the Form T-1 Statement of Eligibility of the Trustee filed as an exhibit to
the Registration Statement; (v) a specimen certificate evidencing the Company
Common
<PAGE>
Stock (vi) the Certificate of Incorporation of the Company, as presently in
effect; (vii) the By-Laws of Company, as presently in effect; (viii) the
Purchase Agreement, dated September 4, 1997, among the Company and Goldman Sachs
& Co., Morgan Stanley & Co. Incorporated, Bear, Sterns & Co. Inc and Salomon
Brothers, as initial purchasers, and (ix) certain resolutions of the Board of
Directors of the Company and the Pricing Committee of the Board of Directors,
in each case relating to the issuance and sale of the Notes, and related
matters. I have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates and records as I have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In my examination, I have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts
material to the opinions expressed herein which I have not independently
established or verified, I have relied upon statements and representations of
officers and other representatives of the Company and others.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Notes have been duly authorized, executed, issued and delivered by
the Company and constitute valid and binding obligations of the Company entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
2
<PAGE>
2. The shares of Company Common Stock initially issuable upon conversion
of the Notes have been duly authorized and reserved for issuance by the
Company, and, if, and when issue and delivered upon conversion of the Notes in
accordance with the provisions of the Notes and the Indenture at conversion
pries at or in excess of the par value of such Company Common Stock, will be
duly and validly issued and fully paid and non-assessable.
I am admitted to the Bar of the State of Pennsylvania and I do not express
any opinion as to the laws of any other jurisdiction other than the Delaware
General Corporation Law and federal laws of the United States.
I hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. I also consent to the reference to me
under the caption "Legal Matters" in the Registration Statement. In giving this
consent, I do not thereby admit that I am included in the category of persons
whose consent is required under Section 7 of the Securities Act or the rules
and regulations of the Commission.
Very truly yours,
/s/ Elliot S. Gerson
Elliot S. Gerson
Senior Vice President and
General Counsel
3
<PAGE>
EXHIBIT 12.1
RITE AID CORPORATION AND SUBSIDIARIES
STATEMENTS RE COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
THIRTY-NINE WEEKS ENDED NOVEMBER 29, 1997 AND YEARS ENDED MARCH 1, 1997, MARCH
2, 1996, MARCH 4, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTY-NINE YEAR YEAR YEAR YEAR YEAR
WEEKS ENDED ENDED ENDED ENDED ENDED ENDED
NOVEMBER 29, MARCH 1, MARCH 2, MARCH 4, FEBRUARY 26, FEBRUARY 27,
1997 1997 1996 1995 1994 1993
------------ -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest Expense........ $121,329 $ 96,473 $ 68,341 $ 42,300 $ 28,683 $ 29,387
Interest Portion of Net
Rental Expense (1)..... 80,676 66,067 52,080 40,424 40,427 37,659
-------- -------- -------- -------- -------- --------
Fixed Charges Before
Capitalized Interest... 202,005 162,540 120,421 82,724 69,110 67,046
Capitalized Interest.... 2,703 1,897 1,948 373 217 445
-------- -------- -------- -------- -------- --------
Total Fixed Charges..... $204,708 $164,437 $122,369 $ 83,097 $ 69,327 $ 67,491
Earnings
Income Before
Extraordinary Loss and
Income Taxes........... $329,561 $258,927(3) $256,202 $231,464 $ 45,670(2) $200,569
Fixed Charges Before
Capitalized Interest... 202,005 162,540 120,421 82,724 69,110 67,046
-------- -------- -------- -------- -------- --------
Total Adjusted
Earnings............... $531,566 $421,467 $376,623 $314,188 $114,780 $267,615
Ratio of Earnings to
Fixed Charges.......... 2.60 2.56 3.08 3.78 1.66 3.97
</TABLE>
(1) The interest portion of the net rental expense is estimated to be equal to
one-third of the minimum rental expense for the period.
(2) Income before extraordinary loss and income taxes for fiscal year 1994
includes a $149,196,000, pre-tax provision for corporate restructuring and
other charges.
(3) Income before extraordinary loss and income taxes for fiscal year 1997
includes a $68,057,000, pre-tax provision for nonrecurring and other
charges.
<PAGE>
EXHIBIT 15.1
Rite Aid Corporation
Camp Hill, Pennsylvania
Gentlemen:
Re: Registration Statement No. 333-39699
With respect to the subject registration statement, we acknowledge our
awareness of the use therein of our reports dated July 1, 1997 and October 3,
1997 related to our reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are
not considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
December 30, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Rite Aid Corporation
We consent to the use of our audit reports dated April 24, 1997 on the
consolidated financial statements and schedule of Rite Aid Corporation and
subsidiaries as of March 1, 1997 and March 2, 1996 and for each of the years
in the three-year period then ended incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus. Our
reports refer to a change in the method of accounting for investments in
fiscal year 1995.
/s/ KPMG Peat Marwick LLP
Harrisburg, Pennsylvania
December 30, 1997
