PRELIMINARY COPY
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Filed by a party other than registrant ( )
Check appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of
the Commission Only
(as permitted by Rule
14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FILING BY:
RITE AID CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Persons Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
(X) No Fee Required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1998
[LOGO]
RITE AID CORPORATION
P.O. BOX 3165
HARRISBURG, PENNSYLVANIA 17105
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of stockholders ("Special Meeting") of Rite Aid
Corporation ("Rite Aid") will be held on Tuesday December 29, 1998, at The
Radisson Penn Harris Hotel and Convention Center, 1150 Camp Hill Bypass,
Camp Hill, Pennsylvania 17011, at 9:30 a.m., for the following purposes:
1. To approve an amendment to Rite Aid's Restated Certificate of
Incorporation to increase the number of authorized shares of common
stock, par value $1.00, of Rite Aid (the "Common Stock"), from
300,000,000 shares to 600,000,000 shares.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on November 27,
1998, as the record date for the Special Meeting. Only stockholders of
record as of that date are entitled to notice of and to vote at the Special
Meeting and any adjournment and postponements thereof. Reference is made to
the attached proxy statement for further information with respect to the
business to be transacted at the Special Meeting.
By Order of the Board of Directors,
Elliot S. Gerson,
Senior Vice President, General Counsel
and Secretary
Camp Hill, Pennsylvania
November 30, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF RITE AID,
AND RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY
STOCKHOLDER MAY REVOKE HIS PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN
NOTICE TO SUCH EFFECT TO THE SECRETARY, BY SUBMITTING A SUBSEQUENTLY DATED
PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
RITE AID CORPORATION PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
This proxy statement is being furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Rite Aid Corporation, a
Delaware corporation (the "Company"), for use at a Special Meeting of the
stockholders of the Company (the "Special Meeting") to be held at The
Radisson Penn Harris Hotel and Convention Center, 1150 Camp Hill Bypass,
Camp Hill, Pennsylvania 17011, on Tuesday December 29, 1998 at 9:30 a.m.,
or any adjournment or postponement thereof, for the purposes set forth in
the foregoing notice. This proxy statement, the foregoing notice and the
enclosed proxy are first being mailed to stockholders on or about November
30, 1998. Only stockholders of record at the close of business on November
27, 1998 (the "Record Date") shall be entitled to notice of and to vote at
the Special Meeting.
If the enclosed proxy is properly executed and returned prior to voting at
the Special Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. In the absence of
instructions, the shares will be voted FOR the proposal to amend the
Company's Restated Certificate of Incorporation (the "Restated
Certificate"). Management does not intend to bring any matter before the
Special Meeting other than as indicated in the notice and does not know of
anyone else who intends to do so. However, if any other matters properly
come before the Special Meeting, the persons named in the enclosed proxy,
or their duly constituted substitutes acting at the meeting, will be deemed
authorized to vote or otherwise act thereon in accordance with their
judgment on such matters.
At October 24, 1998, the Company had outstanding and entitled to vote
258,576,668 shares of Common Stock. There must be present at the meeting in
person or by proxy holders of a majority of the issued and outstanding
shares entitled to vote to constitute a quorum for the meeting. Shares
represented by a proxy with instructions to abstain and any shares
represented by broker non-votes will be counted in determining whether a
quorum is present. Broker non-votes are not considered present for purposes
of determining the total number of shares with voting power present with
regard to the proposal to approve the proposed amendment. Each holder of
Common Stock is entitled to one vote per share of Common Stock held of
record by him or her on the Record Date.
Approval of the proposed amendment will require the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote thereon
at the Special Meeting. Broker non-votes will be treated as abstentions on
the proposal to approve the proposed amendment. Neither an abstention nor a
broker non-vote is an affirmative vote and, therefore, both will have the
same legal effect as a vote against the approval of the proposed amendment.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 24, 1998, certain information
concerning the beneficial shareholdings of each director and executive
officer of the Company and of all directors and executive officers as a
group. Each of the persons named below has sole voting power and sole
investment power with respect to the shares set forth opposite his or her
name, except as otherwise noted. Except as set forth below, no person was
known by the Company to own beneficially more than five percent (5%) of the
Company's outstanding Common Stock.
Number of
Common Shares
Beneficial Owners Beneficially Owned Percent of Class
----------------- ------------------ ----------------
Alex Grass...................... 2,616,923 (2) 1.0%
William J. Bratton.............. 2,000 *
Franklin C. Brown............... 397,210 (3) *
Leonard I. Green................ 1,002,000 *
Martin L. Grass................. 3,807,785 (4) 1.5%
Nancy A. Lieberman.............. 5,000 (5) *
Phillip Nievert................. 2,877,506 (6) 1.1%
Leonard Stern................... 8,000 *
Preston Robert Tisch............ 8,000 (7) *
Gerald Tsai, Jr................. 2,000 (8) *
Timothy J. Noonan............... 1,210,968 *
Frank M. Bergonzi............... 583,281 *
Beth J. Kaplan.................. 307,155 *
Massachusetts Financial
Services Company.............. 26,228,342 (9) 10.1%
American Express Company........ 18,181,342 (10) 7.0%
Putnam Investments, Inc......... 18,017,600 (11) 7.0%
FMR Corp........................ 24,407,342 (12) 9.4%
All executive officers
and directors (25 persons)...... 13,524,470 (2)(3)(4)(6) 5.2%
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*Percentage less than 1% of class.
(1) Beneficial ownership has been determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended. Unless
otherwise indicated, the address of each beneficial owner shall be
the address of the Company. Except as otherwise specified herein, all
information has been provided to the Company as of May 4, 1998.
(2) Includes 137,904 shares of Common Stock owned by the Grass Family
Foundation of which Mr. Alex Grass is a director. Also includes
90,982 shares of Common Stock held in trust for the benefit of Martin
L. Grass and of which Mr. Alex Grass is a trustee and 370,568 shares
of Common Stock held in trust for the benefit of Lois Grass and of
which Mr. Alex Grass is an alternate trustee.
(3) Includes 383,360 shares owned by Mr. Brown's wife as to which Mr.
Brown disclaims any beneficial interest. All options and stock-based
awards held by Mr. Brown have been assigned to his children and he
disclaims any beneficial interest in those shares.
(4) Includes 370,568 shares held in trust for the benefit of Lois Grass
of which trust Mr. Martin Grass is a co-trustee.
(5) This information is derived from a Form 5 filed with the Securities
and Exchange Commission on May 15, 1998.
(6) Includes 1,440,000 shares held in trust as to which Mr. Nievert is
both a co-trustee and a co-beneficiary and 722,778 shares owned by
Mr. Nievert's wife. Mr. Nievert disclaims any beneficial interest in
those shares owned by his wife.
(7) This information is derived from a Form 5 filed with the Securities
and Exchange Commission on May 21, 1998.
(8) This information is derived from a Form 4 filed with the Securities
and Exchange Commission on October 5, 1998.
(9) Massachusetts Financial Services Company beneficially owns 26,228,342
shares, of which it has sole dispositive power over all of the shares
and sole voting power as to 25,845,562 of the shares. This
information is derived from a Schedule 13G filed with the Securities
and Exchange Commission on August 17, 1998. Massachusetts Financial
Services Company is located at 500 Boylston Street, Boston, MA 02116.
(10) American Express Company, through its wholly owned subsidiary
American Express Financial Corporation, a registered investment
advisor, is deemed to beneficially own 18,181,342 shares, as to which
it has shared dispositive power over all of the shares and shared
voting power as to 8,588,122 of the shares. American Express Company
is located at American Express Tower, 200 Vesey Street, New York, NY
10285.
(11) Putnam Investment Management, Inc. and the Putnam Advisory Company,
Inc., both wholly owned registered investment advisors of Putnam
Investments, Inc., together beneficially own 18,017,600 shares, as to
which Putnam Investment Management, Inc. beneficially owns 15,480,400
shares and The Putnam Advisory Company beneficially owns 2,537,200
shares. Both subsidiaries have shared dispositive power over the
shares each beneficially owns as investment managers, but each of the
mutual fund's trustees have voting power over the shares held by each
fund, and the Putnam Advisory, Inc. has shared voting power over the
shares held by the institution clients (740,200 shares). Putnam
Investments, Inc. is located at One Post Office Square, Boston, MA
02109.
(12) FMR Corp., through its wholly owned subsidiary, Fidelity Management &
Research Company, a registered investment advisor, and through its
wholly owned subsidiary, Fidelity Management Trust Company, a bank,
is deemed to beneficially own 24,407,342 shares, as to which it has
sole dispositive power over all of the shares and sole voting power
as to 1,715,298 of the shares. FMR Corp. is located at 82 Devonshire
Street, Boston, MA 02109.
PROPOSAL TO INCREASE THE AUTHORIZED COMMON STOCK
The Board of Directors of the Company has approved and recommends to the
stockholders a proposal to amend the first paragraph of Article Fourth of
the Company's Restated Certificate of Incorporation (the "Restated
Certificate") to increase the total number of shares of all classes of
capital stock which the Corporation shall have authority to issue from
320,000,000 to 620,000,000 shares by increasing the number of authorized
shares of Common Stock from 300,000,000 shares to 600,000,000 shares (the
"Amendment"). The number of shares of Preferred Stock, par value $1.00,
of the Company will remain at 20,000,000 shares. The Amendment to the
Restated Certificate is attached as Appendix A to this proxy statement. As
of October 24, 1998, 258,576,668 shares of Common Stock were issued and
outstanding and 37,708,302 were reserved for issuance under the Company's
stock option plans and under outstanding convertible subordinated notes.
As a result, only 3,715,030 shares of Common Stock (including shares held
in treasury) remain available for future financing and other corporate
purposes.
The Board of Directors believes that the proposed increase in the
authorized Common Stock is in the best interests of the Company and its
stockholders.
Reasons for the Proposal
The Board of Directors believes that the availability of additional shares
resulting from approval of the proposed Amendment will benefit the Company
by providing the flexibility to issue Common Stock for a variety of proper
corporate purposes without further action by the Company's stockholders,
except as may be required by law, regulation or stock exchange rules. As a
result, the Company would be in a better position to take prompt advantage
of opportunities for which the issuance of Common Stock might be
appropriate including, without limitation, the sale of stock to obtain
additional capital funds, the purchase of property, the acquisition or
merger into the Company of other companies, the use of additional shares
for various equity compensation and other employee benefit plans, the
declaration of stock dividends or other corporate distributions, or other
bona fide corporate purposes. As indicated above, as of October 24, 1998,
the Company had only 3,715,030 authorized but unreserved and unissued
shares of Common Stock available for future issuances. This severely limits
the ability of the Board of Directors to issue shares of Common Stock
without seeking stockholder approval. If the Amendment were postponed until
specific needs arose for an amount of shares in excess of the amount of
Common Stock authorized for issuance, the Company's ability to respond
promptly and effectively might be adversely impacted by the additional
expense and delay resulting from the stockholder approval process.
On November 17, 1998, the Company and Eli Lilly and Company ("Lilly")
announced that they had entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), pursuant to which the Company has agreed to acquire
(the "PCS Acquisition") all of the outstanding capital stock of PCS Holding
Corporation ("PCS"), a wholly owned subsidiary of Lilly, for a purchase
price of $1.5 billion in cash. In addition, Lilly will retain $100 million
of cash from PCS.
The Company currently intends to fund the purchase price of the PCS
Acquisition with the net proceeds it anticipates realizing from a public
offering of securities (the "Offering"), consisting of shares of Common
Stock and equity-linked securities. Based on the last reported sale price
of the Common Stock on the New York Stock Exchange on November 16, 1998
(the last full day of trading for the Common Stock prior to the
announcement of the execution of the Stock Purchase Agreement) of $44.4375
per share, the Offering to fund the purchase price of the PCS Acquisition
(excluding fees and expenses related to the Offering and the PCS Acquisition)
would consist of approximately 34,000,000 shares of Common Stock (assuming
that the Offering consisted solely of shares of Common Stock).
In the event that the proposed Amendment is not approved or conditions in
the equity market are not favorable, the Company intends to use borrowings
under a new credit facility to be provided by a syndicate of lenders (the
"New Credit Facility") to fund the PCS Acquisition. The Company, J.P.
Morgan Securities Inc. ("J.P. Morgan") and Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") have entered into a commitment letter (the
"Commitment Letter") with respect to the New Credit Facility. Pursuant to
the Commitment Letter, Morgan Guaranty and J.P. Morgan have committed to
provide the Company with borrowings of up to $1.5 billion, subject to
customary terms and conditions, including the absence of a material adverse
change in the financial condition of the Company and PCS and the execution
of definitive documentation with respect to the New Credit Facility. The
obligation of the Company to consummate the PCS Acquisition is not
conditioned upon the receipt of financing necessary to consummate the PCS
Acquisition.
The vote of the stockholders of the Company on the proposed Amendment will
not affect the consummation of the PCS Acquisition. If the proposed
Amendment is delayed or not adopted, or if market conditions are not
favorable, the Company intends to postpone the Offering until such time as
the stockholders of the Company shall vote to approve the Amendment and
such time as the Company believes that market conditions are favorable, and
in such event, the Company intends to use borrowings under the New Credit
Facility to consummate the PCS Acquisition. In addition, in the event that
the proposed Amendment is not approved, the Company may find it necessary
to convene a special meeting of stockholders before the Company could
consummate any other transaction in which the number of shares of Common
Stock that would be issued, together with all other new issuances of Common
Stock after October 24, 1998, would exceed 3,715,030. This could
potentially add to the costs of a future transaction and the added time
necessary to prepare for and hold a stockholders' meeting could serve as a
disincentive for third parties otherwise interested in making an investment
in, or entering into such transaction with the Company.
Effects of the Proposal
The Board of Directors is authorized to issue the Common Stock for such
consideration as the Board may fix and for any corporate purposes. Such
issuance can be undertaken without the further action of stockholders,
except as maybe required by law, regulation or stock exchange rule. The
Board of Directors will determine whether, when, and on what terms the
issuance of shares of Common Stock may be warranted in connection with any
of the foregoing purposes.
The additional shares of Common Stock to be authorized by the adoption of
the Amendment would have rights and privileges identical to the currently
outstanding shares of Common Stock of the Company. Adoption of the proposed
Amendment and issuance of the Common Stock authorized thereby would not
affect the rights of the holders of currently outstanding shares of Common
Stock, except for effects incidental to increasing outstanding shares of
Common Stock such as dilution to the earnings per share and voting rights
of current holders of Common Stock. The Company's stockholders do not have
preemptive rights with respect to future issuances of additional shares of
Common Stock, which means that current stockholders do not have a prior
right to purchase any new issue of Common Stock of the Company in order to
maintain their proportionate ownership interest. As a result, the issuance
of additional authorized Common Stock (other than a stock split or other
pro rata distribution to stockholders) would result in dilution of the
beneficial ownership interests and/or voting power of each Company
stockholder who does not purchase additional shares to maintain his or her
pro rata interest.
Because the authorized but unissued stock could be issued by the Board of
Directors for the purpose of countering an unsolicited takeover or other
proposal that is opposed by the Board, an increase in the number of
authorized shares may be viewed as having the effect of discouraging an
unsolicited attempt by another person or entity to acquire control of the
Company that holders of Common Stock may deem to be in their best interest
or in which holders of Common Stock are offered a premium for their shares
over market price. The Board is not currently aware of any person or entity
who is seeking to acquire control of the Company and has no plans to issue
additional shares of Common Stock other than pursuant to the Offering. The
Company has no current plan to issue any Common Stock in any transaction
that would result in a change of control of the Company. If the Amendment
is approved, all or any of the authorized shares of Common Stock may be
issued without further action by the stockholders and without first
offering such shares to the stockholders for subscription.
The Board of Directors believes that the benefits of providing the Company
with the flexibility to issue shares without delay for any purpose
outweighs the possible disadvantages discussed above, and that it is
prudent, advisable and in the best interests of the stockholders to provide
the greater flexibility that will result from the approval of the proposed
increase in authorized shares.
Effective Date
If the Amendment is approved by the stockholders, it will become effective
upon the filing of a Certificate of Amendment to the Restated Certificate
with the Delaware Secretary of State, which filing is expected to take
place promptly after the stockholders approve the Amendment. The only
changes to the current Restated Certificate are those made by the proposed
Amendment. Stockholder approval of the Amendment will also constitute
approval of the filing of a Certificate of Amendment to the Certificate
incorporating the Amendment as set forth on Appendix A attached hereto.
Recommendation of the Board of Directors
FOR ALL THE FOREGOING REASONS, THE BOARD OF DIRECTORS BELIEVES THAT THE
AMENDMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSALS OF SECURITY HOLDERS
All proposals of any stockholder of the Company which the holder desires be
presented at the next Annual Meeting of stockholders and be included in the
proxy statement and form of proxy prepared for that meeting must be
received by the Company at its principal executive offices no later than
January 18, 1999. All such proposals must be submitted in writing to the
Secretary of the Company at the address appearing on the notice
accompanying this proxy statement.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, solicitations may be made by telephone
and personal interviews by officers, directors and regularly engaged
employees of the Company. It is not anticipated that anyone will be
specifically engaged by the Company or by any other person to solicit
proxies. Brokerage houses, custodians, nominees and fiduciaries will be
requested to forward this proxy statement to the beneficial owners of the
stock held of record by such persons, and the Company will reimburse them
for their charges and expenses in this connection.
APPENDIX A
Set forth below is the first paragraph of Article Fourth of the Company's
Restated Certificate of Incorporation as proposed to be amended; the
remainder of Article Fourth is unchanged:
"The total number of shares or stock which the Corporation shall have the
authority to issue shall be 620,000,000 shares of which six hundred million
(600,000,000) shares shall be Common Stock of the par value of $1.00 per
share, and twenty million (20,000,000) shares shall be Preferred Stock of
the par value of $1.00 per share."
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RITE AID CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
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The undersigned hereby appoints Martin L. Grass and Franklin C.
Brown, or either of them, with full power of substitution to each as
proxies to represent the undersigned at a Special Meeting of Stockholders
of Rite Aid Corporation (the "Company"), to be held at The Radisson Penn
Harris Hotel and Convention Center, 1150 Camp Hill Bypass, Camp Hill,
Pennsylvania 17011, on Tuesday December 29, 1998 at 9:30 a.m. and at any
adjournment(s) thereof, and to vote all shares of stock which the
undersigned may be entitled to vote at said meeting as directed below with
respect to the proposal as set forth in the proxy statement, and in their
discretion, upon any other matters that may properly come before the
meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. THE TABULATOR
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
/X/ PLEASE MARK YOUR VOTES AS IN
THIS EXAMPLE.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATION.
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DIRECTORS RECOMMEND A VOTE FOR PROPOSAL 1.
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FOR AGAINST ABSTAIN
1. Approval of Amendment / / / / / /
to the Restated Certificate
of Incorporation to Increase
the Authorized Common Stock.
SIGNATURE ______________________ DATE____________________________
Please sign name(s) exactly as printed hereon. Joint owners should each
sign. In signing as attorney, administrator, executor, guardian or trustee,
please give full title as such.
