SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 27, 1999
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(Date of earliest event reported)
Rite Aid Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 1-5742 23-1614034
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(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
30 Hunter Lane, Camp Hill, Pennsylvania 17011
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(Address of principal executive offices, including zip code)
(717) 761- 2633
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Item 5. Other Events.
Equity Investment
On October 27, 1999 (the "Closing Date"), Rite Aid Corporation
("Rite Aid") issued and sold to Green Equity Investors III, L.P. ("GEI")
3,000,000 shares of Rite Aid's 8% Series A Cumulative Convertible Pay-in-
Kind Preferred Stock, par value $1.00 per share (the "Series A Convertible
Preferred Stock"), at a purchase price of $100 per share, for an aggregate
purchase price of $300,000,000 (the "Equity Investment"). At any time
after the expiration or termination of any applicable waiting period under
the Hart-Scott Rodino Antitrust Act of 1976, the Series A Convertible
Preferred Stock is convertible into Rite Aid's Common Stock, par value
$1.00 per share (the "Common Stock"), at a current conversion price of
$11.00 per share (subject to certain adjustments). Each share of Series A
Convertible Preferred Stock will be exchangeable, either at the option of
Rite Aid or all holders of such shares, for one share of a series of Rite
Aid's preferred stock (the "Series B Convertible Preferred Stock") with
substantially the same terms as the Series A Convertible Preferred Stock,
except that the Series B Convertible Preferred Stock will have certain
voting rights. The holders of Series B Convertible Preferred Stock will
vote with holders of Common Stock and each holder of Series B Convertible
Preferred Stock will have one vote for each share of Common Stock issuable
upon conversion of such holder's Series B Convertible Preferred Stock. The
holders of Series B Convertible Preferred Stock will also be entitled to
vote separately as a class to elect two directors to the Board of Directors
of Rite Aid.
The Series A Convertible Preferred Stock accrues dividends at a
rate of 8% per annum, such dividends payable in cash or in additional
shares of Series A Convertible Preferred Stock at the option of Rite Aid,
subject to the restriction on paying cash dividends in the financial
covenants of Rite Aid's banking facilities. The initial conversion price
will be reset (1) in the event that prior to October 27, 2000, Rite Aid
issues shares of its Common Stock at a sale price lower than the then
current conversion price, to such lower sale price and (2) on March 1,
2001, to the lowest average price (but not less than $7.50) of Rite Aid's
Common Stock during any consecutive three-month period from October 27,
1999 through February 28, 2001 if such average price is lower than the then
current conversion price or, if not lower, to $11.50 (assuming no other
adjustment). Rite Aid may redeem the Series A Convertible Preferred Stock
after October 24, 2004 at a price equal to $105 per share (subject to
certain adjustments) plus accrued and unpaid dividends to the date of
redemption.
In connection with the Equity Investment, Rite Aid granted to GEI
certain registration rights with respect to the Series A Convertible
Preferred Stock and the Common Stock into which it is convertible, pursuant
to the terms of a Registration Rights Agreement, dated as of October 27,
1999, by and between Rite Aid and GEI (the "GEI Registration Rights
Agreement"). Rite Aid has appointed Leonard Green and Jonathan Sokoloff to
serve on the Board of Directors of Rite Aid. Mr. Green will also become a
member of both the executive committee and the audit committee of the Board
of Directors.
On the Closing Date, Rite Aid paid a fee of $3,000,000 to Leonard
Green & Partners, the general partner of GEI, as a placement fee for the
Equity Investment. Rite Aid has also agreed to pay Leonard Green &
Partners a consulting fee of $1,000,000 on each of the first, second and
third anniversaries of the Closing Date.
The consideration for the Equity Investment was arrived at
through arm's-length negotiation. A committee of independent directors of
the Board of Directors of Rite Aid authorized and approved the terms of the
Equity Investment.
The foregoing description of the Equity Investment contained in
this Form 8-K is a brief summary of the terms related thereto but does not
purport to be complete. This summary is qualified in its entirety by
reference to the Restated Certificate of Incorporation, the GEI
Registration Rights Agreement and the Commitment Letter, dated October 18,
1999, by and between Rite Aid and GEI, copies of which are attached as
exhibits hereto and incorporated by reference herein.
Extended and Restructured Bank Facilities and Issuance of the Warrant
On the Closing Date, Rite Aid entered into a series of agreements
(the "Credit Agreements") extending and restructuring all $2,700,000,000 of
its outstanding banking facilities. Rite Aid entered into a Term Loan
Agreement, dated as of October 27, 1999 (the "Term Loan Agreement"), with
Morgan Guaranty Trust Company of New York ("MGT"), as Administrative Agent,
along with other banks. Pursuant to the Term Loan Agreement, Rite Aid may
borrow up to $1,300,000,000 under this bank facility. Rite Aid also
entered into an Amended and Restated Credit Agreement, dated as of October
27, 1999 (the "Amended and Restated Credit Agreement"), with MGT, as Agent,
along with other banks. Pursuant to the Amended and Restated Credit
Agreement, Rite Aid may borrow up to $1,300,000,000 under this bank
facility. The Amended and Restated Credit Agreement extends the maturity
of (1) $1,000,000,000 of Rite Aid's bank debt originally scheduled to
mature on October 29, 1999 and (2) $300,000,000 of its bank debt originally
due on demand, in both cases to November 1, 2000. The Amended and Restated
Credit Agreement also amends financial covenants in Rite Aid's bank
facilities to be consistent with Rite Aid's current business plans. In
order to secure Rite Aid's obligations under the Credit Agreements, as well
as under other existing lines of credit, Rite Aid has pledged to MGT, as
agent for the benefit of certain banks acting as lenders to Rite Aid, Rite
Aid's interests in each of PCS Holding Corporation and drugstore.com, inc.
Rite Aid paid approximately $30,000,000 in aggregate fees in
connection with the closing of the Credit Agreements. This amount includes
all fees paid to the lenders and financial advisors under the Credit
Agreements (the "Lending Syndicate"). In addition, this amount includes
fees paid to lenders involved with certain other of Rite Aid's bank
facilities that were, by the terms of those facilities, entitled to fees
commensurate with the fees paid to the Lending Syndicate.
In connection with Rite Aid's extending and restructuring of its
banking facilities, Rite Aid issued a warrant, dated October 27, 1999 (the
"Warrant"), to J. P. Morgan Ventures Corporation ("J. P. Morgan Ventures")
to purchase 2,500,000 shares of Rite Aid's Common Stock. The exercise
price for the Common Stock is $11.00 per share (subject to certain
adjustments), and the Warrant will expire on September 23, 2002. Rite Aid
has also granted J. P. Morgan Ventures registration rights with respect to
the shares of Common Stock issuable upon exercise of the Warrant pursuant
to the terms of a Registration Rights Agreement, dated as of
October 27, 1999, by and between Rite Aid and J. P. Morgan Ventures (the
"J. P. Morgan Registration Rights Agreement").
The foregoing description of the Credit Agreements and the
Warrant contained in this Form 8-K is a brief summary of the provisions
contained in the various agreements and documents in connection therewith
but does not purport to be complete. This summary is qualified in its
entirety by reference to the Term Loan Agreement, the Amended and Restated
Credit Agreement, the Pledge Agreement, the PCS Junior Pledge Agreement,
the J. P. Morgan Registration Rights Agreement and the Warrant attached as
exhibits hereto and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibit No. Description
3 Restated Certificate of Incorporation.
4.1 Registration Rights Agreement, dated as of October
27, 1999, by and between Rite Aid Corporation and
Green Equity Investors III, L.P.
4.2 Registration Rights Agreement, dated as of October
27, 1999, by and between Rite Aid Corporation and
J.P. Morgan Ventures Corporation.
4.3 Warrant to purchase Common Stock, par value $1.00
per share, of Rite Aid Corporation, dated October
27, 1999, issued to J.P. Morgan Ventures
Corporation.
10.1 Commitment Letter, dated October 18, 1999, by and
between Rite Aid Corporation and Green Equity
Investors III, L.P.
10.2 Term Loan Agreement, dated as of October 27, 1999,
by and among Rite Aid Corporation, the banks from
time to time parties thereto and Morgan Guaranty
Trust Company of New York, as Administrative
Agent.
10.3 Amended and Restated Credit Agreement, dated as of
October 27, 1999, by and among Rite Aid
Corporation, the banks from time to time parties
thereto and Morgan Guaranty Trust Company of New
York, as Agent.
10.4 Pledge Agreement, dated as of October 25, 1999, by
and between Rite Aid Corporation and Morgan
Guaranty Trust Company of New York, as Agent.
10.5 PCS Junior Pledge Agreement, dated as of
October 19, 1999, by and between Rite Aid
Corporation and Morgan Guaranty Trust Company of
New York, as Agent.
99 Press release issued by Rite Aid Corporation on
October 27, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereto duly authorized.
DATE: November 2, 1999
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
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Name: Elliot S. Gerson
Title: Senior Executive Vice President,
General Counsel and Secretary
Exhibit 3(i)
RESTATED
CERTIFICATE OF INCORPORATION
OF
RITE AID CORPORATION
Rite Aid Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Rite Aid Corporation and the
corporation was originally incorporated under the same name. The original
Certificate of Incorporation of Rite Aid Corporation was filed April 15,
1968.
2. This Restated Certificate of Incorporation merely restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of the corporation, as amended or supplemented, and there is
no discrepancy between the provisions of the Certificate of Incorporation,
as amended, and this Restated Certificate of Incorporation.
3. This Restated Certificate of Incorporation has been duly
adopted by the Board of Directors of the corporation in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware.
4. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated to read in its
entirety as follows:
FIRST: The name of this Corporation (hereinafter called the
"corporation") is RITE AID CORPORATION.
SECOND: The address, including street, number, city, and county,
of the registered office of the corporation in the State of Delaware is
1013 Centre Road, City of Wilmington, County of New Castle; and the name of
the registered agent of the corporation in the State of Delaware at such
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "General Corporation Law"):
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue shall be three hundred twenty million
(320,000,000) shares of which three hundred million (300,000,000) 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.
The designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of each class of stock are as follows:
A. The Preferred Stock may be issued in one or more series and
may be with such voting powers, full or limited, or without voting powers,
and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be fixed by the Board of Directors pursuant
to authority hereby expressly granted to it, and as shall be stated and
expressed in the resolution or resolutions providing for the issue of such
stock adopted by the Board of Directors pursuant to authority expressly
vested in it by these provisions.
B. Any Preferred Stock or series thereof may be made subject to
redemption at such time or times and at such price or prices as shall be
stated and expressed in the resolutions or resolutions providing for the
issue of such stock adopted by the Board of Directors as hereinabove
provided.
C. The holders of Preferred Stock or of any series thereof shall
be entitled to receive dividends at such rates, on such conditions and at
such times as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the Board of
Directors as hereinabove provided, payable in preference to, or in such
relation to, the dividends payable on any other class or classes of stock,
or cumulative or non-cumulative as shall be so stated and expressed.
D. The holders of Preferred Stock or of any class or of any
series thereof, shall be entitled to such rights upon the dissolution of,
or upon any distribution of the assets of, the corporation as shall be
stated and expressed in the resolution or resolutions providing for the
issue of such stock adopted by the Board of Directors as hereinabove
provided.
E. Any Preferred Stock of any class or of any series thereof may
be made convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or of any other class or classes
of stock of the corporation, or shares of any class or series of stock of
any other corporation, at such price or prices or at such rates of exchange
and with such adjustments as shall be stated and expressed or provided for
in the resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors as hereinabove provided.
F. Except as otherwise by statute or by the resolutions providing
for the issue of Preferred Stock specifically provided, the Preferred Stock
and the Common Stock shall each have the right and power to vote on all
matters on which a vote of stockholders is to be taken. Each holder of
Preferred Stock and each holder of Common Stock of the corporation entitled
to vote shall have one vote for each share thereof held.
FIFTH: The name and the mailing address of the incorporator is as
follows: Lawrence P. Lavan, 61 Broadway, New York, New York 10006.
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between
the corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of the corporation, or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
the corporation under the provisions of Section 291 of the General
Corporation Law or on the application of trustees in dissolution or of any
receiver or receivers appointed for the corporation under the provisions of
Section 279 of the General Corporation Law order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders
of the corporation, as the case may be, to be summoned in such manner as
the said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders
or class of stockholders of the corporation, as the case may be, agree to
any compromise or arrangement and to any reorganization of the corporation
as consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
stockholders or class of stockholders, of the corporation, as the case may
be, and also on the corporation.
EIGHTH: For the management of the business and for the conduct of
the affairs of the corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and
stockholders, or any class thereof, as the case may be, it is further
provided:
1. The management of the business and the conduct of the
affairs of the corporation, including the election of the Chairman of
the Board of Directors, if any, the President, the Treasurer, the
Secretary, and other principal officers of the corporation, shall be
vested in its Board of Directors. The number of Directors of the
corporation shall be fixed by the By-Laws of the corporation and may
be altered from time to time as provided therein, but in no event
shall the number of directors of the corporation be less than three
nor more than fifteen. A director shall be elected to hold office
until the expiration of the term for which such person is elected, and
until such person's successor shall be duly elected and qualified. The
directors of the corporation shall be divided into three classes, as
nearly equal in number as possible, designated Class I, Class II and
Class III. The term of office of the initial Class I directors shall
expire at the annual meeting of stockholders to be held in 1977; the
term of office of the initial Class II directors shall expire at the
annual meeting of stockholders to be held in 1978; and the term of
office of the initial Class III directors shall expire at the annual
meeting of stockholders to be held in 1979. At each annual meeting of
stockholders commencing with the annual meeting to be held in 1977 for
the purpose of electing a class of directors, persons shall be elected
to hold office as such class of directors for a period of three years
and until the third succeeding annual meeting of stockholders
following the meeting at which they are elected. When the number of
directors is changed, any newly created directorships or any decrease
in directorships shall be so apportioned among the classes so as to
make all classes as nearly equal in number as possible. Any vacancies
created in the Board of Directors through increase in the number of
directors or otherwise, may be filled in accordance with the By-Laws
of the corporation and the applicable laws of the State of Delaware.
Election of directors need not be by written ballot.
2. The original By-Laws of the corporation shall be adopted
by the incorporator. Thereafter, the power to make, alter, or repeal
the ByLaws, and to adopt any new By-Law, except a By-Law classifying
directors for election for staggered terms, shall be vested in the
Board of Directors.
3. Whenever the corporation shall be authorized to issue
more than one class of stock, one or more of which is denied voting
power, no outstanding share of any class of stock which is denied
voting power under this Certificate of Incorporation shall entitle the
holder thereof to notice of, and the right to vote, at any meeting of
stockholders except as the provisions of paragraph (b)(2) of Section
242 of the General Corporation Law and of Section 251, 252, and 253 of
the General Corporation Law shall otherwise require; provided, that no
share of any such class which is otherwise denied voting power shall
entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
4. In lieu of taking any permissive or requisite action by
vote at a meeting of stockholders, any such vote and any such meeting
may be dispensed with if either all of the stockholders entitled to
vote upon the action at any such meeting shall consent in writing to
any such corporate action being taken or if less then all of the
stockholders entitled to vote upon the action at any such meeting
shall consent in writing to any such corporate action being taken;
provided, that any such action taken upon less than the unanimous
written consent of all stockholders entitled to vote upon any such
action shall be by the written consent of the stockholders holding at
least the minimum percentage of the votes required to be cast to
authorize any such action under the provisions of the General
Corporation Law or under the provisions of this Certificate of
Incorporation or the By-Laws as permitted by the provisions of the
General Corporation Law; and, provided, that prompt notice be given to
all stockholders entitled to vote on any such action or the taking of
such action without a meeting and by less than unanimous written
consent. NINTH: No contract or transaction between the corporation and
one or more of its directors or officers, or between the corporation
and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of
Directors or a committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such
purpose, if:
(a) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by a vote sufficient
for such purpose without counting the vote of the interested
director or directors; or
(b) The material facts as to his interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof, or the
stockholders.
Interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
TENTH:
A. Modification of Certain Liability of Directors.
A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the General Corporation
Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law, as so amended. Any repeal
or modification of this Section A or B by the stockholders of the
corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification.
B. Indemnification and Insurance.
(1) Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
he or she or a person of whom he or she is the legal representative is
or was a director or officer of the corporation or is or was serving
at the request of the corporation as a director or officer of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while
serving as a director or officer shall be indemnified and held
harmless by the corporation to the fullest extent authorized by the
General Corporation Law as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to
such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however,
that except as provided in paragraph (2) of this Section B with
respect to proceedings seeking to enforce rights to indemnification,
the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this Section B shall be a contract right
and shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the General Corporation Law
requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to
any employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the corporation of an
undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
Section B or otherwise.
(2) Right of Claimant to Bring Suit. If a claim under
paragraph (1) of this Section B is not paid in full by the corporation
within the thirty days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the
General Corporation Law for the corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall
be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors,
independent legal counsel or stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the
applicable standard of conduct.
(3) Non Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance
of its final disposition conferred in this Section B shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of this Certificate of
Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
(4) Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or
loss, whether or not the corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law.
ELEVENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in
force may be added or inserted in the manner and at the time prescribed by
said law, and all rights at any time conferred upon the stockholders of the
corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article ELEVENTH.
TWELFTH: A. As used in this Article TWELFTH:
(1) "Affiliate" and "Associate" shall be determined pursuant to
Rule 12b-2 (or any successor rule) of the General Rules and Regulations
under the Securities Exchange Act of 1934;
(2) "Beneficial Ownership" shall be determined pursuant to Rule
13d-3 (or any successor rule) of the General Rules and Regulations under
the Securities Exchange Act of 1934 and shall include:
(i) shares of stock which a Person has the right to acquire, hold
or vote pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants, options or otherwise;
and
(ii) shares of stock which are beneficially owned, directly or
indirectly (including shares deemed owned through application of the
foregoing clause (i)), by any Person (a) with which it or its
Affiliate or Associate has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of shares
of stock of the corporation or (b) which is its Affiliate or
Associate;
(3) "Business Combination" shall include:
(i) any merger or consolidation of the corporation with or into
any other Related Person;
(ii) the sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Related Person of any assets of the corporation or any
subsidiary thereof having an aggregate fair market value of
$15,000,000 or more;
(iii) the issuance or transfer by the corporation or any
subsidiary thereof (in one transaction or a series of transactions) of
any securities of the corporation or any subsidiary thereof to any
Related Person in exchange for cash, securities or other property (or
a combination thereof) having an aggregate fair market value of
$15,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of any Related
Person; or
(v) any reclassification or recapitalization of securities of the
corporation if the effect, directly or indirectly, of such transaction
is to increase the relative voting power of any Related Person;
(4) "Continuing Director" shall mean a member of the Board of
Directors of the corporation who was not affiliated with the Related Person
and was a member of the Board of Directors prior to the time that the
Related Person acquired the last shares of stock of the corporation
entitling such Related Person to exercise, in the aggregate, in excess of
ten percent (10%) of the total voting power of all classes of stock of the
corporation entitled to vote in elections of directors, or a Person
recommended to succeed a Continuing Director by a majority of Continuing
Directors;
(5) "Person" shall include any individual, corporation,
partnership, person or other entity; and
(6) "Related Person" shall mean any Person, together with any
Affiliate or Associate of such Person, which has Beneficial Ownership,
directly or indirectly, of shares of stock of the corporation entitling
such Person to exercise more than ten percent (10%) of the total voting
power of all classes of stock of the corporation entitled to vote in
elections of directors, considered for the purposes of this Article TWELFTH
as one class, together with the successors and assigns of any such Person
in any transaction or series of transactions not involving a public
offering of the corporation's stock within the meaning of the Securities
Act of 1933.
B. Unless the conditions set forth in subparagraphs (1) or (2) of
this paragraph B are satisfied, the affirmative vote of not less than
seventy-five percent (75%) of the outstanding shares of stock of the
corporation entitled to vote in elections of directors, considered for the
purposes of this Article TWELFTH as one class, shall be required for the
adoption or authorization of a Business Combination with any Related
Person. Such affirmative vote shall be required notwithstanding the fact
that no vote, or a lesser percentage, may be required by law or in any
agreement with any national securities exchange or otherwise, but such vote
shall not be applicable if:
(1) The definitive agreement or other arrangements to effectuate
a Business Combination with a Related Person are approved by a majority of
the Continuing Directors; such determination shall be made by a majority of
the Continuing Directors even if such majority does not constitute a quorum
of the members of the Board of Directors then in office; or
(2) All of the following conditions are satisfied:
(i) The cash and fair market value of the property, securities or
other consideration (including, without limitation, stock of the
corporation retained by its existing public stockholders in the event
of a Business Combination in which the corporation is the surviving
corporation) to be received per share by the holders of each class or
series of stock of the corporation in a Business Combination with a
Related Person is not less than the highest per share price (including
brokerage commissions and/or soliciting dealers' fees) paid by such
Related Person in acquiring any shares of such class or series,
respectively;
(ii) The consideration to be received by holders of a particular
class of securities shall be in cash or in the same form as the
Related Person has previously paid for shares of such class of stock.
If the Related Person has paid for shares of any class of stock with
varying forms of consideration, the form of consideration for such
class of stock shall be either cash or the form used to acquire the
largest number of shares of such class of stock previously acquired by
it;
(iii) After a Person has become a Related Person and prior to the
consummation of a Business Combination, except as approved by a
majority of the Continuing Directors, there shall have been no
reduction in the annual rate of dividends paid on shares of stock of
the corporation (except as necessary to reflect any subdivision of
such shares);
(iv) The Related Person shall not have (a) received the benefit,
directly or indirectly (except proportionately as a stockholder), of
any loans, advances, guarantees, pledges or other financial assistance
or tax credits provided by the corporation, or (b) made any major
change in the corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors, in
either case prior to the consummation of the Business Combination; and
(v) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 shall be mailed to public stockholders
of the corporation for the purpose of soliciting stockholder approval
of the Business Combination and shall contain at the front thereof, in
a prominent place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing
Directors, or any of them, may choose to state and, if deemed
advisable by a majority of the Continuing Directors, an opinion of a
reputable investment banking firm as to the fairness (or not) of the
terms of such Business Combination, from the point of view of the
remaining public stockholders of the corporation (such investment
banking firm to be selected by a majority of the Continuing Directors
and to be paid a reasonable fee for their services by the corporation
upon receipt of such opinion).
The provisions of this Article TWELFTH shall also apply to a Business
Combination with any Person which at any time has been a Related Person,
notwithstanding the fact that such Person is no longer a Related Person,
if, at the time the definitive agreement or other arrangements relating to
a Business Combination with such Person was entered into, it was a Related
Person or if, as of the record date for the determination of stockholders
entitled to notice of and to vote on the Business Combination, such Person
is an Affiliate of the corporation.
C. A majority of the Continuing Directors shall have the power
and duty, consistent with their fiduciary obligations, to determine for the
purposes of this Article TWELFTH, on the basis of information known to
them,
(1) whether any Person is a Related Person;
(2) whether any Person is an Affiliate or Associate of another;
(3) whether any Person has an agreement, arrangement, or
understanding with another; or
(4) the fair market value of property, securities or other
consideration (other than cash) to be received by holders of shares of
stock of the corporation.
The good faith determination of a majority of the Continuing Directors
on such matters shall be binding and conclusive for purposes of this
Article TWELFTH.
D. Any corporation action which may be taken by the written
consent of stockholders entitled to vote upon such action pursuant to
Article EIGHTH Section 4 of this Certificate of Incorporation or pursuant
to the General Corporation Law shall be only by the written consent of
holders of not less than seventy-five percent (75%) of the shares of stock
of the corporation entitled to vote thereon, notwithstanding the fact that
a lesser percentage may be required by law or otherwise.
E. Any corporate action which may be taken at a special meeting
of stockholders called by the Board of Directors, a majority of which Board
are not Continuing Directors, shall be only by the affirmative vote of the
holders of not less than seventy-five percent (75%) of the outstanding
shares of stock of the corporation entitled to vote in elections of
directors, considered for purposes of this Article TWELFTH as one class,
notwithstanding the fact that a lesser percentage may be required by law or
otherwise.
F. Notwithstanding any other provision contained in this
Certificate of Incorporation, any action by stockholders to amend this
Certificate of Incorporation or the By-Laws of the corporation shall be
made at a meeting of the stockholders called for that purpose and not by
written consent.
G. No amendments to this Certificate of Incorporation of the
corporation shall amend, alter, change or repeal any of the provisions of
this Article TWELFTH, unless the amendment effecting such amendment,
alteration, change or repeal shall receive the affirmative vote of not less
than seventy-five percent (75%) of the shares of stock of the corporation
entitled to vote in elections of directors, considered for the purposes of
this Article TWELFTH as one class; provided that this paragraph G shall not
apply to, and such seventy-five percent (75%) vote shall not be required
for, any amendment, alteration, change or repeal recommended to the
stockholders by a majority of the Continuing Directors.
H. Nothing contained in this Article TWELFTH shall be construed
to relieve the Board of Directors or any Related Person from any fiduciary
obligation imposed by law.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation
has been signed by Elliot S. Gerson, its authorized officer, this 12th day
of December, 1996.
By: /s/ Elliot S. Gerson
---------------------------------------
Title: Senior Vice President
Exhibit 3(ii)
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
RITE AID CORPORATION
------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------------
Rite Aid Corporation, a Delaware corporation (hereinafter
called the "Corporation"), does hereby certify as follows:
FIRST: The first paragraph of Article FOURTH of the
Corporation's Restated Certificate of Incorporation is hereby amended to
read in its entirety as set forth below:
"FOURTH: The total number of shares of stock which the
corporation shall have authority to issue shall be six
hundred twenty million (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."
SECOND: This amendment to the Restated Certificate of
Incorporation was duly adopted in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Rite Aid Corporation has caused this
Certificate to be duly executed in its corporate name this 22nd day of
February, 1999.
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
-------------------------------
Name: Elliot S. Gerson
Title: Executive Vice President
and Secretary
Exhibit 3(iii)
CERTIFICATE OF DESIGNATION
OF
8% SERIES A CUMULATIVE CONVERTIBLE PAY-IN-KIND
PREFERRED STOCK
OF
Rite Aid Corporation
_________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________
Rite Aid Corporation (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware,
certifies that pursuant to the authority contained in Article Fourth of its
Restated Certificate of Incorporation (the "Certificate of Incorporation")
and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Company, at a meeting duly called and held on October 18, 1999 duly
approved and adopted the following resolution which resolution remains in
full force and effect on the date hereof:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issuance of 8%
Series A Cumulative Convertible Pay-in-Kind Preferred Stock (the "Series A
Preferred Stock"), par value $1.00 per share, with a liquidation preference
of $100 per share at the time of initial issuance, initially consisting of
3,000,000 shares, which number may be increased from time to time by the
Board of Directors upon any issuance of Series A Preferred Stock in
accordance with Section 3 of this Certificate of Designation, having the
following voting powers, preferences and relative, optional and other
special rights, and qualifications, limitations and restrictions thereof as
follows:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"Board of Directors" means the Board of Directors of the Company
or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Closing Price" means, with respect to any securities on any day,
the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the New York Stock Exchange, or, if
such security is not listed or admitted to trading on such exchange, on the
principal national securities exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported
by the National Quotation Bureau Incorporated, or a similarly generally
accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time to
time by the Board of Directors for that purpose.
"Common Stock" means the common stock, par value $1.00 per share,
of the Company.
"Common Stock Sale Price" means, the most recent price per share
at which the Company shall have issued and sold its Common Stock from the
Issue Date through the first anniversary of the Issue Date other than
pursuant to an Excluded Transaction. For purposes of this definition,
sales of securities which are convertible into Common Stock or issuances of
options or warrants to purchase Common Stock shall be treated as sales of
Common Stock at the conversion price on the date of issuance of the
convertible security or the price at which the option or warrant may be
exercised on the date of the issuance of the option or warrant, as the case
may be.
"Conversion Price" means (a) at any time prior to March 1, 2001,
the lowest of (i) $11.00, (ii) the applicable Common Stock Sale Price or
(iii) the then applicable Conversion Price and (b) on and after March 1,
2001, (x) if any Three-Month Average Price is less than the Conversion
Price as of the end of the day on February 28, 2001, the greater of (1) the
lowest Three-Month Average Price or (2) $7.50 and (y) if the Conversion
Price as of the end of the day on February 28, 2001 is equal to or less
than the lowest Three-Month Average Price, the lower of $11.50 or the
lowest of any Common Stock Sale Price; provided, however, that in the event
of any adjustment to the Conversion Price pursuant to section 6(c) hereof
prior to March 1, 2001, each and every aspect of this definition shall be
proportionately adjusted.
"DGCL" means the Delaware General Corporation Law.
"Dividend Payment Date" has the meaning set forth in Section 3(a)
below.
"Dividend Rate" means 8.00% per annum.
"Excluded Transaction" means (i) the exercise of options or
warrants existing as the Issue Date, (ii) the exercise of warrants to
purchase up to 2,500,000 shares of Common Stock (subject to certain anti-
dilution provisions) issued on or about the Issue Date, (iii) the issuance
of options to purchase Common Stock granted or to be granted to any
employees or directors of the Company under a stock option plan and the
exercise thereof, (iv) the settlement of any stock appreciation rights by
the issuance of Common Stock and (v) the issuance of Common Stock in
connection with the acquisition by the Company of all or a substantial
portion of the assets or Capital Stock of any Person.
"Holder" means the record holder of one or more shares of Series
A Preferred Stock, as shown on the books and records of the Company.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Issue Date" means the first date on which any shares of Series A
Preferred Stock are issued.
"Junior Securities" has the meaning set forth in Section 2 below.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed.
"Liquidation Date" has the meaning set forth in Section 4(a)
below.
"Liquidation Preference" means, as of any date and subject to
adjustment based on stock splits, subdivisions or combinations with respect
to the Series A Preferred, $100 plus unpaid dividends with respect to any
preceding Dividend Payment Date, as if the same had been paid on such date,
at the Dividend Rate.
"Optional Redemption Price" has the meaning set forth in Section
5(a) below.
"Parity Securities" has the meaning set forth in Section 2 below.
"Partial Dividend Period Amount" means, as of any applicable
date, with respect to any Series A Preferred Stock, an amount equal to the
amount of dividends that would accrue at the Dividend Rate on the
Liquidation Preference of such Series A Preferred Stock on a daily basis
from the last Dividend Payment Date to and including such applicable date.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or
business).
"Record Date" has the meaning set forth in Section 3(a) below.
"Redemption Date" has the meaning set forth in Section 5(c)
below.
"Senior Security" has the meaning set forth in Section 2 below.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
that Person (or a combination thereof) and (ii) any partnership (a) the
sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"Three-Month Average Price" means the average Closing Price of
the Common Stock for the Trading Days during any consecutive 90-day period
from the Issue Date through February 28, 2001.
"Trading Day" means (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on which
trade may be made on the Nasdaq National Market or (z) if the applicable
security is not otherwise listed, admitted for trading or quoted, any day
other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order
to close.
2. Ranking. The Series A Preferred Stock shall, with respect
to dividend rights and distributions upon the liquidation, winding-up or
dissolution of the Company, rank (i) senior to all classes of Common Stock
of the Company and to each other class of Capital Stock or series of
preferred stock established after the Issue Date by the Board of Directors,
the terms of which do not expressly provide that it ranks senior to or on a
parity with the Series A Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company (collectively referred to with the Common Stock of the Company as
"Junior Securities"); (ii) subject to Section 7(b) hereof, on a parity with
any additional shares of Series A Preferred Stock issued by the Company in
the future in accordance with Section 3 hereof and any other class of
Capital Stock or series of preferred stock established after the Issue Date
by the Board of Directors, the terms of which expressly provide that such
class or series will rank on a parity with the Series A Preferred Stock as
to dividend distributions and distributions upon the liquidation, winding-
up and dissolution of the Company, including but not limited to the Series
B Preferred Stock (as defined in Section 8 hereof) (collectively referred
to as "Parity Securities") and (iii) subject to Section 7(b) hereof,
junior to any additional shares of Series A Preferred Stock issued by the
Company in the future and any other class of Capital Stock or series of
preferred stock established after the Issue Date by the Board of Directors,
the terms of which expressly provide that such class or series will rank
senior to the Series A Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company (collectively referred to as "Senior Securities").
3. Dividends.
a. The Holders of shares of the Series A Preferred Stock shall
be entitled to receive, when, as and if dividends are declared by the Board
of Directors out of funds of the Company legally available therefor,
cumulative preferential dividends, accruing from the date of issuance at
the Dividend Rate on the Liquidation Preference and payable quarterly in
arrears on each March 31, June 30, September 30 and December 31 or, if any
such date is not a Business Day, on the next succeeding Business Day (each,
a "Dividend Payment Date"), to the Holders of record as of the next
preceding March 15, June 15, September 15 and December 15 (each, a "Record
Date"). Dividends shall be payable, at the option of the Company, either
(i) in cash, (ii) by issuance of additional shares of Series A Preferred
Stock (including fractional shares) having an aggregate Liquidation
Preference equal to the amount of the dividend to be paid, or (iii) any
combination thereof. All dividends paid with respect to shares of Series A
Preferred Stock, whether in cash or shares of Series A Preferred Stock,
pursuant to this Section 3 shall be made pro rata among the Holders based
upon the aggregate accrued but unpaid dividends on the shares held by each
such Holder. If and when any shares are issued under this Section 3(a) for
the payment of accrued dividends, such shares shall be validly issued and
outstanding and fully paid and nonassessable and shall initially have a
Conversion Price equal to that of the Series a Preferred Stock with respect
to which it is issued. The first dividend payment shall be payable on
December 31, 1999. Dividends payable on the Series A Preferred Stock shall
be computed on the basis of a 360-day year consisting of twelve 30-day
months and shall be deemed to accumulate on a daily basis.
b. To the extent not paid pursuant to Section 3(a) above,
dividends on the Series A Preferred Stock shall accumulate, whether or not
there are funds legally available for the payment of such dividends and
whether or not dividends are declared. For all purposes hereunder,
dividends on the Series A Preferred Stock shall be treated as if the same
were paid on the relevant Dividend Payment Date, whether or not the same
were in fact so paid or declared.
c. Holders of the Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described. Unless full
cumulative dividends on all outstanding shares of Series A Preferred Stock
for all past dividend periods shall have been declared and paid in cash or
by the issuance of additional shares of Series A Preferred Stock, or
declared and a sufficient sum for the payment thereof set apart, then: (i)
no dividend (other than a dividend payable solely in Junior Securities)
shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (ii) no other distribution
shall be declared or made upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior Securities, other than a
distribution consisting solely of Junior Securities; (iii) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange or conversion for shares of other
Junior Securities) by the Company or any of its Subsidiaries; and (iv) no
monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or
retirement for value of any shares of Junior Securities by the Company or
any of its Subsidiaries.
d. In the case of shares of Series A Preferred Stock issued on
the Issue Date, dividends shall accrue and be cumulative from such date.
In the case of shares of Series A Preferred Stock issued as a dividend on
shares of Series A Preferred Stock, dividends shall accrue and be
cumulative from the Dividend Payment Date in respect of which such shares
were issued or were scheduled to be paid pursuant to Section 3(a) hereof as
a dividend.
e. Each fractional share of Series A Preferred Stock
outstanding (or treated as outstanding pursuant to Section 3(b) hereof)
shall be entitled to a ratably proportionate amount of all dividends
accruing with respect to each outstanding or due to be issued and
outstanding share of Series A Preferred Stock pursuant to paragraph (a) of
this Section 3, and all such dividends with respect to such outstanding
fractional shares shall be cumulative and shall accrue (whether or not
declared); and shall be payable in the same manner and at such times as
provided for in paragraph (a) of this Section 3 with respect to dividends
on each outstanding or due to be issued and outstanding share of Series A
Preferred Stock. Each fractional share of Series A Preferred Stock
outstanding shall also be entitled to a ratably proportionate amount of any
other distributions made with respect to each outstanding or due to be
issued and outstanding share of Series A Preferred Stock, and all such
distributions shall be payable in the same manner and at the same time as
distributions on each outstanding or due to be issued and outstanding share
of Series A Preferred Stock.
f. Accrued but unpaid dividends for any past dividend periods
may be declared by the Board of Directors and paid on any date fixed by the
Board of Directors, whether or not a regular Dividend Payment Date, to
Holders of record on the books of the Corporation on such record date as
may be fixed by the Board of Directors, which record date shall be no more
than 60 days prior to the payment date thereof.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company or reduction or decrease in its
Capital Stock resulting in a distribution of assets to the holders of any
class or series of the Company's Capital Stock (the date of such
occurrence, the "Liquidation Date"), the Company shall, out of the assets
of the Company available for distribution, make the following payments in
respect of its Capital Stock:
a. first, payments due in connection with the Senior Securities
on the Liquidation Date, including any accumulated and unpaid dividends, if
any, on such Senior Securities, to the Liquidation Date;
b. second, on a pro rata basis, payments (i) on shares of the
Series A Preferred Stock equal to the Liquidation Preference per share of
Series A Preferred Stock held by or due to (as of such date pursuant to
Section 3 hereof) such Holder, plus all Partial Dividend Period Amounts, if
any, thereon to the Liquidation Date and (ii) due on Parity Securities; and
c. third, payments on any Junior Securities, including, without
limitation, the Common Stock.
After payment in full in cash of the Liquidation Preference and all
accumulated dividends, if any, to which Holders of Series A Preferred Stock
are entitled, such Holders shall not be entitled to any further
participation in any distribution of assets of the Company.
5. Redemption by the Company.
a. From time to time, on and after October 25, 2004, the
Company shall have the option to redeem (subject to the legal availability
of funds therefor) all, or any part of, the outstanding (and due to be
issued and outstanding as of such date pursuant to Section 3 hereof) shares
of the Series A Preferred Stock at a price equal to 105% of the Liquidation
Preference), plus the Partial Dividend Period Amount, if any, to the
applicable Redemption Date (together, the "Optional Redemption Price").
b. In case of redemption of less than all of such shares of
Series A Preferred Stock, the shares to be redeemed shall be selected pro
rata or by other appropriate means.
c. Notice of any redemption shall be sent by or on behalf of
the Company not less than 30 nor more than 60 days prior to the date
specified for redemption in such notice (the "Redemption Date"), by first
class mail, postage prepaid, to all Holders of record of the Series A
Preferred Stock at their last addresses as they shall appear on the books
of the Company; provided, however, that no failure to give such notice or
any defect therein or in the mailing thereof shall affect the validity of
the proceedings for the redemption of any shares of Series A Preferred
Stock except as to the Holder to whom the Company has failed to give notice
or except as to the Holder to whom notice was defective. In addition to
any information required by law, such notice shall state: (i) the
Redemption Date; (ii) the Optional Redemption Price; (iii) the number of
shares of Series A Preferred Stock to be redeemed and, if less than all
shares held by such Holder are to be redeemed, the number of such shares to
be redeemed; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the Optional Redemption Price; (v) the
Conversion Price then in effect; (vi) that the Holder's right to convert
such shares of into Common Stock shall terminate on the close of business
on the fifth Business Day preceding such redemption date; and (vii) that
dividends on the shares to be redeemed will cease to accumulate on the
Redemption Date. Upon the mailing of any such notice of redemption, the
Company shall become obligated to redeem at the time of redemption
specified thereon all shares called for redemption.
d. If notice has been mailed in accordance with Section 5(c)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside
by the Company, separate and apart from its other funds in trust for the
pro rata benefit of the Holders of the shares so called for redemption, so
as to be, and to continue to be available therefor, then, from and after
the Redemption Date, dividends on the shares of the Series A Preferred
Stock so called for redemption shall cease to accumulate, and said shares
shall no longer be deemed to be outstanding and shall not have the status
of shares of Series A Preferred Stock, and all rights of the Holders
thereof as stockholders of the Company (except the right to receive from
the Company the Optional Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so
require and the notice shall so state), such shares shall be redeemed by
the Company at the Optional Redemption Price.
e. Any deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except
that any balance of monies so deposited by the Company and unclaimed by the
Holders of the Series A Preferred Stock entitled thereto at the expiration
of two years from the applicable Redemption Date shall be repaid, together
with any interest or other earnings earned thereon, to the Company, and
after any such repayment, the Holders of the shares entitled to the funds
so repaid to the Company shall look only to the Company for payment without
interest or other earnings; provided, however, that any funds deposited for
the purpose of redeeming shares of Series A Preferred Stock which are
subsequently converted in accordance with Section 6 hereof shall be repaid
to the Company upon such conversion.
6. Conversion.
a. At any time after the termination or expiration of any
applicable waiting period under the HSR Act, holders of shares of Series A
Preferred Stock shall have the right to convert any of such shares which
have not been previously redeemed into fully paid, nonassessable shares of
Common Stock. For the purpose of conversion, each share of Series A
Preferred Stock shall be valued at the Liquidation Preference, which shall
be divided by the Conversion Price in effect on the conversion date to
determine the number of shares issuable upon conversion. In case any
shares of Series A Preferred Stock are to be redeemed pursuant to Section 5
hereof or exchanged pursuant to Section 8 hereof, such right of conversion
shall cease and terminate as to the shares of Series A Preferred Stock to
be redeemed or exchanged at the close of business on the fifth Business Day
preceding the date fixed for redemption or exchange, as the case may be,
unless the Company shall default in the payment of the applicable
redemption price or making available the Series B Preferred Stock prior to
the close of business on the date fixed for redemption or exchange.
b. Any Holder of shares of Series A Preferred Stock desiring to
convert such shares into Common Stock shall surrender the certificate or
certificates (unless such certificates have not yet been issued by the
Company but are otherwise due such Holder pursuant to Section 3 hereof)
evidencing such shares of Series A Preferred Stock at the office of the
transfer agent (which may be the Company) for the Series A Preferred Stock,
which certificate or certificates, if the Company shall so require, shall
be duly endorsed to the Company or in blank, or accompanied by proper
instruments of transfer to the Company or in blank, accompanied by (i) an
irrevocable written notice to the Company that the Holder elects so to
convert such shares of Series A Preferred Stock and specifying the name or
names (with address or addresses) in which a certificate or certificates
evidencing shares of Common Stock are to be issued, (ii) in the event that
the Series A Preferred Stock is converted during the period from the close
of business on any Record Date next preceding any Dividend Payment Date to
the opening of business on such Dividend Payment Date, payment in New York
Clearing House funds or other funds acceptable to the Company of an amount
equal to the Partial Dividend Period Amount (other than with respect to
dividends to be paid-in-kind by the Company) that would accrue from the
date of conversion to such Dividend Payment Date on the Series A Preferred
Stock so converted and (iii) if required pursuant to Section 6(f), an
amount sufficient to pay any transfer or similar tax (or evidence
reasonably satisfactory to the Company demonstrating that such taxes have
been paid). In the event that a holder fails to notify the Company of the
number of shares of Series A Preferred Stock which such Holder wishes to
convert, such Holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates surrendered for conversion.
Holders of shares of Series A Preferred Stock at the close of
business on a Record Date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding
the conversion thereof following such Record Date and prior to such
Dividend Payment Date. A Holder of shares of Series A Preferred Stock on a
Record Date who (or whose transferee) tenders any such shares for
conversion into shares of Common Stock on such Dividend Payment Date will
receive the dividend payable by the Company on such shares of Series A
Preferred Stock on such date; provided, however, in the case of a dividend
to be paid-in-kind, the aggregate Liquidation Preference of the series A
Preferred stock to be issued will be equal to the Partial Dividend Period
Amount through the date of conversion. Except as provided for above, no
payments or adjustments in respect of dividends on shares of Series A
Preferred Stock surrendered for conversion or on account of any dividend on
the Common Stock issued upon conversion shall be made upon the conversion
of any shares of Series A Preferred Stock.
The Company shall, as soon as practicable after such deposit of
certificates (to the extent required above) evidencing shares of Series A
Preferred Stock accompanied by the written notice and compliance with any
other conditions herein contained, deliver at such office of such transfer
agent to the person for whose account such shares of Series A Preferred
Stock were so surrendered, or to the nominee or nominees of such person,
certificates evidencing the number of full shares of Common Stock to which
such person shall be entitled as aforesaid, together with a cash adjustment
in respect of any fraction of a share of Common Stock as hereinafter
provided. Subject to the following provisions of this paragraph, each
conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates for shares of
Series A Preferred Stock to be converted shall have been surrendered (to
the extent required above) together with the irrevocable written notice and
payment of taxes (if applicable) as provided for in clauses (i) and (ii)
above, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Series A Preferred Stock shall be
treated for all purposes as the record holder or holders of such Common
Stock at such time on such date, unless the stock transfer books of the
Company shall be closed on such date, in which event such person or persons
shall be deemed to have become such holder or holders of record at the
close of business on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in
effect on the date on which such shares shall have been surrendered and
such notice (and, if applicable, payment) received by the Company.
Immediately following such conversion, the rights of the holders of
converted Series A Preferred Stock shall cease.
c. Adjustment of Conversion Price. The Conversion Price at
which shares of Series A Preferred Stock are convertible into Common Stock
shall be subject to adjustment from time to time, as follows:
i. In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all or any portion of
its Common Stock or shall make a dividend or other distribution on any
other class of Capital Stock of the Company which dividend or distribution
includes Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be decreased by multiplying such Conversion Price by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such decrease
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (i), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall
include shares issuable in respect of scrip Common Stock. If any dividend
or distribution of the type described in this Section 6(c)(i) is declared
but not so paid or made, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
ii. In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all of its Common
Stock consisting of, or shall otherwise issue to all holders of its Common
Stock, rights, warrants or options (not being available on an equivalent
basis to Holders of the Series A Preferred Stock upon conversion) entitling
the holders of its Common Stock to subscribe for or purchase Common Stock
at a price per share less than the current market price per share
(determined as provided in paragraph (viii) of this Section 6(c)) of the
shares of Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, warrants or options (other
than pursuant to a dividend reinvestment plan), the Conversion Price in
effect at the opening of business on the day following the date fixed for
such determination shall be decreased by multiplying such Conversion Price
by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such decrease to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (ii), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but will include shares issuable in
respect of scrip certificates, if any, issued in lieu of fractions of
shares of Common Stock. The Company will not issue any rights or warrants
in respect of Common Stock held in the treasury of the Company (or, if
rights or warrants are issued in respect of all of the Common Stock of the
Company, will not exercise any such rights or warrants in respect of Common
Stock held in the treasury of the Company). In the event that such rights
or warrants are not so issued, the Conversion Price shall again be adjusted
to be the Conversion Price which would then be in effect if such date fixed
for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock at
less than such current market price, and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants. The value
of such consideration, if other than cash, shall be determined in the
reasonable good faith judgment of the Board of Directors of the Company,
whose determination shall be conclusive.
iii. In case at any time after the date hereof, all or any
portion of the Common Stock outstanding shall be subdivided into a greater
number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely in case at any time after the date hereof, all or any portion of
the shares of Common Stock outstanding shall each be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
iv. In case at any time after the date hereof, the Company
shall, by dividend or otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness or assets (including securities,
rights, warrants or options, but excluding any rights, warrants, or options
referred to in paragraph (ii) of this Section 6(c) as entitling the holders
of Common Stock to subscribe for or purchase Common Stock at a price per
share less than the curent market price, any dividend or distribution paid
exclusively in cash, any dividend or distribution referred to in paragraph
(i) of this Section 6(c) and any dividend or distribution upon a merger or
consolidation referred to in paragraph (v) of this Section 6(c)), the
Conversion Price shall be decreased so that the same shall equal the rate
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which
the numerator shall be the current market price per share (determined as
provided in paragraph (viii) of this Section 6(c)) of the Common Stock on
the date fixed for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive) of the portion of the assets or evidence of indebtedness so
distributed applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
adjustment to become effective immediately prior to the opening of business
on the day following the date fixed for the determination of stockholders
entitled to receive such distribution. If any dividend or distribution of
the type described in this Section 6(c)(iv) is declared but not so paid or
made, the Conversion Price shall again be adjusted to the Conversion Price
which would then be in effect if such dividend or distribution had not been
declared.
v. In case at any time after the date hereof, the Company
shall, by dividend or otherwise, make a distribution to all holders of its
Common Stock consisting exclusively of cash (excluding any cash that is
distributed upon a merger or consolidation or a sale or transfer of all or
substantially all of the assets of the Company to which Section 6(e)
applies or as part of a distribution referred to in paragraph (iv) of this
Section 6(c)) in an aggregate amount that, combined together with (i) the
aggregate amount of any other distributions to all holders of its Common
Stock made exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant
to this paragraph (v) has been made and (ii) the aggregate of any cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of consideration payable in respect of
any tender offer by the Company or any of its Subsidiaries for all or any
portion of the Common Stock concluded within the 12 months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to paragraph (vi) of this Section 6(c) has been made, exceeds
12.5% of the product of the current market price per share of Common Stock
on the date for the determination of holders of Common Stock entitled to
receive such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after
the close of business on such date for determination, the Conversion Price
shall be decreased so that the same shall equal the rate determined by
multiplying the Conversion Price in effect immediately prior to the close
of business in the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (A) the numerator of
which shall be equal to the current market price per share (determined as
provided in paragraph (viii) of this Section 6(c)) of the Common Stock on
the date fixed for such determination less an amount equal to the quotient
of (x) the excess of such combined amount over such 12.5% and (y) the
number of shares of Common Stock outstanding on such date for determination
and (B) the denominator of which shall be equal to the current market price
per share (determined as provided in paragraph (viii) of this section 6(c))
of the Common Stock on such date for determination. If any dividend or
distribution of the type described in this Section 6(c)(v) is declared but
not so paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
vi. In case a tender or exchange offer made by the Company
or any Subsidiary for all or any portion of the Common Stock shall expire
and such tender or exchange offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up to
any maximum specified in the terms of the tender offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive) that combined together with (i) the aggregate of the cash
plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) as of the expiration of such tender or
exchange offer, of consideration payable in respect of any other tender or
exchange offer, by the Company or any Subsidiary of the company for all or
any portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender or exchange offer and in respect of which no
adjustment, pursuant to this paragraph (vi) has been made and (ii) the
aggregate amount of any distributions to all holders of the Company's
Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender or exchange offer and in respect of which no
adjustment pursuant to paragraph (v) of this Section 6(c) has been made,
exceeds 12.5% of the product of the current market price per share of the
Common Stock (determined as provided in paragraph (viii) of this Section
6(c)) as of the last time (the "Expiration Time") tenders or tenders could
have been made pursuant to such tender or exchange offer (as it may be
amended) times the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) on the Expiration Time, then, and in each
such case, immediately prior to the opening of business on the day after
the date of the Expiration Time, the Conversion Price shall be decreased so
that the same shall equal the rate determined by multiplying the Conversion
Price immediately prior to the close of business on the date of the
Expiration Time by a fraction (A) the numerator of which shall be equal to
(1) the product of (x) the current market price per share of the Common
Stock (determined as provided in paragraph (viii) of this Section 6(c)) on
the date of the Expiration Time and (y) the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the date
of the Expiration Time less (2) the amount of cash plus the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares, and (B) the denominator of
which shall be equal to the product of (x) the current market price per
share of the Common Stock (determined as provided in paragraph (viii) of
this Section 6(c), as of the Expiration Time and (y) the number of shares
of Common Stock outstanding (including any tendered or exchanged shares) as
of the Expiration Time less the number of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted up to any such maximum, being referred to as the "Purchased
Shares"). In the event that the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is permanently prevented
by applicable law from effecting any such purchases or all such purchases
are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had not
been made.
vii. The reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 6(e) applies) shall be deemed to
involve (i) a distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of paragraph
(ii) of this Section 6(c)) and (ii) a subdivision or combination, as the
case may be, of the number of Common Stock outstanding immediately prior to
such reclassification into the number of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective," as the case may be, and "the day upon which such subdivision or
combination becomes effective", within the meaning of the paragraph (iii)
of this Section 6(c).
viii. For the purpose of any computation under
paragraphs (ii), (iv), (v), or (vi) of this Section 6(c), the current
market price per share of Common Stock on any date shall be deemed to be
the average of the daily Closing Prices per share for the five consecutive
Trading Days immediately preceding the earlier of the day in question and
the day before the "ex date" with respect to the issuance or distribution
requiring such computation. For purposes of this paragraph, the term "ex
date", when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the applicable
securities exchange or in the applicable securities market without the
right to receive such issuance or distribution.
ix. The Company may make such reductions in the Conversion
Price, in addition to those required by subparagraphs (i), (ii), (iii),
(iv), (v) and (vi), of this Section 6(c), as it considers to be advisable
to avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income
tax purposes. The Company from time to time may reduce the Conversion Price
by any amount for any period of time if the period is at least twenty days,
the reduction is irrevocable during the period and the Board of Directors
(or, to the extent permitted by applicable law, a duly authorized committee
thereof) shall have made a determination that such reduction would be in
the best interests of the Company, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to Holders of record of the Series A
Preferred Stock a notice of the reduction at least fifteen days prior to
the date the reduced Conversion Price takes effect, and such notice shall
state the reduced Conversion Price and the period it will be in effect.
x. Notwithstanding any other provision of this Section 6,
no adjustment to the Conversion Price shall reduce the Conversion Price
below the then par value per share of the Common Stock, and any such
purported adjustment shall instead reduce the Conversion Price to such par
value. The Company hereby covenants not to take any action (1) to increase
the par value per share of the Common Stock or (2) that would or does
result in any adjustment in the Conversion Price that would cause the
Conversion Price to be less than the then par value per share of the Common
Stock.
xi. Notwithstanding any other provision of this Section 6,
no adjustment in the Conversion Price need be made until all cumulative
adjustments amount to 1% or more of the Conversion Price as last adjusted.
Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
xii. Whenever the Conversion Price is adjusted as herein
provided:
(1) the Company shall compute the adjusted conversion
price and shall prepare a certificate signed by the Treasurer of the
Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the transfer agent for the Series
A Preferred Stock; and
(2) a notice stating that the Conversion Price has
been adjusted and setting forth the adjusted Conversion Price shall as soon
as practicable be mailed by the Company to all record Holders of shares of
Series A Preferred Stock at their last addresses as they shall appear upon
the stock transfer books of the Company.
xiii. In any case in which this Section 6(c) provides
that an adjustment shall become effective immediately after a record date
for an event, the Company may defer until the occurrence of such event (x)
issuing to the Holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event the
additional shares of Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and
(y) paying to such Holder any amount in cash in lieu of any fractional
share of Common Stock pursuant to Section 6(d).
d. The Company shall not issue fractional shares or scrip
representing fractional shares of Common Stock upon conversion of Series A
Preferred Stock. Instead the Company shall pay a cash adjustment based upon
the Closing Price of the Common Stock on the Business Day immediately
preceding the date of conversion. If more than one certificate evidencing
shares of Series A Preferred Stock shall be surrendered for conversion at
one time by the same Holder, the number of shares issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock so surrendered.
e. In the event that the Company shall be a party to any
transaction, including without limitation any (i) recapitalization or
reclassification of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of the Common Stock), (ii) any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), (iii)
any sale or transfer of all or substantially all of the assets of the
Company or (iv) any compulsory share exchange, pursuant to which the Common
Stock is converted into the right to receive other securities, cash or
other property, then lawful provision shall be made as part of the terms of
such transaction whereby the Holder of each share of Series A Preferred
Stock then outstanding shall have the right thereafter, to convert such
share into the kind and amount of securities, cash and other property
receivable upon such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock
might have been converted immediately prior to such recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange.
The Company or the person formed by such consolidation or resulting from
such merger or which acquires such assets or which acquires the Company's
shares, as the case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 6. The above provisions
shall similarly apply to successive recapitalization, reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
f. The Company shall at all times reserve and keep available,
out of its authorized and unissued stock, solely for the purpose of
effecting the conversion of the Series A Preferred Stock, such number of
shares of its Common Stock, free of preemptive rights, as shall from time
to time be sufficient to effect the conversion of all shares of Series A
Preferred Stock from time to time outstanding. The Company shall from time
to time, in accordance with the laws of the State of Delaware, use its best
efforts to increase the authorized number of shares of Common Stock if at
any time the number of shares of authorized and unissued Common Stock shall
not be sufficient to permit the conversion of all the then outstanding
shares of Series A Preferred Stock.
The Company shall pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Series A Preferred Stock. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other
securities or assets) in a name other than that in which the shares of
Series A Preferred Stock so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue
has paid to the Company the amount of such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
g. In case:
i. the Company shall authorize or take an action that
would, upon consummation, require a Conversion Price adjustment pursuant to
subparagraphs (ii), (iii), (iv), (v) or (vi) of Section 6(c); or
ii. of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company shall be
required, or of the sale or transfer of all or substantially all of the
assets of the Company or of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or other property; or
iii. of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Holders of record of the
Series A Preferred Stock, at their last addresses as they shall appear upon
the stock transfer books of the Company, at least twenty days prior to the
proposed record or effective date as the case may be, notice stating (x)
the date on which a record (if any) is to be taken for the purpose of such
action, dividend or distribution, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to
such dividend or distribution are to be determined or (y) the date on which
such action, reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon such action,
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice
or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice).
h. Notwithstanding the foregoing provisions, the issuance of
any shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Company
and the investment of dividends or interest payable on securities of the
Company and the investment of additional optional amounts in shares of
Common Stock under any such plan and the issuance of any shares of Common
Stock or options or rights to purchase such shares pursuant to any employee
benefit plan or program of the Company or pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as
of the Issue Date, shall not be deemed to constitute an issuance of Common
Stock or exercisable, exchangeable or convertible securities by the Company
to which any of the adjustment provisions described above applies so long
as the size or extent of the plan or plans are customary for corporations
similar to the Company. There shall also be no adjustment of the
Conversion Price in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the Company except as
specifically described in this Section 6. If any action would require
adjustment of the Conversion Price pursuant to more than one of the
provisions described above, only one adjustment shall be made and such
adjustment shall be the amount of adjustment which has the greatest
absolute value.
i. For purposes of this Section 6, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
7. Voting Rights.
(a) Holders of Series A Preferred Stock shall have no voting
rights, except as required by law and as hereinafter provided in this
Section 7.
(b) The Company shall not, without the affirmative vote or
consent of the Holders of a majority of the shares of Series A Preferred
Stock then outstanding:
i. authorize, create (by way of reclassification or
otherwise) or issue any Parity Securities (other than additional
shares of Series A Preferred Stock issued in accordance with Section
3(a) hereof, Series B Preferred Stock issued in accordance with
Section 8 hereof or Series B Preferred Stock issued as a dividend on
Series B Preferred Stock) or Senior Securities or any obligation or
security convertible into or evidencing the right to purchase any
Parity Securities or Senior Securities;
ii. amend or otherwise alter its Certificate of
Incorporation in any manner that adversely affects the rights,
privileges and preferences of the Series A Preferred Stock set forth
in this Certificate of Designation; or
iii. take any action requiring a vote of stockholders of the
Company that (x) is materially adverse to the Holders of Series A
Preferred Stock or (y) adversely affects the rights, preferences and
privileges of the Series A Preferred Stock set forth in this
Certificate of Designation.
8. Exchange.
(a) The Series A Preferred Stock shall be exchangeable, at the
option of either the Company or all of the Holders, at any time after the
expiration or termination of any applicable waiting period under the HSR
Act, into shares of Series B Cumulative Convertible Pay-in-Kind Preferred
Stock (the "Series B Preferred Stock") of the Company with an aggregate
liquidation preference equal to the Liquidation Preference of the Series A
Preferred Stock so exchanged plus any Partial Dividend Period Amount
accrued on such Series A Preferred Stock to the date of exchange. The
Series B Preferred Stock shall have substantially identical rights,
privileges and preferences as the Series A Preferred Stock set forth in
this Certificate of Designation, such rights, privileges and preferences to
be set forth in a Certificate of Designation in substantially the form of
Exhibit A attached hereto (the "Series B Certificate of Designation").
(b) In order to exercise the exchange set forth in Section
8(a), the Company, or all Holders, as the case may be, shall mail to (x) in
the case of the Corporation, each Holder of Series A Preferred Stock or (y)
in the case of the Holders, to the Corporation, written notice of its or
their intention to exchange all Series A Preferred Stock then outstanding
or thereafter issued in accordance with Section 3(a). Any notice sent by
the Company pursuant to the immediately preceding sentence shall be sent
not less than 30 nor more than 60 days prior to the date fixed for such
exchange (any such date, an "Exchange Date"). Promptly upon receipt by the
Company of a written notice from all Holders pursuant to this Section 8(b),
the Company shall send a notice to all Holders stating the Exchange Date
which Exchange Date shall be not less than 30 nor more than 60 days
subsequent to the receipt by the Company of the notice sent by Holders
pursuant to the first sentence of this Section 8(b). Each notice sent by
the Company pursuant to this Section 8(b) shall include a statement as to
the place or places where certificates for shares of Series A Preferred
Stock are to be surrendered for exchange. Upon the first delivery of any
such notice, the Corporation shall take all necessary actions to cause the
Series B Certificate of Designation to be filed with the Secretary of State
of the State of Delaware on or prior to the first Exchange Date.
(c) If notice has been mailed as set forth in Section 8(b)
above, and if on or before the Exchange Date specified in such notice, the
Series B Certificate of Designation has been filed with the Secretary of
State of the State of Delaware, then, regardless of whether certificates
for the shares of Series A Preferred Stock have been surrendered for
exchange, on the Exchange Date, dividends on the shares of Series A
Preferred Stock to be exchanged shall cease to accrue, and said shares of
Series A Preferred Stock shall no longer be deemed to be issued and
outstanding, and all rights of the Holders thereof (except the right to
receive shares of Series B Preferred Stock) shall cease and terminate.
Upon surrender of the certificates for any shares of Series A Preferred
Stock so exchanged, such shares shall be exchanged by the Company into
shares of Series B Preferred Stock as aforesaid and no Holder of Series A
Preferred Stock shall have the right to receive any accrued and unpaid
dividends on any share of the Series A Preferred Stock.
(d) The Company will give prior written notice to each Holder
(the "Company Notice") of any Specified Debt Issuance (as defined below) by
the Company to be consummated during the period from the Issue Date through
November 29, 2000. The Company Notice shall be provided to each Holder at
its address set forth in the register of Holders of Series A Preferred
Stock maintained by the Company no less than five Business Days prior to
any Specified Debt Issuance. Any Company Notice shall (1) describe the
terms of the securities to be issued (the "New Securities") in reasonable
detail, (2) include a statement that the Holders, upon unanimous election,
have the right to exchange all shares of outstanding Series A Preferred
Stock for securities with substantially the same terms as the New
Securities if any New Securities are issued and (3) include a statement
that any exchange pursuant to this Section 8(d) shall be effected on the
date of the issuance of the New Securities. If all Holders provide written
notice to the Company within five Business Days of the Company Notice of
their election to exchange all Series A Preferred Stock for securities with
substantially the same terms as the New Securities and if such New
Securities are issued, on the date of the issuance of the New Securities,
the Company shall exchange all Series A Preferred Stock for securities with
substantially the same terms as the New Securities. The securities to be
issued to Holders will have a principal amount equal to the Liquidation
Preference of the Series A Preferred Stock so exchanged. The Company shall
provide prior written notice to each Holder of the date for the exchange
and, regardless of whether certificates for the shares of Series A
Preferred Stock have been surrendered for exchange, on the date specified
by the Company for the exchange, dividends on the shares of Series A
Preferred Stock shall cease to accrue and the Series A Preferred Stock
shall no longer be deemed to be issued and outstanding, and all rights of
the Holders thereof (except the right to receive shares of the securities
to be issued upon exchange) shall cease and terminate. If less than all
Holders provide written notice to the Company of their election to exchange
as provided above, the Company shall not so exchange any Series A Preferred
Stock and the Company shall be permitted to issue the New Securities for up
to 60 days from the date of the Company Notice. For purposes of this
Section 8(d) and Section 8(e) below, "Specified Debt Issuance" shall mean
any private placement that is not widely distributed of any securities
which are treated as indebtedness on the balance sheet of the Company in
accordance with U.S. generally accepted accounting principles if such
securities (i) are convertible into or exchangeable for Common Stock or
Junior Securities or (ii) are issued with warrants, options or rights to
purchase Common Stock or Junior Securities issued to the purchasers of such
debt securities. For purposes of the immediately preceding sentence, a
widely distributed private placement is any offering of securities not
registered under the Securities Act of 1933 made to five or more
unaffiliated purchasers or to fewer than five purchasers if such purchasers
are purchasing the securities with a view to reselling such securities to
five or more unaffiliated purchasers.
(e) Notwithstanding the foregoing provisions, the Company shall
have no obligations and the Holders shall have no rights pursuant to
Section 8(d) upon a Specified Debt Issuance if a majority of the Holders
shall have consented in writing to suchissuance and waived its rights under
Secion 8(d).
9. Payment.
(a) All amounts payable in cash with respect to the Series A
Preferred Stock shall be payable in United States dollars at the principal
executive office of the Company or, at the option of the Holder, payment of
dividends (if any) may be made by check mailed to such Holder of the Series
A Preferred Stock at its address set forth in the register of Holders of
Series A Preferred Stock maintained by the Company.
(b) Any payment on the Series A Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on
the next succeeding Business Day with the same force and effect as if made
on such due date.
(c) Dividends payable on the Series A Preferred Stock on any
Redemption Date that is a Dividend Payment Date shall be paid to the
Holders of record as of the immediately preceding Record Date.
10. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series
A Preferred Stock shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designation (as such
Certificate of Designation may be amended from time to time) and in the
Certificate of Incorporation. The shares of Series A Preferred Stock shall
have no preemptive or subscription rights.
11. Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
12. Severability of Provisions.
If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) is
invalid, unlawful or incapable of being enforced by reason of any rule of
law or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred
Stock and qualifications, limitations and restrictions thereof set forth in
this Certificate of Designation (as so amended) which can be given effect
without the invalid, unlawful or unenforceable voting powers, preferences
and relative, participating, optional and other special rights of Series A
Preferred Stock and qualifications, limitations and restrictions thereof
shall, nevertheless, remain in full force and effect, and no voting powers,
preferences and relative, participating, optional or other special rights
of Series A Preferred Stock and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any
other such voting powers, preferences and relative, participating, optional
or other special rights of Series A Preferred Stock and qualifications,
limitations and restrictions thereof unless so expressed herein.
13. Reissuance of Series A Preferred Stock. Shares of Series A
Preferred Stock that have been issued and reacquired in any manner,
including shares purchased, redeemed, exchanged or converted, shall (upon
compliance with any applicable provisions of the DGCL) have the status of
authorized but unissued shares of preferred stock of the Company
undesignated as to series and may be designated or redesignated and issued
or reissued, as the case may be, as part of any series of preferred stock
of the Company, provided that any issue of such shares as Series A
Preferred Stock must be in compliance with the terms hereof.
[signature page follows]
IN WITNESS WHEREOF, the Company has caused this certificate to be
duly executed this 25th day of October, 1999.
RITE AID CORPORATION
By: /s/Elliot S. Gerson
-----------------------------
Name: Elliot S. Gerson
Title: Executive Vice President,
Secretary and General Counsel
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
DATED AS OF OCTOBER 25, 1999
By and Among
RITE AID CORPORATION
and
GREEN EQUITY INVESTORS III, L.P.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made
and entered into as of October 25, 1999, by and among RITE AID CORPORATION,
a Delaware corporation (the "COMPANY") and GREEN EQUITY INVESTORS III, L.P.
("GEI").
W I T N E S S E T H:
WHEREAS, pursuant to a letter agreement, dated as of October
18, 1999 (the "LETTER AGREEMENT"), GEI has agreed to purchase 3,000,000
shares of the Company's Series A 8% Convertible Pay-in-Kind Preferred Stock
(the "PREFERRED STOCK") at a purchase price of $100 per share;
WHEREAS, in consideration of the aforementioned purchase of
the Preferred Stock by GEI, the Company has agreed to provide to the
holders of the Preferred Stock and the Common Stock (as defined below) into
which it is convertible the registration rights set forth herein pursuant
to Section 3.4 of the Letter Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to and on the terms and conditions herein set
forth, the parties hereto hereby agree as follows:
ARTICLE I.
Certain Definitions
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
1.1. "Common Stock" shall mean the common stock of the
Company, par value $1.00 per share, that may be issued from time to time
comprising common equity of the Company.
1.2. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any federal statute then in effect which has replaced
such statute.
1.3. "Group" shall mean two or more Persons that would be
deemed a "group" for purposes of Rule 13d-5 under the Exchange Act.
1.4. "Holder" means GEI for so long as it owns any
Registrable Securities and any other Person who is a holder or beneficial
owner of Registrable Securities for so long as such Person owns any
Registrable Securities.
1.5. "Person" shall mean an individual, corporation, limited
liability company, joint venture, partnership, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity that may be treated as a person under applicable law.
1.6. "Registrable Securities" shall mean the Preferred Stock,
the Company's Series B 8% Convertible Pay-in-Kind Preferred Stock (the
"Series B Preferred Stock) issued upon exchange of the Preferred Stock
and/or the Common Stock issued or issuable upon conversion of the Preferred
Stock or the Series B Preferred Stock.
As to any Registrable Securities, such securities shall cease
to be Registrable Securities when (i) a registration statement registering
such Registrable Securities under the Securities Act has been declared or
becomes effective and such Registrable Securities have been sold or
otherwise transferred by the Holder thereof pursuant to such effective
registration statement; (ii) such Registrable Securities are sold pursuant
to Rule 144 under circumstances in which any legend borne by such
Registrable Securities relating to restrictions on the transferability
thereof, under the Securities Act or otherwise, is removed by the Company
or such Registrable Securities are eligible to be sold pursuant to
paragraph (k) of Rule 144; or (iii) such Registrable Securities shall cease
to be outstanding.
1.7. "Rule 144" shall mean Rule 144 promulgated under the
Securities Act.
1.8. "Securities" shall mean the Preferred Stock, the Series
B Preferred Stock or the Common Stock.
1.9. "Securities Act" shall mean Securities Act of 1933, as
amended, or any federal statute then in effect which has replaced such
statute.
ARTICLE II.
Public Offering Pursuant to Registration Rights
2.1. Demand Registrations.
(a) Holders of Registrable Securities representing not
less than one-third of the then-outstanding Registrable Securities
(for purposes of this calculation, any Preferred Stock to be
measured as the number of shares of Common Stock issuable upon
conversion of such Preferred Stock at the then applicable conversion
rate) (the "INITIATING HOLDERS") may require that the Company effect
a registration under the Securities Act at any time or times (i)
with respect to at least 25% of the Common Stock issued or issuable
upon conversion of the Preferred Stock or Series B Preferred Stock
(or such lesser of all remaining Registrable Securities) (a "COMMON
STOCK REGISTRATION"), and (ii) with respect to Preferred Stock or
Series B Preferred Stock with an anticipated offering or sale price
of $75,000,000 to be registered on or after October 25, 2001 (a
"PREFERRED STOCK REGISTRATION") (each of such a Common Stock
Registration and a Preferred Stock Registration a "DEMAND
REGISTRATION"). Upon receipt of written notice of such demand, the
Company will promptly give written notice of the proposed
registration to all Holders other than Initiating Holders and will
include in such registration (x) all Registrable Securities
specified in such demand, together with Registrable Securities of
like kind of any other Holder joining in such demand as are
specified in a written request received by the Company within 20
days after delivery of the Company's notice and (y) all shares of
equity securities of the Company which the Company or other holders
of equity securities having registration rights may elect to
register. Notwithstanding anything in this Section 2.1(a) to the
contrary, the Holders will collectively be entitled to no more than
an aggregate of two (2) Demand Registrations.
(b) The Company shall file a registration statement with
respect to each Demand Registration requested pursuant to Section
2.1(a) as soon as practicable after receipt of the demand of the
Initiating Holders; provided, however, that if (x) in the good faith
judgment of the Board of Directors of the Company (the "BOARD"),
deferral of such Demand Registration or delivery of any prospectus
supplement to be delivered pursuant to Section 2.1(d) or Section 2.5
would be in the best interests of the Company in that such
registration or delivery would interfere with any other material
corporate transaction (as evidenced by an appropriate resolution of
the Board) of the Company or would require the disclosure of
material non-public information, then the Company shall have the
right to defer such filing or delivery, as the case may be, in order
to effect such other material corporate transaction; provided,
further, however, that (i) in any 12-month period in which the
Company has not made a Shelf Registration (as defined in Section
2.4(d)), the Company may not defer the filing or delivery, as the
case may be, for any period or periods aggregating more than 90 days
after receipt of the demand of the Initiating Holders, and (ii) in
any 12-month period in which the Company has made a Shelf
Registration, the Company may not defer the filing or delivery, as
the case may be, for any period or periods aggregating more than 120
days after receipt of the demand of the Initiating Holders, (y) the
Company shall not be required to file any registration statement or
deliver any prospectus supplement (i) if such filing or delivery is
prohibited by applicable law, (ii) if the Company cannot obtain,
after using its reasonable best efforts, financial information (or
information used to prepare such information) necessary for
inclusion of such registration statement or prospectus supplement or
(iii) if the Company has already filed a registration statement
which has not yet been declared effective or 30 days prior to the
anticipated consummation of a public offering by the Company of its
equity securities and 90 days subsequent to the consummation of such
public offering, and (z) if the Company undertakes a registration
within 90 days following an exercise of its deferral right, the
Holders shall have "piggyback" rights under Section 2.2 hereof such
that they shall be entitled to include therein a number of shares
equal to not less than one-third (1/3) of the number of shares of
Common Stock to be sold in such offering unless such inclusion would
be in conflict with the express registration rights of any other
party pursuant to any agreement by and between the Company and such
party as in existence on the date hereof, in which instance such
Holders shall be entitled to include in such offering the maximum
number of shares not resulting in such conflict.
(c) If the Initiating Holders intend to distribute the
Registrable Securities covered by a Demand Registration by means of
an underwriting, they shall so advise the Company as part of their
demand made pursuant to Section 2.1(a) and the Company shall include
such information in its written notice to Holders. The Initiating
Holders shall have the right to select the managing underwriter(s)
for any underwritten Demand Registration, subject to the approval of
the Board (which will not be unreasonably withheld or delayed). The
right of any Holder to participate in an underwritten Demand
Registration shall be conditioned upon such Holder's participation
in such underwriting in accordance with the terms and conditions
thereof, and the Company and all such Holders will enter into an
underwriting agreement in customary form.
(d) The Initiating Holders may require the Company to
make such Demand Registration in the form of a "shelf" registration
(to the extent the Company then qualifies for the filing of a
"shelf" registration statement), which they shall so advise the
Company as part of their demand made pursuant to Section 2.1(a),
providing for the registration of, and the sale on a continuous or
delayed basis by the Holders of, the Registrable Securities,
pursuant to Rule 415 under the Securities Act and/or any similar
rule that may be adopted by the Commission (the "SHELF
Registration"). The Company agrees to use its best efforts to file
the registration statement relating to the Shelf Registration to
become or be declared effective no later than 120 days after such
obligation arises, and to keep such Shelf Registration continuously
effective until the earlier of (i) two (2) years from the effective
date thereof or (ii) such time as there are no longer any
Registrable Securities outstanding subject to such demand, subject
to the Securities Act and the rules and regulations thereunder. The
Company further agrees, subject to Section 2.1(b), to supplement or
make amendments to the Shelf Registration, as and when required by
the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration or
by the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to the Holders of
the Registrable Securities copies of any such supplement or
amendment promptly following its being used and/or filed with the
Commission.
(e) The Holders will have absolute priority over any
other Securities sought to be included in a Demand Registration. If
such other Securities are included in any Demand Registration that
is not an underwritten offering, all Registrable Securities of the
Holders included in such offering shall be sold prior to or
concurrently with the sale of any of such other Securities. If other
Securities are included in any Demand Registration that is an
underwritten offering, and the managing underwriter for such
offering advises the Company that in its opinion the amount of
Securities to be included exceeds the amount of Securities which can
be sold in such offering without adversely affecting the
marketability thereof, the Company will include in such registration
all Registrable Securities requested to be included therein by the
Holders prior to the inclusion of any other Securities. If the
number of Registrable Securities requested by the Holders to be
included in such registration exceeds the amount of Securities which
in the opinion of such managing underwriter can be sold without
adversely affecting the marketability of such offering, such
Registrable Securities shall be included pro rata among the Holders
based on the percentage of the then-outstanding Registrable
Securities held by each such Holder.
2.2. Piggyback Registration.
(a) If the Company shall determine to register any
equity securities of the Company for its own account or for the
account of other holders of equity securities of the Company on any
registration form (other than Form S-4 or S-8 or other successor
forms) which permits the inclusion of Registrable Securities held by
any Holder (a "PIGGYBACK REGISTRATION"), the Company will promptly
give each Holder written notice thereof and, subject to Section
2.2(c), shall include in such registration all Registrable
Securities requested to be included therein pursuant to the written
requests of Holders received within 20 days after delivery of the
Company's notice.
(b) If the Piggyback Registration relates to an
underwritten public offering, the Company shall so advise the
Holders as part of the written notice given pursuant to Section
2.2(a). In such event, the right of any Holder to participate in
such registration shall be conditioned upon such Holder's
participation in such underwriting in accordance with the terms and
conditions thereof. The Board shall have the right to select the
managing underwriter(s) for any underwritten Piggyback Registration.
All Holders proposing to distribute their Securities through such
underwriting shall (together with the Company) enter into an
underwriting agreement in customary form.
(c) If such proposed Piggyback Registration is an
underwritten offering and the managing underwriter for such offering
advises the Company that the Securities requested to be included
therein exceeds the amount of Securities or other securities that
can be sold in such offering, except as provided in Section 2.1(b),
any Securities or other securities to be sold by the Company or
other holders of the Company's securities initiating such offering
in such offering shall have priority over any Registrable Securities
held by Holders, and the number of shares to be included by a Holder
and other holders of the Company's securities that did not initiate
the offering in such registration shall be reduced pro rata on the
basis of the percentage of the then outstanding Registrable
Securities held by each such Holder and all other holders exercising
similar registration rights.
2.3. Expenses of Registration. All expenses incurred in
connection with up to two Demand Registrations and all Piggyback
Registrations shall be borne by the Company, including without limitation
the reasonable cost of one counsel to all Holders reasonably acceptable to
the Company (the Company herein acknowledging that Irell & Manella LLP is
acceptable counsel). All underwriting discounts, selling commissions and
other similar fees relating to Registrable Securities included in any
Demand or Piggyback Registration shall be borne by the holders of such
Registrable Securities pro rata on the basis of the amount of Registrable
Securities sold by them.
2.4. Registration Procedures. In the case of each
registration effected by the Company pursuant to this Article II, the
Company will keep each Holder advised in writing as to the initiation of
such registration and as to the completion thereof. At its expense, the
Company will use its best efforts to:
(a) cause such registration to be declared effective by
the Securities and Exchange Commission (the "COMMISSION") and, (i)
in the case of a Demand Registration other than a Shelf
Registration, keep such registration effective for a period of 180
days or until the Holders whose Registrable Securities are included
therein have completed the distribution described in the
registration statement relating thereto, whichever first occurs, and
(ii) in the case of a Shelf Registration, keep such registration
effective as set forth in Section 2.1(d);
(b) as soon as reasonably possible, prepare and file
with the Commission such amendments and supplements to such
registration statement and the prospectus included therein
(including post-effective amendments, prospectus supplements and
pricing supplements) as may be necessary to effect and maintain the
effectiveness of such registration statement for the period
specified in Section 2.4(a).
(c) provide (A) the Holders of the Registrable
Securities to be included in such registration statement, (B) the
underwriters (which term, for purposes of this Agreement, shall
include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act) if any, thereof, (C) the sales
or placement agent therefor, if any, (D) counsel for such
underwriters or agent, and (E) not more than one counsel for all the
holders of such Registrable Securities the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment or supplement thereto;
(d) with respect to any Demand Registration that is a
Shelf Registration, for a reasonable period prior to the filing of
such registration statement, and throughout the period specified in
Section 4(a), make available at reasonable times at the Company's
principal place of business or such other reasonable place for
inspection by one representative of each of the parties referred to
in Section 2.4(d) who shall certify to the Company that they have a
current intention to sell the Registrable Securities pursuant to the
Shelf Registration such financial and other information and books
and records of the Company, and cause the officers, employees,
counsel and independent certified public accountants of the Company
to respond to such inquiries, as shall be reasonably necessary, in
the reasonable judgment of the respective counsel referred to in
such Section, to conduct a reasonable investigation within the
meaning of Section 11 of the Securities Act; provided, however, that
each such party shall be required to maintain in confidence and not
to disclose to any other person any information or records
reasonably designated by the Company in writing as being
confidential, until such time as (A) such information becomes a
matter of public record, other than by an impermissible disclosure
by such party (whether by virtue of its inclusion in such
registration statement or otherwise), or (B) such person shall be
required, or shall deem it advisable, to disclose such information
pursuant to the subpoena or order of any court or other governmental
agency or body having jurisdiction over the matter (subject to the
requirements of such order, and only after such person shall have
given the Company prompt prior written notice thereof), or (C) such
information is required to be set forth in such registration
statement or the prospectus included therein or in an amendment to
such registration statement or an amendment or supplement to such
prospectus in order that such registration statement, prospectus,
amendment or supplement, as the case may be, does not contain an
untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(e) (A) register or qualify the Registrable Securities
to be included in such registration statement under such securities
laws or blue sky laws of such jurisdictions as any Holder of such
Registrable Securities and each placement or sales agent, if any,
therefor and underwriter, if any, thereof shall reasonably request,
and (B) with respect to any Shelf Registration, keep such
registrations or qualifications in effect and comply with such laws
so as to permit the continuance of offers, sales and dealings
therein in such jurisdictions during the period the Shelf
Registration is required to remain effective under Section 2.4(a)
above and for so long as may be necessary to enable any such Holder,
agent or underwriter, if any, to complete its distribution of
Registrable Securities pursuant to such registration statement and
(C) take any and all other actions as may be reasonably necessary or
advisable to enable each such Holder, agent, if any, and
underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required for any other purpose to (1)
qualify as a foreign corporation in any jurisdiction wherein it
would not otherwise be required to qualify but for the requirements
of this Section 2.4(f) or (2) consent to general service of process
or taxation in any such jurisdiction;
(f) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement
to the prospectus, as any Holder from time to time may reasonably
request;
(g) promptly notify the selling Holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm
such advice in writing, (A) when such registration statement or the
prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and with
respect to such registration statement or any post-effective
amendment, when the same has become effective, (B) of any comments
by the Commission, the Blue Sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration
statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Company contemplated by
Section 2.4(p) or Section 3 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for the sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (F)
at any time when a prospectus is required to be delivered under the
Securities Act, that such registration statement, prospectus,
prospectus amendment or supplement or post-effective amendment, or
any document incorporated by reference in any of the foregoing,
contains an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances
then existing;
(h) obtain the withdrawal of any order suspending the
effectiveness of such registration statement or any post-effective
amendment thereto at the earliest practicable date;
(i) if requested by any managing underwriter or
underwriters, any placement or sales agent or any Holder of
Registrable Securities, promptly incorporate in a prospectus
supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission
and as such managing underwriter or underwriters, such agent or such
holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including, without
limitation, information with respect to the principal amount of
Registrable Securities being sold by such Holder or agent or to any
underwriters, the name and description of such Holder, agent or
underwriter, the offering price of such Registrable Securities and
any discount, commission or other compensation payable in respect
thereof, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the offering of the
Registrable Securities to be sold by such Holder or agent or to such
underwriters; and, with respect to a Demand Registration that is a
Shelf Registration, make all required filings of such prospectus
supplement or post-effective amendment promptly after notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment pursuant to this clause (i);
(j) furnish to each Holder of Registrable Securities
included in such registration statement, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 2.4(d) an executed copy of
such registration statement, each such amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein) and such number of copies of such
registration statement (excluding exhibits thereto and documents
incorporated by reference therein unless specifically and reasonably
so requested by such Holder, agent or underwriter, as the case may
be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus),
in conformity with the requirements of the Securities Act; and the
Company hereby consents to the use of such prospectus (including
such preliminary and summary prospectus) and any amendment or
supplement thereto by each such Holder and by any such agent and
underwriter, if any, in each case in the form most recently provided
to such party by the Company, in connection with the offering and
sale of the Registrable Securities covered by the prospectus
(including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(k) cause all Registrable Securities covered by such
registration to be listed on each securities exchange or
inter-dealer quotation system on which similar securities issued by
the Company are then listed;
(l) provide a transfer agent and registrar for all
Registrable Securities covered by such registration and a CUSIP
number for all such Registrable Securities, in each case not later
than the effective date of such registration;
(m) obtain the consent or approval of each governmental
agency or authority, whether federal, state, provincial or local,
which may be required to effect any such Shelf Registration or the
offering or sale in connection therewith or to enable the selling
Holder or Holders to offer, or to consummate the disposition of,
their Registrable Securities; provided, however, that the Company
shall not be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not
otherwise be required to qualify but for the requirements of this
Section 2.4(n) or (2) consent to general service of process or
taxation in any such jurisdiction;
(n) cooperate with the Holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any
restrictive legends;
(o) with respect to an underwritten Demand, whether or
not an agreement of the type referred to in Section 2.4(s) hereof is
entered into and whether or not any portion of the offering
contemplated by such registration statement is an underwritten
offering or is made through a placement or sales agent or any other
entity, obtain an opinion or opinions of counsel to the Company in
customary form and covering such other matters of the type
customarily covered by such an opinion, as the managing
underwriters, if any, and as any Holders of at least 25% in
aggregate principal amount of the Registrable Securities to be
included in such Shelf Registration may reasonably request,
addressed to such Holder or Holders and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof and
dated the closing date of such offering; obtain a "cold comfort"
letter or letters from the independent certified public accountants
of the Company addressed to the underwriters, thereof, dated (i) the
effective date of such registration statement, (ii) the effective
date of any prospectus supplement to the prospectus included in such
registration statement or post-effective amendment to such
registration statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus (and, if such
registration statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in
such registration statement or post-effective amendment to such
registration statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus, dated the date
of the closing under the underwriting agreement relating thereto),
such letter or letters to be in customary form and covering such
matters of the type customarily covered by letters of such type;
deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by any Holders of at
least 25% in aggregate principal amount of the Registrable
Securities to be included in such Shelf Registration and the
placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof to evidence the accuracy of the
representations and warranties contained in Section 3 hereof and the
compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Section 2.7 hereof;
(p) in the event that any broker-dealer registered under
the Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the
Rules of Conduct (the "RULES OF CONDUCT") of the National
Association of Securities Dealers, Inc. ("NASD") thereof, whether as
a holder of such Registrable Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof,
or otherwise use its reasonable best efforts to assist such
broker-dealer in complying with the requirements of such Rules of
Conduct, including, without limitation, by providing such
information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the Rules of
Conduct;
(q) otherwise comply with all applicable rules and
regulations of the Commission and make available to its security
holders, as soon as reasonably practicable but in no event later
than eighteen months after the effective date of such registration
statement, an earnings statement covering the period of at least
twelve months, but not more than 18 months, beginning with the first
month after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act (including, at the option of the Company, Rule
158 thereunder); and
(r) in connection with any underwritten Demand
Registration, the Company will enter into an underwriting agreement
reasonably satisfactory to the Initiating Holders containing
customary underwriting provisions, including indemnification and
contribution provisions.
2.5. Delivery of Prospectus Supplement. Subject to Section
2.1(b), in the event that the Company would be required, pursuant to
Section 2.4(h) above, to notify the selling Holders of Registrable
Securities, the placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof, the Company shall as soon as reasonably
practicable prepare and furnish to each such Holder, to each placement or
sales agent, if any, and to each underwriter, if any, a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to initial purchasers of Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing. Each Holder of Registrable Securities agrees that upon receipt of
any notice from the Company pursuant to Section 2.4(h) hereof, such Holder
shall forthwith discontinue the disposition of Registrable Securities
pursuant to the registration statement applicable to such Registrable
Securities until such Holder shall have received copies of such amended or
supplemented prospectus, and if so directed by the Company, such Holder
shall deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such Holder's possession of the
prospectus covering such Registrable Securities at the time of receipt of
such notice.
2.6. Furnishing Information by the Holders. The Company may
require each Holder of Registrable Securities as to which any registration
is being effected to furnish to the Company such information regarding such
Holder and such Holder's intended method of distribution of such
Registrable Securities as the Company may from time to time reasonably
request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such Holder
agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such Holder to the Company
or of the occurrence of any event in either case as a result of which any
prospectus relating to such registration contains or would contain an
untrue statement of a material fact regarding such Holder or such Holder's
intended method of distribution of such Registrable Securities or omits to
state any material fact regarding such Holder or such Holder's intended
method of distribution of such Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and promptly to furnish information so
required so that such prospectus shall not contain, with respect to such
Holder or the distribution of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
2.7. Indemnification.
(a) The Company will indemnify each Holder whose
Registrable Securities are to be included in a registration pursuant
to this Article II, each of such Holder's officers, directors,
partners, agents, employees and representatives and each person
controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to each registration, qualification or
compliance effected pursuant to this Article II, against all
expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus,
or other document incorporated by reference therein, or compliance,
or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such
indemnified person for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability or action; provided,
however, that the Company will not be liable in any such case to a
Holder to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
such Holder and provided for use in such registration statement,
prospectus, offering circular or other document or the Holder
delivered a registration or prospectus in violation of Section 2.5
hereof after notice was provided by the Company as provided in
Section 2.5. It is agreed that the indemnity agreement contained in
this Section 2.7(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement
is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed).
(b) Each Holder whose Registrable Securities are
included in any registration effected pursuant to this Article II
shall indemnify the Company, each of its directors, officers,
agents, employees and representatives, and each Person who controls
the Company within the meaning of Section 15 of the Securities Act,
each other such Holder and each of their officers, directors,
partners, agents, employees and representatives and each person
controlling such Holder, and each underwriter, if any, of such
Registrable Securities and each Person who controls any such
underwriter, against all expenses, claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document incident
to such registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse such indemnified persons for any
legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability
or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and
in strict conformity with written information furnished to the
Company by such Holder and provided specifically for use therein;
provided, however, that (x) no Holder shall be liable hereunder for
any amounts in excess of the gross proceeds received by such Holder
pursuant to such registration, and (y) the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of
any such claims, losses, damages or liabilities (or actions in
respect thereof) if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this
Section 2.7 (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY")
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld
or delayed, the Company herein and hereby approving Irell & Manella
LLP as counsel to GEI for the purposes of this Section 2.7(c)), and
the Indemnified Party may participate in such defense with counsel
reasonably acceptable to and paid for by the Indemnifying Party but
otherwise at the Indemnified Party's expense, and provided, further,
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Section 2.7 to the extent such failure is not materially
prejudicial. No Indemnifying Party in the defense of any such claim
or litigation shall except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include an unconditional release of such Indemnified
Party from all liability in respect of such claim or litigation.
Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section
2.7 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, liability, claim, damage or expense in
such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party
on the other in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense as well
as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of section 11(f) of
the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in an
underwriting agreement entered into in connection with an
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
2.8. Other Obligations. With a view to making available the
benefits of certain rules and regulations of the Commission which may
effectuate the registration of Registrable Securities or permit the sale of
Registrable Securities to the public without registration, the Company
agrees to:
(a) exercise best efforts to cause the Company to be
eligible to utilize Form S-3 (or any similar form) for the
registration of Securities;
(b) at such time as any Registrable Securities are
eligible for transfer under Rule 144(k), upon the request of the
holder of such Registrable Securities, remove any restrictive legend
from the certificates evidencing such Registrable Securities at no
cost to such holder;
(c) make and keep available public information as
defined in Rule 144 under the Securities Act at all times;
(d) file with the Commission in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become
subject to such reporting requirements; and
(e) furnish any Holder upon request a written statement
by the Company as to its compliance with the reporting requirements
of Rule 144 (at any time from and after 90 days following the
effective date of the first registration statement filed by the
Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Company, and such
other reports and documents as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission
(including Rule 144A) allowing a holder of Registrable Securities to
sell any such Registrable Securities without registration.
2.9. Hold-Back Agreements. If requested by the Company or any
underwriter of securities of the Company, Holders shall not sell or
otherwise transfer or dispose of any Securities (other than pursuant to
such registration) during the period 15 days prior to and 90 days following
the effective date of registration statement relating to the offering of
the Company's Securities for its own account or such longer period that the
underwriters may reasonably request. The obligations described in this
Section 2.9 shall not apply to a registration on Form S-4 or Form S-8 or
similar forms which may be promulgated in the future and shall not apply to
a Holder holding less than 1% of the then-outstanding Securities.
ARTICLE III.
Representations and Warranties
The Company represents and warrants to, and agrees with, GEI
and each of the Holders from time to time of Registrable Securities that:
(a) The compliance by the Company with all of the
provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or
any subsidiary of the Company is a party or by which the Company or
any subsidiary of the Company is bound or to which any of the
property or assets of the Company or any subsidiary of the Company
is subject nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of the
Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company
or any subsidiary of the Company or any of their properties; and no
consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or
body is required for the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Securities Act of the Registrable Securities, and such
consents, approvals, authorizations, registrations or qualifications
as may be required under State securities or blue sky laws in
connection with the offering and distribution of the Registrable
Securities.
(b) This Agreement has been duly authorized, executed
and delivered by the Company.
ARTICLE IV.
Termination
This Agreement shall terminate immediately following the
moment at which there exist no Securities that constitute Registrable
Securities; provided, however, that Section 2.7 hereof shall survive
indefinitely.
ARTICLE V.
Miscellaneous
5.1. Recapitalization, Exchanges, etc. Affecting the Common
Stock. The provisions of this Agreement shall apply to the full extent set
forth herein with respect to (a) the Registrable Securities and (b) any and
all shares of capital stock of the Company or any successor or assign of
the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for, or in substitution for
the Registrable Securities, by reason of any stock dividend (including,
without limitation, a payment-in-kind dividend paid on the Preferred
Stock), split, reverse split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. In the event of any
change in the capitalization of the Company as a result of any stock split,
stock dividend or stock combination, the provisions of this Agreement shall
be appropriately adjusted.
5.2. Injunctive Relief. It is hereby agreed and acknowledged
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that in the event of any such failure, an aggrieved
Person will be irreparably damaged and will not have an adequate remedy at
law. Any such Person shall, therefore, in addition to any other remedies
available under applicable law, be entitled to injunctive relief, including
specific performance, to enforce such obligations, without the posting of
any bond, and if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise
the defense that there is an adequate remedy at law.
5.3. Parties in Interest. All the terms and provisions of
this Agreement shall be binding upon, shall inure to the benefit of and
shall be enforceable by the respective successors and assigns of the
parties hereto. In the event that any transferee of any Holder of
Registrable Securities shall acquire Registrable Securities, in any manner,
whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing of any kind, be deemed a
party hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such transferee shall be entitled to receive
the benefits of and be conclusively deemed to have agreed to be bound by
and to perform all of the terms and provisions of this Agreement.
5.4. Survival. The respective indemnities, agreements,
representations, warranties and each other Provision set forth in this
Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statements as to the results thereto)
made by or on behalf of any Holder of Registrable Securities, any director,
officer or partner of such Holder, any agent or underwriter or any
director, officer or partner thereof, or any controlling person of any of
the foregoing, and shall survive delivery of and payment for the
Registrable Securities pursuant to the Letter Agreement and the transfer of
Registrable Securities by such Holder.
5.5. Amendment; Waiver.
(a) This Agreement may be amended only by a written
instrument signed by the Company and by Holders holding more than
66% of the then outstanding Registrable Securities and, in the case
of any amendment that adversely affects any Holder or all of the
members of any group of Holders differently from any of the other
Holders, by such Holder or the holders of more than 66% in interest
of the Securities held by such group of Holders.
(b) No provision of this Agreement may be waived orally,
but only by a written instrument signed by the party against whom
enforcement of such wavier is sought. Holders shall be bound from
and after the date of the receipt of a written notice from the
Company setting forth such amendment or waiver, whether or not the
Registrable Securities shall have been marked to indicate such
amendment or waiver.
5.6. Notices. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing
(including a writing delivered by facsimile transmission) and shall be
deemed to have been duly given if delivered personally, or sent by either
certified or registered mail, return receipt requested, postage prepaid, or
by overnight courier guaranteeing next day delivery, or by telex or
telecopier, at the following addresses:
if to the Company:
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: President
Telecopier: (717) 975-3762
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Stacy J. Kanter
Telecopier: (212) 735-2000
if to GEI:
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, California 90025
Attention: Jonathan D. Sokoloff
Telecopier: (310) 954-0404
with a copy to:
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071
Attention: Edmund M. Kaufman, Esq.
Telecopier: (213) 229-0515
GEI may, by written notice given to the Company in accordance with this
Section 4.5, change the address to which such notice or other
communications are to be sent to it. All such notices and communications
shall be deemed to have been given on the date of delivery thereof, if
delivered by hand, on the fifth day after the mailing thereof, if mailed,
on the next day after the sending thereof, if by overnight courier and when
receipt is acknowledged, if telecopied.
5.7. Inspection. So long as this Agreement shall be in
effect, this Agreement and any amendments hereto shall be made available
for inspection by any Holder at the principal offices of the Company.
5.8. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
5.9. Headings. Article, section and paragraph headings are
inserted for convenience only and do not constitute a part of this
Agreement.
5.10. Integration. This Agreement and the documents referred
to herein or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties with respect to the subject matter
hereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter
hereof other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to this subject matter.
5.11. Illegality. In case any provision in this Agreement
shall be declared or held invalid, illegal or unenforceable, in whole or in
part, whether generally or in any particular jurisdiction, such provision
shall be deemed amended to the extent, but only to the extent, necessary to
cure such invalidity, illegality or unenforceability, and the validity,
legality and enforceability of the remaining provisions, both generally and
in every other jurisdiction, shall not in any way be affected or impaired
thereby.
5.12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth above.
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
Its: Senior Executive Vice President,
General Counsel and Secretary
GREEN EQUITY INVESTORS III, L.P.
By: Leonard Green & Partners, L.P.
By: LGP Management, Inc.
/s/ Jonathan Sokoloff
_________________________
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
DATED AS OF OCTOBER 27, 1999
By and Between
RITE AID CORPORATION
and
J.P. MORGAN VENTURES CORPORATION
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of October 27, 1999, by and between RITE AID CORPORATION, a
Delaware corporation (the "COMPANY"), and J.P. MORGAN VENTURES CORPORATION
("J.P. MORGAN").
W I T N E S S E T H:
WHEREAS, the Company has agreed to issue to J. P. Morgan a warrant,
dated October 27, 1999 (the "WARRANT"), to purchase 2,500,000 shares (the
"WARRANT SHARES") of the Company's Common Stock, par value $1.00 per share
(the "COMMON STOCK"), in accordance with the terms thereof;
WHEREAS, in connection with the issuance of the Warrant to J.P.
Morgan, the Company has agreed to provide to the holders of the Warrant and
the Warrant Shares the registration rights set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to and on the terms and conditions herein set
forth, the parties hereto hereby agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
1.1 "Commission" shall mean the Securities and Exchange Commission or
any federal agency at the time administering the Securities Act.
1.2 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any federal statute then in effect which has replaced such
statute.
1.3 "Group" shall mean two or more Persons that would be deemed a
"group" for purposes of Rule 13d-5 under the Exchange Act.
1.4 "Holder" means J.P. Morgan for so long as it owns any Registrable
Securities and any other Person who is a holder or beneficial owner of
Registrable Securities for so long as such Person owns any Registrable
Securities.
1.5 "Person" shall mean an individual, corporation, limited liability
company, joint venture, partnership, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other
entity that may be treated as a person under applicable law.
1.6 "Registrable Securities" shall mean the Common Stock issued or
issuable upon exercise of the Warrant.
As to any Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement registering such
Registrable Securities under the Securities Act has been declared or
becomes effective and such Registrable Securities have been sold or
otherwise transferred by the Holder thereof pursuant to such effective
registration statement; (ii) such Registrable Securities are sold pursuant
to Rule 144 under circumstances in which any legend borne by such
Registrable Securities relating to restrictions on the transferability
thereof, under the Securities Act or otherwise, is removed by the Company
or such Registrable Securities are eligible to be sold pursuant to
paragraph (k) of Rule 144; or (iii) such Registrable Securities shall cease
to be outstanding.
1.7 "Rule 144" shall mean Rule 144 promulgated under the Securities
Act.
1.8 "Securities Act" shall mean Securities Act of 1933, as amended, or
any federal statute then in effect which has replaced such statute.
ARTICLE II
Public Offering Pursuant to Registration Rights
-----------------------------------------------
2.1 Demand Registrations.
(a) Holders of Registrable Securities representing not less than
one-third of the then-outstanding Registrable Securities (the "INITIATING
HOLDERS") may require that the Company effect a registration under the
Securities Act at any time or times with respect to at least 25% of the
Common Stock issued or issuable upon exercise of the Warrant (or, if less,
all remaining Registrable Securities) (a "DEMAND REGISTRATION"). Upon
receipt of written notice of such demand, the Company will promptly give
written notice of the proposed registration to all Holders other than
Initiating Holders and will include in such registration (x) all
Registrable Securities specified in such demand, together with Registrable
Securities of like kind of any other Holder joining in such demand as are
specified in a written request received by the Company within 20 days after
delivery of the Company's notice and (y) all shares of equity securities of
the Company which the Company or other holders of equity securities having
registration rights may elect to register. Notwithstanding anything in this
Section 2.1(a) to the contrary, the Holders will collectively be entitled
to no more than an aggregate of two (2) Demand Registrations.
(b) The Company shall file a registration statement with respect to
each Demand Registration requested pursuant to Section 2.1(a) as soon as
practicable after receipt of the demand of the Initiating Holders;
provided, however, that (x) if in the good faith judgment of the Board of
Directors of the Company (the "BOARD"), deferral of such Demand
Registration or delivery of any prospectus supplement to be delivered
pursuant to Section 2.5 would be in the best interests of the Company in
that such registration or delivery would interfere with any other material
corporate transaction (as evidenced by an appropriate resolution of the
Board) of the Company or would require the disclosure of material
non-public information, then the Company shall have the right to defer such
filing or delivery, as the case may be, in order to effect such other
material corporate transaction; provided, further, however, that the
Company may not defer the filing or delivery, as the case may be, for any
period or periods aggregating more than 90 days after receipt of the demand
of the Initiating Holders, (y) the Company shall not be required to file
any registration statement or deliver any prospectus supplement (i) if such
filing or delivery is prohibited by applicable law, (ii) if the Company
cannot obtain, after using its reasonable best efforts, financial
information (or information used to prepare such information) necessary for
inclusion of such registration statement or prospectus supplement or (iii)
if the Company has already filed a registration statement which has not yet
been declared effective or 30 days prior to the anticipated consummation of
a public offering by the Company of its equity securities and 90 days
subsequent to the consummation of such public offering, and (z) if the
Company undertakes a registration within 90 days following an exercise of
its deferral right, the Holders shall have "piggyback" rights under Section
2.2 hereof such that they shall be entitled to include therein a number of
shares equal to not less than one-third (1/3) of the number of shares of
Common Stock to be sold in such offering unless such inclusion would be in
conflict with the express registration rights of any other party pursuant
to any agreement by and between the Company and such party as in existence
on the date hereof, in which instance such Holders shall be entitled to
include in such offering the maximum number of shares not resulting in such
conflict.
(c) If the Initiating Holders intend to distribute the Registrable
Securities covered by a Demand Registration by means of an underwriting,
they shall so advise the Company as part of their demand made pursuant to
Section 2.1(a) and the Company shall include such information in its
written notice to Holders. The Initiating Holders shall have the right to
select the managing underwriter(s) for any underwritten Demand
Registration, subject to the approval of the Board (which will not be
unreasonably withheld or delayed). The right of any Holder to participate
in an underwritten Demand Registration shall be conditioned upon such
Holder's participation in such underwriting in accordance with the terms
and conditions thereof, and the Company and all such Holders will enter
into an underwriting agreement in customary form.
(d) The Holders will have absolute priority over any other securities
of the Company sought to be included in a Demand Registration. If such
other securities are included in any Demand Registration that is not an
underwritten offering, all Registrable Securities of the Holders included
in such offering shall be sold prior to or concurrently with the sale of
any of such other securities. If other securities of the Company are
included in any Demand Registration that is an underwritten offering, and
the managing underwriter for such offering advises the Company that in its
opinion the amount of securities to be included exceeds the amount of
securities which can be sold in such offering without adversely affecting
the marketability thereof, the Company will include in such registration
all Registrable Securities requested to be included therein by the Holders
prior to the inclusion of any other securities of the Company. If the
number of Registrable Securities requested by the Holders to be included in
such registration exceeds the amount of securities which in the opinion of
such managing underwriter can be sold without adversely affecting the
marketability of such offering, such Registrable Securities shall be
included pro rata among the Holders based on the percentage of the
then-outstanding Registrable Securities held by each such Holder.
2.2 Piggyback Registration.
(a) If the Company shall determine to register any equity securities
of the Company for its own account or for the account of other holders of
equity securities of the Company on any registration form (other than Form
S-4 or S- 8 or other successor forms) which permits the inclusion of
Registrable Securities held by any Holder (a "PIGGYBACK REGISTRATION"), the
Company will promptly give each Holder written notice thereof and, subject
to Section 2.2(c), shall include in such registration all Registrable
Securities requested to be included therein pursuant to the written
requests of Holders received within 20 days after delivery of the Company's
notice.
(b) If the Piggyback Registration relates to an underwritten public
offering, the Company shall so advise the Holders as part of the written
notice given pursuant to Section 2.2(a). In such event, the right of any
Holder to participate in such registration shall be conditioned upon such
Holder's participation in such underwriting in accordance with the terms
and conditions thereof. The Board shall have the right to select the
managing underwriter(s) for any underwritten Piggyback Registration. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form.
(c) If such proposed Piggyback Registration is an underwritten
offering and the managing underwriter for such offering advises the Company
that the securities requested to be included therein exceeds the amount of
securities that can be sold in such offering, except as provided in Section
2.1(b), any securities to be sold by the Company or other holders of the
Company's securities initiating such offering in such offering shall have
priority over any Registrable Securities held by Holders, and the number of
shares to be included by a Holder and other holders of the Company's
securities that did not initiate the offering in such registration shall be
reduced pro rata on the basis of the percentage of the then outstanding
Registrable Securities held by each such Holder and all other holders
exercising similar registration rights.
2.3 Expenses of Registration. All expenses incurred in connection with
up to two Demand Registrations and all Piggyback Registrations shall be
borne by the Company, including without limitation the reasonable cost of
one counsel to all Holders reasonably acceptable to the Company (the
Company herein acknowledging that Davis Polk & Wardwell is acceptable
counsel). All underwriting discounts, selling commissions and other similar
fees relating to Registrable Securities included in any Demand or Piggyback
Registration shall be borne by the holders of such Registrable Securities
pro rata on the basis of the amount of Registrable Securities sold by them.
2.4 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article II, the Company will keep each
Holder advised in writing as to the initiation of such registration and as
to the completion thereof. At its expense, the Company will use its best
efforts to:
(a) cause such registration to be declared effective by the Commission
and, in the case of a Demand Registration, keep such registration effective
for a period of 180 days or until the Holders whose Registrable Securities
are included therein have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) as soon as reasonably possible, prepare and file with the
Commission such amendments and supplements to such registration statement
and the prospectus included therein (including post-effective amendments,
prospectus supplements and pricing supplements) as may be necessary to
effect and maintain the effectiveness of such registration statement for
the period specified in Section 2.4(a);
(c) provide (A) the Holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which term,
for purposes of this Agreement, shall include a person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act) if
any, thereof, (C) the sales or placement agent therefor, if any, (D)
counsel for such underwriters or agent, and (E) not more than one counsel
for all the holders of such Registrable Securities the opportunity to
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment or supplement thereto;
(d) (A) register or qualify the Registrable Securities to be included
in such registration statement under such securities laws or blue sky laws
of such jurisdictions as any Holder of such Registrable Securities and each
placement or sales agent, if any, therefor and underwriter, if any, thereof
shall reasonably request, and (B) take any and all other actions as may be
reasonably necessary or advisable to enable each such Holder, agent, if
any, and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that the
Company shall not be required for any other purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 2.4(d) or (2)
consent to general service of process or taxation in any such jurisdiction;
(e) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as any
Holder from time to time may reasonably request;
(f) promptly notify the selling Holders of Registrable Securities, the
sales or placement agent, if any, therefor and the managing underwriter or
underwriters, if any, thereof and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has been
filed, and with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission, the Blue Sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such registration statement or
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings
for that purpose, (D) if at any time the representations and warranties of
the Company contemplated by Section 2.4(n) or Section 3 cease to be true
and correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Registrable Securities for the sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, or (F) at any time when
a prospectus is required to be delivered under the Securities Act, that
such registration statement, prospectus, prospectus amendment or supplement
or post-effective amendment, or any document incorporated by reference in
any of the foregoing, contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
then existing;
(g) obtain the withdrawal of any order suspending the effectiveness of
such registration statement or any post-effective amendment thereto at the
earliest practicable date;
(h) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Holder of Registrable Securities, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as is required by the applicable rules and regulations of the
Commission and as such managing underwriter or underwriters, such agent or
such holder specifies should be included therein relating to the terms of
the sale of such Registrable Securities, including, without limitation,
information with respect to the principal amount of Registrable Securities
being sold by such Holder or agent or to any underwriters, the name and
description of such Holder, agent or underwriter, the offering price of
such Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold by such Holder or agent
or to such underwriters;
(i) furnish to each Holder of Registrable Securities included in such
registration statement, each placement or sales agent, if any, therefor,
each underwriter, if any, thereof and the respective counsel referred to in
Section 2.4(c) an executed copy of such registration statement, each such
amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein) and such number of
copies of such registration statement (excluding exhibits thereto and
documents incorporated by reference therein unless specifically and
reasonably so requested by such Holder, agent or underwriter, as the case
may be) and of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act; and the Company
hereby consents to the use of such prospectus (including such preliminary
and summary prospectus) and any amendment or supplement thereto by each
such Holder and by any such agent and underwriter, if any, in each case in
the form most recently provided to such party by the Company, in connection
with the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or any
supplement or amendment thereto;
(j) cause all Registrable Securities covered by such registration to
be listed on each securities exchange or inter-dealer quotation system on
which similar securities issued by the Company are then listed;
(k) provide a transfer agent and registrar for all Registrable
Securities covered by such registration and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration;
(l) cooperate with the Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends;
(m) with respect to an underwritten Demand Registration, whether or
not an agreement of the type referred to in Section 2.4(p) hereof is
entered into, obtain an opinion or opinions of counsel to the Company in
customary form and covering such other matters of the type customarily
covered by such an opinion, as the managing underwriters may reasonably
request, addressed to the underwriters thereof and dated the closing date
of such offering; obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to the
underwriters thereof, dated (i) the effective date of such registration
statement, (ii) the effective date of any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus (and, if
such registration statement contemplates an underwritten offering pursuant
to any prospectus supplement to the prospectus included in such
registration statement or post-effective amendment to such registration
statement which includes unaudited or audited financial statements as of a
date or for a period subsequent to that of the latest such statements
included in such prospectus, dated the date of the closing under the
underwriting agreement relating thereto), such letter or letters to be in
customary form and covering such matters of the type customarily covered by
letters of such type; deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by the managing
underwriters thereof to evidence the accuracy of the representations and
warranties contained in Section 3 hereof and the compliance with or
satisfaction of any agreements or conditions contained in the underwriting
agreement or other agreement entered into by the Company; and undertake
such obligations relating to expense reimbursement, indemnification and
contribution as are provided in Section 2.7 hereof;
(n) in the event that any broker-dealer registered under the Exchange
Act shall underwrite any Registrable Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Conduct (the "RULES OF
CONDUCT") of the National Association of Securities Dealers, Inc. ("NASD")
thereof, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise use its reasonable best efforts to assist such
broker-dealer in complying with the requirements of such Rules of Conduct,
including, without limitation, by providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules of Conduct;
(o) otherwise comply with all applicable rules and regulations of the
Commission and make available to its security holders, as soon as
reasonably practicable but in no event later than eighteen months after the
effective date of such registration statement, an earnings statement
covering the period of at least twelve months, but not more than 18 months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act (including, at the option of the Company, Rule
158 thereunder); and
(p) in connection with any underwritten Demand Registration, the
Company will enter into an underwriting agreement reasonably satisfactory
to the Initiating Holders containing customary underwriting provisions,
including indemnification and contribution provisions.
2.5 Delivery of Prospectus Supplement. Subject to Section 2.1(b), in
the event that the Company would be required, pursuant to Section 2.4(f)
above, to notify the selling Holders of Registrable Securities, the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof, the Company shall as soon as reasonably practicable
prepare and furnish to each such Holder, to each placement or sales agent,
if any, and to each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to
initial purchasers of Registrable Securities, such prospectus shall not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing. Each
Holder of Registrable Securities agrees that upon receipt of any notice
from the Company pursuant to Section 2.4(f) hereof, such Holder shall
forthwith discontinue the disposition of Registrable Securities pursuant to
the registration statement applicable to such Registrable Securities until
such Holder shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such Holder shall deliver to
the Company (at the Company's expense) all copies, other than permanent
file copies, then in such Holder's possession of the prospectus covering
such Registrable Securities at the time of receipt of such notice.
2.6 Furnishing Information by the Holders. The Company may require
each Holder of Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding such Holder
and such Holder's intended method of distribution of such Registrable
Securities as the Company may from time to time reasonably request in
writing, but only to the extent that such information is required in order
to comply with the Securities Act. Each such Holder agrees to notify the
Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement
of a material fact regarding such Holder or such Holder's intended method
of distribution of such Registrable Securities or omits to state any
material fact regarding such Holder or such Holder's intended method of
distribution of such Registrable Securities required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish information so
required so that such prospectus shall not contain, with respect to such
Holder or the distribution of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
2.7 Indemnification.
(a) The Company will indemnify each Holder whose Registrable
Securities are to be included in a registration pursuant to this Article
II, each of such Holder's officers, directors, partners, agents, employees
and representatives and each person controlling such Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, with respect to each registration, qualification or compliance
effected pursuant to this Article II, against all expenses, claims, losses,
damages and liabilities (or actions, proceedings or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, or other document incorporated by reference therein, or
compliance, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such indemnified
person for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim,
loss, damage, liability or action; provided, however, that the Company will
not be liable in any such case to a Holder to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to
the Company by such Holder and provided for use in such registration
statement, prospectus, offering circular or other document or the Holder
delivered a registration or prospectus in violation of Section 2.5 hereof
after notice was provided by the Company as provided in Section 2.5. It is
agreed that the indemnity agreement contained in this Section 2.7(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld or delayed).
(b) Each Holder whose Registrable Securities are included in any
registration effected pursuant to this Article II shall indemnify the
Company, each of its directors, officers, agents, employees and
representatives, and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, each other such Holder and each of their officers, directors,
partners, agents, employees and representatives and each person controlling
such Holder, and each underwriter, if any, of such Registrable Securities
and each Person who controls any such underwriter, against all expenses,
claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document
incident to such registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse such indemnified persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in strict conformity with written information furnished
to the Company by such Holder and provided specifically for use therein;
provided, however, that (x) no Holder shall be liable hereunder for any
amounts in excess of the gross proceeds received by such Holder pursuant to
such registration, and (y) the obligations of such Holder hereunder shall
not apply to amounts paid in settlement of any such claims, losses, damages
or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld).
(c) Each party entitled to indemnification under this Section 2.7 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld or delayed, the Company
herein and hereby approving Davis Polk & Wardwell as counsel to J.P. Morgan
for the purposes of this Section 2.7(c)), and the Indemnified Party may
participate in such defense with counsel reasonably acceptable to and paid
for by the Indemnifying Party but otherwise at the Indemnified Party's
expense, and provided, further, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 2.7 to the extent such failure is not
materially prejudicial. No Indemnifying Party in the defense of any such
claim or litigation shall except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does not include an unconditional release of such Indemnified Party from
all liability in respect of such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in
question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim
and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim,
damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. No person guilty of fraudulent misrepresentation (within the
meaning of section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.8 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the Commission which may effectuate the
registration of Registrable Securities or permit the sale of Registrable
Securities to the public without registration, the Company agrees to:
(a) exercise best efforts to cause the Company to be eligible to
utilize Form S-3 (or any similar form) for the registration of securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of the holder of such
Registrable Securities, remove any restrictive legend from the certificates
evidencing such Registrable Securities at no cost to such holder;
(c) make and keep available public information as defined in Rule 144
under the Securities Act at all times;
(d) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act at any time after it has become subject to such reporting requirements;
and
(e) furnish any Holder upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any
time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission
(including Rule 144A) allowing a holder of Registrable Securities to sell
any such Registrable Securities without registration.
2.9 Hold-Back Agreements. If requested by the Company or any
underwriter of securities of the Company, Holders shall not sell or
otherwise transfer or dispose of the Warrant or any Common Stock (other
than pursuant to such registration) during the period 15 days prior to and
90 days following the effective date of registration statement relating to
the offering of the Company's securities for its own account or such longer
period that the underwriters may reasonably request. The obligations
described in this Section 2.9 shall not apply to a registration on Form S-4
or Form S-8 or similar forms which may be promulgated in the future and
shall not apply to a Holder holding less than 1% of the then-outstanding
Common Stock (assuming exercise of the Warrant for this purpose).
ARTICLE III
Representations and Warranties
------------------------------
The Company represents and warrants to, and agrees with, J.P. Morgan
and each of the Holders from time to time of Registrable Securities that:
(a) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which the Company or any
subsidiary of the Company is bound or to which any of the property or
assets of the Company or any subsidiary of the Company is subject nor will
such action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under
the Securities Act of the Registrable Securities, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under State securities or blue sky laws in connection with the
offering and distribution of the Registrable Securities.
(b) This Agreement has been duly authorized, executed and delivered by
the Company.
ARTICLE IV
Termination
-----------
This Agreement shall terminate immediately following the moment at
which there exist no securities of the Company that constitute Registrable
Securities; provided, however, that Section 2.7 hereof shall survive
indefinitely.
ARTICLE V
Miscellaneous
-------------
5.1 Recapitalization, Exchanges, etc. Affecting the Common Stock. The
provisions of this Agreement shall apply to the full extent set forth
herein with respect to (a) the Registrable Securities and (b) any and all
shares of capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in exchange for, or in substitution for
the Registrable Securities, by reason of any stock dividend, split, reverse
split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. In the event of any change in the
capitalization of the Company as a result of any stock split, stock
dividend or stock combination, the provisions of this Agreement shall be
appropriately adjusted.
5.2 Injunctive Relief. It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be suffered
if the parties fail to comply with any of the obligations herein imposed on
them and that in the event of any such failure, an aggrieved Person will be
irreparably damaged and will not have an adequate remedy at law. Any such
Person shall, therefore, in addition to any other remedies available under
applicable law, be entitled to injunctive relief, including specific
performance, to enforce such obligations, without the posting of any bond,
and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.
5.3 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the parties hereto.
In the event that any transferee of any Holder of Registrable Securities
shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall,
without any further writing of any kind, be deemed a party hereto for all
purposes and such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such transferee shall be entitled to receive the benefits of and
be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement.
5.4 Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made
pursuant hereto shall remain in full force and effect regardless of any
investigation (or statements as to the results thereto) made by or on
behalf of any Holder of Registrable Securities, any director, officer or
partner of such Holder, any agent or underwriter or any director, officer
or partner thereof, or any controlling person of any of the foregoing, and
shall survive delivery of and payment for the Registrable Securities
pursuant to the Warrant and the transfer of Registrable Securities by such
Holder.
5.5 Amendment; Waiver.
-----------------
(a) This Agreement may be amended only by a written instrument signed
by the Company and by Holders holding more than 66% of the then outstanding
Registrable Securities and, in the case of any amendment that adversely
affects any Holder or all of the members of any group of Holders
differently from any of the other Holders, by such Holder or the holders of
more than 66% in interest of the securities of the Company held by such
group of Holders.
(b) No provision of this Agreement may be waived orally, but only by a
written instrument signed by the party against whom enforcement of such
waiver is sought. Holders shall be bound from and after the date of the
receipt of a written notice from the Company setting forth such amendment
or waiver, whether or not the Registrable Securities shall have been marked
to indicate such amendment or waiver.
5.6 Notices. Except as otherwise provided in this Agreement, notices
and other communications under this Agreement shall be in writing
(including a writing delivered by facsimile transmission) and shall be
deemed to have been duly given if delivered personally, or sent by either
certified or registered mail, return receipt requested, postage prepaid, or
by overnight courier guaranteeing next day delivery, or by telex or
telecopier, at the following addresses:
if to the Company:
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: President
Telecopier: (717) 975-3762
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Stacy J. Kanter
Telecopier: (212) 735-2000
if to J.P. Morgan:
J.P. Morgan Ventures Corporation
60 Wall Street
New York, New York 10260
Attention: Sarah E. Nash
Telecopier: (212) 648-5142
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Bradley Y. Smith, Esq.
Telecopier: (212) 450-4800
J.P. Morgan may, by written notice given to the Company in accordance with
this Section 4.5, change the address to which such notice or other
communications are to be sent to it. All such notices and communications
shall be deemed to have been given on the date of delivery thereof, if
delivered by hand, on the fifth day after the mailing thereof, if mailed,
on the next day after the sending thereof, if by overnight courier and when
receipt is acknowledged, if telecopied.
5.7 Inspection. So long as this Agreement shall be in effect, this
Agreement and any amendments hereto shall be made available for inspection
by any Holder at the principal offices of the Company.
5.8 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
5.9 Headings. Article, section and paragraph headings are inserted for
convenience only and do not constitute a part of this Agreement.
5.10 Integration. This Agreement and the documents referred to herein
or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof.
There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter
hereof other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to this subject matter.
5.11 Illegality. In case any provision in this Agreement shall be
declared or held invalid, illegal or unenforceable, in whole or in part,
whether generally or in any particular jurisdiction, such provision shall
be deemed amended to the extent, but only to the extent, necessary to cure
such invalidity, illegality or unenforceability, and the validity, legality
and enforceability of the remaining provisions, both generally and in every
other jurisdiction, shall not in any way be affected or impaired thereby.
5.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one
such counterpart.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
___________________________________
Its: Senior Executive Vice President,
General Counsel and Secretary
J.P. MORGAN VENTURES CORPORATION
By: /s/ John A. Major, Jr.
____________________________________
Title: Managing Director
Exhibit 4.3
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE
SUBJECT TO AND HAVE THE BENEFIT OF A REGISTRATION RIGHTS AGREEMENT DATED AS
OF OCTOBER 27,1999 BETWEEN RITE AID CORPORATION AND J.P. MORGAN VENTURES
CORPORATION, A COPY OF WHICH IS ON FILE WITH RITE AID CORPORATION.
Dated: October 27, 1999
WARRANT
TO PURCHASE 2,500,000 SHARES OF COMMON STOCK OF
RITE AID CORPORATION
EXPIRING SEPTEMBER 23, 2002
THIS IS TO CERTIFY THAT, for value received, J.P. MORGAN VENTURES
CORPORATION or registered assigns ("HOLDER") is entitled to purchase from
RITE AID CORPORATION, a Delaware corporation ("COMPANY"), at any time or
from time to time after 9:00 a.m., New York City time, on the date hereof
and prior to 5:00 p.m., New York City time, on September 23, 2002 at the
place where the Warrant Agency is located, at the Exercise Price, the
number of shares of Common Stock of Company, par value $1.00 per share,
shown above, all subject to adjustment and upon the terms and conditions
hereinafter provided.
Certain terms used in this Warrant are defined in Article 4.
ARTICLE 1
EXERCISE OF WARRANTS
SECTION 1.1 Method of Exercise. To exercise this Warrant, in whole or
in part, the Holder shall deliver on any Business Day to Company, at the
Warrant Agency, (a) this Warrant, (b) a written notice of such Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased (which shall be a whole number of
shares if for less than all the shares then issuable hereunder), the method
of payment elected by the holder pursuant to clause (c) below, the
denominations of the share certificate or certificates desired and the name
or names in which such certificates are to be registered, and (c) payment
of the Exercise Price with respect to such shares. Such payment may be
made, at the option of the Holder, either (a) by cash, certified or bank
cashier's check or wire transfer in an amount equal to the product of (i)
the Exercise Price times (ii) the number of Warrant Shares for which this
Warrant is being exercised or (b) by receiving from Company the number of
Warrant Shares equal to (i) the number of Warrant Shares for which this
Warrant is being exercised minus (ii) the number of Warrant Shares having a
value, based on the average reported closing prices on the five Trading
Days immediately prior to the date of such exercise, equal to the product
of (x) the Exercise Price times (y) the number of Warrant Shares as to
which this Warrant is being exercised.
Company shall, as promptly as practicable and in any event within
seven days after receipt of such notice and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock to be issued pursuant to such notice together with cash in
lieu of any fractions of a share as provided in Section 1.3. The share
certificate or certificates so delivered shall be in such denominations as
may be specified in such notice, and shall be issued in the name of the
Holder or such other name or names as shall be designated in such notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such Holder or any
other Person so designated to be named therein shall be deemed for all
purposes to have become a holder of record of shares, as of the date the
aforementioned notice and payment is received by Company. If this Warrant
shall have been exercised only in part, Company shall, at the time of
delivery of such certificate or certificates, deliver to the Holder a new
Warrant evidencing the rights to purchase the remaining shares of Common
Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of the Holder
specified in such notice, appropriate notation may be made on this Warrant
which shall then be returned to the Holder. Company shall pay all expenses,
taxes and other charges payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants, except that,
if share certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all
transfer taxes payable as a result of such transfer shall be paid by the
Holder at the time of delivery of the aforementioned notice of exercise or
promptly upon receipt of a written request of Company for payment.
SECTION 1.2 Shares to Be Fully Paid and Nonassessable. All shares of
Common Stock issued upon the exercise of this Warrant shall be validly
issued, fully paid and nonassessable and, if the Common Stock is then
listed on any national securities exchange or quoted on NASDAQ, shall be
duly listed or quoted thereon, as the case may be.
SECTION 1.3 No Fractional Shares Required to Be Issued. Company shall
not be required to issue fractions of shares of Common Stock upon exercise
of this Warrant. If any fraction of a share would, but for this Section, be
issuable upon final exercise of this Warrant, in lieu of such fractional
share Company shall pay to the Holder, in cash, an amount equal to the same
fraction of the closing price per share of the Common Stock on the Trading
Day immediately prior to the date of such exercise.
SECTION 1.4 Share Legend. Each certificate for shares of Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such
shares are registered under the Securities Act, shall bear the following
legend:
"This security has not been registered under the Securities Act
of 1933 and may not be sold or offered for sale unless registered
under said Act and any applicable state securities laws or unless an
exemption from such registration is available. This security is also
subject to and has the benefit of a Registration Rights Agreement
dated as of October 27, 1999 between Rite Aid Corporation and J.P.
Morgan Ventures Corporation, copies of which are on file with Rite
Aid Corporation."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend (except a new certificate issued upon
completion of a public offering pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate (who may be an employee
of such holder) and reasonably acceptable to Company, the securities
represented thereby need no longer be subject to restrictions on resale
under the Securities Act.
SECTION 1.5 Reservation. Company has duly reserved and will keep
available for issuance upon exercise of the Warrants the total number of
Warrant Shares deliverable from time to time upon exercise of all Warrants
from time to time outstanding.
ARTICLE 2
WARRANT AGENCY; TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
SECTION 2.1 Warrant Agency. As long as this Warrant remains
outstanding, Company shall perform the obligations of and be the warrant
agency with respect to the Warrant (the "WARRANT AGENCY") at its address
set forth on the signature page or at such other address as Company shall
specify by notice to the Holder.
SECTION 2.2 Ownership of Warrant. Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made
by any person other than Company) for all purposes and shall not be
affected by any notice to the contrary, until due presentment of this
Warrant for registration of transfer as provided in this Article 2.
SECTION 2.3 Transfer of Warrant. Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrant, and
transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the
Warrant Agency, together with a written assignment of this Warrant duly
executed by the Holder or its duly authorized agent or attorney, with (if
the Holder is a natural person) signatures guaranteed by a bank or trust
company or a broker or dealer registered with the NASD, and funds
sufficient to pay any transfer taxes payable upon such transfer. Upon
surrender and, if required, such payment, Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in
the denominations specified in the instrument of assignment (which shall be
whole numbers of shares only) and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, if any, and this
Warrant shall promptly be canceled.
SECTION 2.4 Division or Combination of Warrants. This Warrant may be
divided or combined with other Warrants upon presentment hereof and of any
Warrant or Warrants with which this Warrant is to be combined at the
Warrant Agency, together with a written notice specifying the names and
denominations (which shall be whole numbers of shares only) in which the
new Warrant or Warrants are to be issued, signed by the Holder and the
holders thereof or their respective duly authorized agents or attorneys.
Subject to compliance with Section 2.3 as to any transfer or assignment
which may be involved in the division or combination, Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice.
SECTION 2.5 Loss, Theft, Destruction of Warrant Certificates. Upon
receipt of evidence satisfactory to Company of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and, in the case of
any such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to Company (it being understood and agreed that if the holder
of such Warrant is J.P. Morgan & Co. Incorporated or one of its
subsidiaries, then a written agreement of indemnity given by such holder
alone shall be satisfactory to Company and no further security shall be
required) or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same aggregate number of
shares of Common Stock.
SECTION 2.6 Expenses of Delivery of Warrants. Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of Warrants
hereunder.
ARTICLE 3
ANTIDULUTION PROVISIONS
SECTION 3.1 Adjustment Generally. The Exercise Price and the number
of shares of Common Stock (or other securities or property) issuable upon
exercise of this Warrant shall be subject to adjustment from time to time,
as follows:
SECTION 3.2 Common Stock Dividends. In case at any time after the
date hereof, Company shall pay or make a dividend or other distribution on
all or any portion of its Common Stock or shall make a dividend or other
distribution on any other class of Capital Stock of Company which dividend
or distribution includes Common Stock, the Exercise Price in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be decreased by multiplying such Exercise Price by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other
distribution, such decrease to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (i), the number of shares
of Common Stock at anytime outstanding shall not include shares held in the
treasury of Company but shall include shares issuable in respect of scrip
Common Stock. If any dividend or distribution of the type described in this
Section 3.2 is declared but not so paid or made, the Exercise Price shall
again be adjusted to be the Exercise Price which would then be in effect if
such dividend or distribution had not been declared.
SECTION 3.3 Common Stock Rights. In case at any time after the date
hereof, Company shall pay or make a dividend or other distribution on all
of its Common Stock consisting of, or shall otherwise issue to all holders
of its Common Stock, rights, warrants or options (not being available on an
equivalent basis to the Holder of this Warrant upon exercise) entitling the
holders of its Common Stock to subscribe for or purchase Common Stock at a
price per share less than the current market price per share (determined as
provided in Section 3.9) of the shares of Common Stock on the date fixed
for the determination of stockholders entitled to receive such rights,
warrants or options (other than pursuant to a dividend reinvestment plan),
the Exercise Price in effect at the opening of business on the day
following the date fixed for such detennination shall be decreased by
multiplying such Exercise Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase
would purchase at such current market price and the denominator shall be
the number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such decrease to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (ii), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of Company but
will include shares issuable in respect of scrip certificates, if any,
issued in lieu of fractions of shares of Common Stock. Company will not
issue any rights or warrants in respect of Common Stock held in the
treasury of Company (or, if rights or warrants are issued in respect of all
of the Common Stock of Company, will not exercise any such rights or
warrants in respect of Common Stock held in the treasury of Company). In
the event that such rights or warrants are not so issued, the Exercise
Price shall again be adjusted to be the Exercise Price which would then be
in effect if such date fixed for the determination of stockholders entitled
to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than such current market price, and
in determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received for such
rights or warrants. The value of such consideration, if other than cash,
shall be determined in the reasonable good faith judgment of the Board of
Directors of Company, whose determination shall be conclusive.
SECTION 3.4 Common Stock Subdivisions and Combinations. In case at
any time after the date hereof, all or any portion of the Common Stock
outstanding shall be subdivided into a greater number of shares of Common
Stock, the Exercise Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely in case at any time after the date
hereof, all or any portion of the shares of Common Stock outstanding shall
each be combined into a smaller number of shares of Common Stock, the
Exercise Price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be,
to become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
SECTION 3.5 Distributions of Property. In case at any time after the
date hereof, Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness or assets
(including securities, rights, warrants or options, but excluding any
rights, warrants, or options referred to in Section 3.3 as entitling the
holders of Common Stock to subscribe for or purchase Common Stock at a
price per share less than the current market price, any dividend or
distribution paid exclusively in cash, any dividend or distribution
referred to in Section 3.2 and any dividend or distribution upon a merger
or consolidation referred to in Section 3.16), the Exercise Price shall be
decreased so that the same shall equal the rate determined by multiplying
the Exercise Price in effect immediately prior to the close of business on
the date fixed for the determination of stockholders entitled to receive
such distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided in Section 3.9) of the
Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the assets or evidence of
indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. If any dividend or
distribution of the type described in this Section 3.5 is declared but not
so paid or made, the Exercise Price shall again be adjusted to the Exercise
Price which would then be in effect if such dividend or distribution had
not been declared.
SECTION 3.6 Special Cash Distributions. In case at any time after the
date hereof, Company shall, by dividend or otherwise, make a distribution
to all holders of its Common Stock consisting exclusively of cash
(excluding any cash that is distributed upon a merger or consolidation or a
sale or transfer of all or substantially all of the assets of Company to
which Section 3.16 applies or as part of a distribution referred to in
Section 3.5) in an aggregate amount that, combined together with (i) the
aggregate amount of any other distributions to all holders of its Common
Stock made exclusively in cash within the 12 months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant
to this Section 3.6 has been made and (ii) the aggregate of any cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of consideration payable in respect of
any tender offer by Company or any of its Subsidiaries for all or any
portion of the Common Stock concluded within the 12 months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to Section 3.7 has been made, exceeds 12.5% of the product of the
current market price per share of Common Stock on the date for the
determination of holders of Common Stock entitled to receive such
distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business
on such date for determination, the Exercise Price shall be decreased so
that the same shall equal the rate determined by multiplying the Exercise
Price in effect immediately prior to the close of business in the date
fixed for determination of the stockholders entitled to receive such
distribution by a fraction (A) the numerator of which shall be equal to the
current market price per share (determined as provided in Section 3.9) of
the Common Stock on the date fixed for such determination less an amount
equal to the quotient of (x) the excess of such combined amount over such
12.5% and (y) the number of shares of Common Stock outstanding on such date
for determination and (B) the denominator of which shall be equal to the
current market price per share (determined as provided in Section 3.9) of
the Common Stock on such date for determination. If any dividend or
distribution of the type described in this Section 3.6 is declared but not
so paid or made, the Exercise Price shall again be adjusted to the Exercise
Price which would then be in effect if such dividend or distribution had
not been declared.
SECTION 3.7 Tender Offers. In case a tender or exchange offer made by
Company or any Subsidiary for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance
(up to any maximum specified in the terms of the tender offer) of Purchased
Shares (as defined below)) of an aggregate consideration having a fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive) that combined together with (i) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive) as of the expiration of such
tender or exchange offer, of consideration payable in respect of any other
tender or exchange offer, by Company or any Subsidiary of Company for all
or any portion of the Common Stock expiring within the 12 months preceding
the expiration of such tender or exchange offer and in respect of which no
adjustment, pursuant to this Section 3.7 has been made and (ii) the
aggregate amount of any distributions to all holders of Company's Common
Stock made exclusively in cash within 12 months preceding the expiration of
such tender or exchange offer and in respect of which no adjustment
pursuant to Section 3.6 has been made, exceeds 12.5% of the product of the
current market price per share of the Common Stock (determined as provided
in Section 3.9) as of the last time (the "EXPIRATION TIME") tenders or
tenders could have been made pursuant to such tender or exchange offer (as
it may be amended) times the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Exercise Price shall be
decreased so that the same shall equal the rate determined by multiplying
the Exercise Price immediately prior to the close of business on the date
of the Expiration Time by a fraction (A) the numerator of which shall be
equal to (1) the product of (x) the current market price per share of the
Common Stock (determined as provided in Section 3.9) on the date of the
Expiration Time and (y) the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the date of the Expiration
Time less (2) the amount of cash plus the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on
the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares, and (B) the denominator of which shall be equal
to the product of (x) the current market price per share of the Common
Stock (determined as provided in Section 3.9, as of the Expiration Time and
(y) the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) as of the Expiration Time less the number of
all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted up to any such maximum,
being referred to as the "PURCHASED SHARES"). In the event that Company is
obligated to purchase shares pursuant to any such tender offer, but Company
is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Exercise Price shall
again be adjusted to be the Exercise Price which would then be in effect if
such tender offer had not been made.
SECTION 3.8 Reclassifications. The reclassification of Common Stock
into securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 3.16 applies) shall be
deemed to involve (i) a distribution of such securities other than Common
Stock to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of Section 3.5))
and (ii) a subdivision or combination, as the case may be, of the number of
Common Stock outstanding immediately prior to such reclassification into
the number of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective", within the
meaning of Section 3.4.
SECTION 3.9 Current Market Price. For the purpose of any computation
under Section 3.3, 3.5, 3.6 or 3.7, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily
Closing Prices per share for the five consecutive Trading Days immediately
preceding the earlier of the day in question and the day before the "ex
date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used
with respect to any issuance or distribution, means the first date on which
the Common Stock trades regular way on the applicable securities exchange
or in the applicable securities market without the right to receive such
issuance or distribution.
SECTION 3.10 Optional Reductions. Company may make such reductions in
the Exercise Price, in addition to those required by Sections 3.2 to 3.7,
as it considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. Company from time to
time may reduce the Exercise Price by any amount for any period of time if
the period is at least twenty days, the reduction is irrevocable during the
period and the Board of Directors (or, to the extent permitted by
applicable law, a duly authorized committee thereof) shall have made a
determination that such reduction would be in the best interests of
Company, which determination shall be conclusive. Whenever the Exercise
Price is reduced pursuant to the preceding sentence, Company shall mail to
the Holder a notice of the reduction at least fifteen days prior to the
date the reduced Exercise Price takes effect, and such notice shall state
the reduced Exercise Price and the period it will be in effect.
SECTION 3.11 Adjustments to Warrant Shares. Upon any adjustment to the
Exercise Price pursuant to the foregoing provisions of this Article 3, the
number of shares of Common Stock for which this Warrant may be exercised
shall be adjusted by multiplying the number of shares of Common Stock for
which this Warrant was exercisable immediately prior to such adjustment by
a fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and the denominator of which shall be
the Exercise Price in effect immediately after such adjustment.
SECTION 3.12 Certain Limitations. Notwithstanding any other provision
of this Article 3, no adjustment to the Exercise Price shall reduce the
Exercise Price below the then par value per share of the Common Stock, and
any such purported adjustment shall instead reduce the Exercise Price to
such par value. Company hereby covenants not to take any action (1) to
increase the par value per share of the Common Stock, (2) that would or
does result in any adjustment in the Exercise Price that would cause the
Exercise Price to be less than the then par value per share of the Common
Stock or (3) that would or does result in any adjustment to the number of
shares for which this Warrant may be exercised that would cause such number
to exceed the number of authorized but unissued shares of Common Stock not
reserved for other purposes.
SECTION 3.13 Minimum Adjustment. Notwithstanding any of the foregoing
provisions of this Article 3, no adjustment in the Exercise Price need be
made until all cumulative adjustments amount to 1% or more of the Exercise
Price as last adjusted. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment.
SECTION 3.14 Notice to Holder. Whenever the Exercise Price is adjusted
as herein provided, Company shall compute the adjusted Exercise Price and
number of Warrant Shares and shall prepare a certificate signed by the
Treasurer of Company setting forth the adjusted Exercise Price and number
of Warrant Shares and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall forthwith be delivered
to the Holder.
SECTION 3.15 Deferred Delivery. In any case in which this Article 3
provides that an adjustment shall become effective immediately after a
record date for an event, Company may defer until the occurrence of such
event (x) issuing to the Holder upon exercise of this Warrant after such
record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such exercise by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment and (y) paying to such
Holder any amount in cash in lieu of any fractional share of Common Stock
pursuant to Section 1.03.
SECTION 3.16 Merger and Consolidation. In the event that Company shall
be a party to any transaction, including without limitation any (i)
recapitalization or reclassification of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination of the
Common Stock), (ii) any consolidation of Company with, or merger of the
Company into, any other Person, any merger of another Person into the
Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
of the Company), (iii) any sale or transfer of all or substantially all of
the assets of the Company or (iv) any compulsory share exchange, pursuant
to which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as
part of the terms of such transaction whereby the Holder of this Warrant
shall have the right thereafter, to exercise this Warrant for the kind and
amount of securities, cash and other property receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange by a holder of the number of shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange. Company or the person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires
Company's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or
other constituent document shall provide for adjustments which, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Article 3.
The above provisions shall similarly apply to successive recapitalization,
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
ARTICLE 4
DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
on which banking institutions located in New York are authorized by law or
other governmental action to be closed.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the
issuing Person,
"COMPANY" means Rite Aid Corporation, a Delaware corporation, and its
successors.
"EXERCISE PRICE" means $11.00 per share of Common Stock, subject to
adjustment pursuant to Article 3.
"HOLDER" has the meaning set forth in the first paragraph of this
Warrant.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or
business).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
rules and regulations of the Securities and Exchange Commission thereunder.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
that Person (or a combination thereof) and (ii) any partnership (a) the
sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"TRADING DAY" means (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on which
trade may be made on the Nasdaq National Market or (z) if the applicable
security is not otherwise listed, admitted for trading or quoted, any day
other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or executive order
to close.
"WARRANT AGENCY" has the meaning set forth in Section 2.1.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Warrants.
"WARRANTHOLDER" means a holder of a Warrant.
All references herein to "DAYS" shall mean calendar days unless
otherwise specified.
ARTICLE 5
MISCELLANEOUS
SECTION 5.1 Notices. Notices and other communications provided for
herein shall be in writing and may be given by mail, courier, confirmed
telex or facsimile transmission and shall, unless otherwise expressly
required, be deemed given when received or, if mailed, four Business Days
after being deposited in the United States mail with postage prepaid and
properly addressed. In the case of the Holder, such notices and
communications shall be addressed to its address as shown on the books
maintained by the Warrant Agency, unless the Holder shall notify the
Warrant Agency that notices and communications should be sent to a
different address (or telex or facsimile number), in which case such
notices and communications shall be sent to the address (or telex or
facsimile number) specified by the Holder.
SECTION 5.2 Amendments. The provisions of this Warrant may be
amended, modified or waived only with the written consent of Company and
the Holder.
SECTION 5.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
SECTION 5.4 Transfer; Covenants to Bind Successor and Assigns. All
covenants, stipulations, promises and agreements in this Warrant contained
by or on behalf of Company or the Holder shall bind its successors and
assigns, whether so expressed or not. This Warrant shall be transferable
and assignable by the Holder hereof in whole or from time to time in part
to any other Person and the provisions of this Warrant shall be binding
upon and inure to the benefit of the Holder hereof and its successors and
assigns.
SECTION 5.5 No Stockholder Rights. Prior to exercise of this Warrant,
the Holder shall not be entitled to any rights of a stockholder with
respect to the shares of Common Stock purchasable upon exercise, including,
without limitation, the right to vote such shares of Common Stock, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of stockholder meetings, and, except as explicitly stated herein,
the Holder shall not be entitled to any notice or other communication
concerning the business or affairs of Company.
IN WITNESS WHEREOF, Company has caused this Warrant to be executed in
its corporate name by one of its officers thereunto duly authorized, and
its corporate seal to be hereunto affixed, attested by its Secretary or an
Assistant Secretary, all as of the day and year first above written.
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
_____________________________________
Name: Elliot S. Gerson
Title: Senior Executive Vice President
Address: 30 Hunter Lane
Camp Hill, PA 17011
Attention: Chief Financial Officer
Telephone No.: (717) 975-5750
Facsimile No.: (717) 975-3764
[Corporate Seal]
Attest:
/s/ Lawrence Gelman
- --------------------------------
Name: Lawrence Gelman
Title: Secretary
Exhibit 10.1
October 18, 1999
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Re: Commitment with Respect to
Investment in Rite Aid Corporation
----------------------------------
Dear Sirs and Madams:
You have requested that Green Equity Investors III (the
"Purchaser") commit to purchase 3,000,000 shares of 8% convertible
pay-in-kind preferred stock (the "Preferred Stock") of Rite Aid
Corporation, a Delaware corporation (the "Company"), on the terms and
conditions described below. The closing of the sale of the Preferred Stock
is hereinafter referred to as the "Closing". The Closing is expected to
occur on October 25, 1999.
1. Authorization of Preferred Stock. The Company has approved the issuance
of 3,000,000 shares (the "Preferred Shares") of Preferred Stock to be
designated as its "8% Convertible Pay-in-Kind Preferred Stock". The
Preferred Stock shall have the relative rights, preferences and privileges,
including, without limitation, the right to convert the Preferred Stock
into shares of the Company's common stock, par value $1.00 per share (the
"Common Stock"), as described in Annex A hereto and to be set forth in a
Certificate of Designation to be filed pursuant to Section 151 of the
General Corporation Law of the State of Delaware (the "Certificate of
Designation").
2. Sale and Purchase of Stock. The Company will issue and sell to the
Purchaser and, subject to the terms and conditions of this Commitment, the
Purchaser will purchase from the Company, at the Closing, the Preferred
Shares at a purchase price of $100 per share, in immediately available
funds. The Closing shall take place on October 25, 1999 at 10:00 a.m. (New
York City time) at a place to be agreed by the Company and the Purchaser.
3. Conditions to Closing. The Purchaser's obligation to purchase and pay
for the Preferred Shares to be sold to the Purchaser at the Closing is
subject to the fulfillment, prior to or concurrently with the Closing, of
the following conditions:
3.1 Representations and Warranties. The representations and
warranties of the Company contained in this Commitment shall be in all
material respects correct when made and at the time of the Closing.
3.2 Certificate of Designation. The Certificate of Designation shall
have been duly filed under the laws of the State of Delaware, and the
Restated Certificate of Incorporation of the Company, as amended by the
Certificate of Designation, shall be in full force and effect, and shall
not have been otherwise amended or modified.
3.3 Amendment and Restatement of Credit Facilities. The Company's
credit facilities aggregating $2.75 billion shall have been amended and
restated, including any necessary waivers thereunder, which amendment and
restatement shall contain substantially the terms set forth in the drafts
dated October 16, 1999 previously furnished to the Purchaser.
3.4 Registration Rights Agreement. The Company and the Purchaser
shall have entered into a registration rights agreement containing
substantially the terms described in Annex A hereto (the "Registration
Rights Agreement").
3.5 Legal Opinions. The Purchaser shall have received a legal opinion
(which may contain customary assumptions and qualifications) dated the date
of the Closing from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
the Company, covering the matters set forth on Schedule A hereto.
3.6 No Default. After giving effect to the amendment and restatement
of the credit facilities referred to in Section 3.3 hereof, there shall not
have occurred and be continuing any default or any event which with notice
or passage of time would constitute a default under any of the Company's
material agreements with respect to indebtedness for borrowed money.
3.7 Financial Statements. The contemplated restatement of the
Company's financial statements for all periods ending prior to the date
hereof is not expected to involve an aggregate reduction in the Company's
net equity as of August 28, 1999 of more than $700,000,000 on a pre-tax
basis.
4. Representations and Warranties. The Company represents and warrants
that:
4.1 Organization, Standing, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted
and as proposed to be conducted, to enter into and perform all of its
obligations under this Commitment, to issue and sell the Preferred Shares
to be issued and sold at the Closing and to carry out the transactions
contemplated hereby or thereby.
4.2 Capital Stock and Related Matters. As of September 25, 1999 and
without giving effect to the transactions contemplated by this Commitment,
the authorized capital stock of the Company consisted of (a) 600,000,000
shares of Common Stock, of which approximately 258,927,199 shares were
issued and outstanding and (b) 20,000,000 shares of preferred stock,
undesignated as to terms, none of which were outstanding. All of the
outstanding shares of Common Stock are validly issued and outstanding,
fully paid and non-assessable. As of September 25, 1999 and except (i) as
set forth in the Company's Annual Report on Form 10-K for the year ended
February 27, 1999, (ii) for employee stock options exercisable for
16,166,529 shares of the Company's Common Stock, (iii) the Company's 5.25%
Convertible Notes due 2002 which are currently convertible into 17,986,413
shares of the Company's Common Stock and (iv) stock appreciation rights
which may be settled in 6,076,895 shares of the Company's Common Stock, the
Company had no outstanding stock or securities convertible into or
exchangeable for any shares of its capital stock, or any outstanding rights
(either preemptive or other) to subscribe for or to purchase, or any
outstanding options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding calls,
commitments or claims of any character relating to, any capital stock or
any stock or securities convertible into or exchangeable for any capital
stock of the Company.
4.3 Governmental Consents, etc. No consent, approval or authorization
of, or declaration or filing with, any governmental authority on the part
of the Company is required for the valid execution and delivery of this
Commitment, the valid offer, issue, sale and delivery of the Preferred
Shares pursuant to this Commitment or the valid issue and delivery of
shares of Common Stock issuable upon conversion of the Preferred Stock.
4.4 Offering of Securities. Neither the Company nor any person acting
on its behalf has offered the Preferred Stock or any similar securities of
the Company to, or solicited any offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any person or
persons other than the Purchaser in such manner as would subject the
offering, issuance or sale of any of the Preferred Shares to the provisions
of Section 5 of the Securities Act. Neither the Company nor any Person
acting on behalf of the Company has taken or will take any action which
would subject the offering, issuance or sale of any of the Preferred Shares
to the provisions of Section 5 of the Securities Act.
4.5 Integration. Neither the Company nor any affiliate (as such term
is defined in Rule 501(b) under the Securities Act) has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the
Preferred Shares, in a manner that would require the registration of the
Securities under the Securities Act.
4.6 Enforceability. This Commitment has been duly authorized, and
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Purchaser) constitutes the valid and
binding obligation of the Company, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity).
4.7 Compliance with Other Instruments, etc. The execution and
delivery by the Company of this Commitment and the issuance and sale of the
Preferred Shares will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is subject, nor
will such action result in any violation of the provisions of the
certificate of incorporation or by-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties, except in
each case as would not, individually or in the aggregate have a material
adverse effect on the Company's business, results of operations or
financial condition.
5. Investment Representations. The Purchaser understands that neither the
Preferred Shares nor any Common Stock issuable upon conversion, if any, of
the Preferred Shares has been registered under the Securities Act and that
the certificates for the Preferred Shares and such Common Stock will bear a
legend to that effect. The Purchaser also understands that the Preferred
Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act, based in part upon their
representations contained in this Commitment. The Purchaser hereby
represents and warrants as follows:
5.1 Acquisition for Own Account. The Purchaser is acquiring the
Preferred Shares for its own account for investment and not with a view
toward distribution in a manner which would violate the Securities Act.
5.2 Ability to Protect Own Interests. The Purchaser represents that
by reason of its business or financial experience, or the business and
financial experience of its management, the Purchaser has the capacity to
protect its own interests in connection with the transaction contemplated
in this Commitment. The Purchaser is not a corporation formed for the
specific purpose of consummating this transaction.
5.3 Accredited Investor. The Purchaser represents that it
is an "accredited investor" as that term is defined in Regulation D promulgated
under the Securities Act.
5.4 Access to Information. The Purchaser has been given access to all
Company documents, records, and other information, have received physical
delivery of all those which the Purchaser has requested, and has had
adequate opportunity to ask questions of, and receive answers from, the
Company's officers, employees, agents, accountants, and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities, and all other matters relevant to its investment in the
Preferred Shares.
5.5 Compliance with Laws. The Purchaser and its transferees will
comply with all filing and other reporting obligations under all applicable
law which shall be applicable to Purchaser with respect to the Preferred
Stock and to the Common Stock issuable or issued on conversion of the
Preferred Stock.
5.6 Enforceability. This Commitment has been duly authorized, and
executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery thereof by the Company) constitutes
the valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity).
6. Reservation of Common Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Stock, the number of shares of Common Stock from time to time
issuable upon conversion of all shares of the Preferred Stock at the time
outstanding. All shares of Common Stock issuable upon conversion of the
Preferred Stock shall be duly authorized and, when issued upon such
conversion, shall be validly issued, fully paid and non-assessable.
7. Transfer Restrictions.
7.1 Restrictive Legends. Except as otherwise permitted by this
Section 7, each certificate for Preferred Stock (including each certificate
for Preferred Stock issued upon the transfer of any certificate for
Preferred Stock and each certificate issued in payment of dividends with
respect to the Preferred Stock) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The shares represented by this Certificate and any
shares of Common Stock issuable upon conversion of any such
shares have not been registered under the Securities Act of
1933 and may not be transferred in the absence of such
registration or an exemption therefrom under such Act. Such
shares and any such shares of Common Stock may be transferred
only in a transaction exempt from registration under the Act or
pursuant to a registration statement under the Act."
Except as otherwise permitted by this Section 7, each certificate for
Common Stock issued upon the conversion of any of the Preferred Stock, and
each certificate issued upon the transfer of any such Common Stock, shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and may not
be transferred in the absence of such registration or an
exemption therefrom under such Act. Such shares may be
transferred only in a transaction exempt from registration
under the Act or pursuant to a registration statement under
the Act."
7.2 Termination of Restrictions. The restrictions imposed by this
Section 7 upon the transferability of Preferred Stock and Common Stock
shall cease and terminate as to any particular securities when such
restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to
any securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any),
new certificates for such securities of like tenor not bearing the
applicable legends required by Section 7.1 hereof.
8. Survival of Representations and Warranties. The representations and
warranties contained in this Commitment shall survive the execution and
delivery of this Commitment and the Closing. No written or oral statements
made by or on behalf of the Company, other than in this Commitment, shall
constitute representations or warranties within the meaning of this
Commitment.
9. Amendments and Waivers. Any term of this Commitment may be amended or
modified and the observance of any term of this Commitment may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the
Purchaser.
10. Termination. This Commitment may be terminated (a) by the mutual
written consent of the Purchaser and the Company at any time or (b) by the
Purchaser or the Company if the Closing shall not have been consummated on
or before November 15, 1999.
11. Standstill Agreement. Concurrently with the Closing, the Company and
the Purchaser agree to enter into a two-year standstill agreement
containing customary terms and provisions.
12. Election of Leonard Green and Jonathan Sokoloff as Directors. After the
Closing, it is agreed that Leonard Green will be elected to fill the
vacancy created by the resignation of Martin Grass, and that Jonathan
Sokoloff will be elected as a director, both of which will be
representatives of the Preferred Stock.
13. Closing Fee. Concurrently with the Closing, the Company agrees to pay
to Leonard Green & Partners a fee of $3 million.
14. Consulting Fee. The Company shall pay to Leonard Green & Partners a
consulting fee of $1 million on each of the first, second and third
anniversaries of the
Closing.
15. Miscellaneous. This Commitment shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns and
affiliates of the parties hereto, whether so expressed or not. Except as
aforesaid, this Commitment shall not inure to the benefit of any third
party. This Commitment embodies the entire agreement and understanding
between the Purchaser and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Commitment
shall be construed and enforced in accordance with and governed by the law
of the State of New York without regard to the principles regarding
conflicts of laws. The headings in this Commitment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Commitment may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
Each of the Company and the Purchaser represent and warrant
that it is duly authorized to execute and deliver and perform its
obligations under this commitment letter and that the execution of this
letter does not violate any contract or law or require any third party
consents.
Very truly yours,
Green Equity Investors III, L.P.
By: Leonard Green & Partners, L.P.
By: LGP Management, Inc.
By: /s/ Jonathan Sokoloff
__________________________________
Name: Jonathan Sokoloff
Title:
Accepted and agreed to
as of the date first written above:
Rite Aid Corporation
By: /s/ Elliot S. Gerson
________________________________
Name: Elliot S. Gerson
Title: Executive Vice President
Schedule A
----------
Matters to be Covered in Legal Opinion of
Skadden, Arps, Slate, Meagher & Flom LLP
----------------------------------------
1. The issuance and sale of the Preferred Shares being sold by the Company
to you have been duly authorized by the Company and, upon payment therefor
and delivery of certificates evidencing the Preferred Shares in accordance
with the Commitment, will be validly issued, fully paid and non-assessable.
The Preferred Shares to be issued by the Company to you at the Closing
shall be entitled to all the rights, preferences and privileges set forth
in the Certificate of Designation. The stock certificates evidencing the
Preferred Shares will, upon due execution thereof by the Company, conform
in all material respects to the requirements of Section 151(f) of the DGCL
(as defined below).
2. The Commitment has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
3. To such counsel's knowledge, the execution and delivery of the
Commitment by the Company and the issuance and sale of the Preferred Shares
pursuant thereto will not (i) require any consent, approval, authorization,
or other order of, or qualification with, any Governmental Authorities
pursuant to Applicable Laws, (ii) conflict with the Certificate of
Incorporation or the By-laws, (iii) constitute a violation of or default
under the terms of any Applicable Contract (except that such counsel need
not express any opinion as to any covenant, restriction or provision of any
such agreement or instrument with respect to financial covenants, ratios or
tests or any aspect of the financial condition or results of operations of
the Company) or (iv) violate or conflict with, or result in any
contravention of, any Applicable Law or any Applicable Order.
For purposes of such opinion: (i) the term "Applicable Laws" means the
General Corporation Law of the State of Delaware (the "DGCL") and those
laws, rules and regulations of the State of New York and the federal laws
of the United States of America, in each case, which, in such counsel's
experience, are normally applicable to transactions of the type
contemplated by the Commitment (other than the United States federal
securities laws, state and foreign securities or Blue Sky laws, antifraud
laws, the rules and regulations of the National Association of Securities
Dealers, Inc.), but without having made any special investigation with
respect to any other laws, rules or regulations; (ii) the term "Applicable
Contracts" means those instruments or agreements that are filed as exhibits
to the Company's Annual Report on Form 10-K for the year ended February 27,
1999; (iii) the term "Governmental Authorities" means any court, regulatory
body, administrative agency, or governmental body of the State of New York,
the State of Delaware or the United States of America having jurisdiction
over the Company under Applicable Laws; and (iv) the term "Applicable
Orders" means those judgments, orders or decrees, if any, of any
Governmental Authorities specifically identified to such counsel by the
Company to be applicable to the Company.
Exhibit 10.2
$1,300,000,000
TERM LOAN AGREEMENT
dated as of
October 25, 1999
among
Rite Aid Corporation,
The Banks from time to time
parties hereto
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
------------------------------------
JP Morgan Securities Inc.,
Lead Arranger and Book Runner
TABLE OF CONTENTS1
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PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.......................................1
SECTION 1.02. Accounting Terms and Determinations..............16
SECTION 1.03. Other Definitional Provisions....................16
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend..............................17
SECTION 2.02. Notice of Borrowing..............................17
SECTION 2.03. Notice to Banks; Funding of Loans................18
SECTION 2.04. Notes............................................19
SECTION 2.05. Maturity of Loans................................19
SECTION 2.06. Interest Rates...................................19
SECTION 2.07. Method of Electing Interest Rates................21
SECTION 2.08. Fees.............................................22
SECTION 2.09. Reduction Events; Mandatory Prepayments and
Commitment Reductions..........................23
SECTION 2.10. Optional Prepayments.............................25
SECTION 2.11. General Provisions as to Payments................25
SECTION 2.12. Funding Losses...................................26
SECTION 2.13. Computation of Interest..........................26
SECTION 2.14. Regulation D Compensation........................26
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing Date.....................................27
SECTION 3.02. Subsequent Borrowings............................28
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power....................29
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention..................................29
SECTION 4.03. Binding Effect...................................29
SECTION 4.04. Financial Information............................29
SECTION 4.05. Full Disclosure..................................30
SECTION 4.06. Litigation.......................................30
SECTION 4.07. Compliance with ERISA............................30
SECTION 4.08. Taxes............................................31
SECTION 4.09. Subsidiaries.....................................31
SECTION 4.10. Environmental Matters............................31
SECTION 4.11. Year 2000 Compliance.............................32
SECTION 4.12. Pledge Agreement.................................32
ARTICLE 5
COVENANTS
SECTION 5.01. Information......................................32
SECTION 5.02. Payment of Obligations...........................35
SECTION 5.03. Maintenance of Property; Insurance...............35
SECTION 5.04. Conduct of Business and Maintenance of Existence.35
SECTION 5.05. Compliance with Laws.............................36
SECTION 5.06. Inspection of Property, Books and Records........36
SECTION 5.07. Restriction on Other Agreements..................36
SECTION 5.08. Restriction on Debt of Subsidiaries..............36
SECTION 5.09. Restriction on Sales with Leases Back............37
SECTION 5.10. Restriction on Liens.............................37
SECTION 5.11. Capital Expenditures.............................39
SECTION 5.12. Capitalization Leverage Ratio....................39
SECTION 5.13. Cash Flow Leverage Ratio.........................39
SECTION 5.14. Fixed Charge Coverage............................39
SECTION 5.15. Limitation on Investments and Acquisitions.......40
SECTION 5.16. Consolidations, Mergers and Sales of Assets......40
SECTION 5.17. Use of Proceeds..................................41
SECTION 5.18. Restricted Payments..............................41
SECTION 5.19. Synthetic Leases.................................41
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default................................42
SECTION 6.02. Notice of Default................................44
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authorization....................44
SECTION 7.02. Administrative Agent and Affiliates..............44
SECTION 7.03. Action by Administrative Agent...................45
SECTION 7.04. Consultation with Experts........................45
SECTION 7.05. Liability of Administrative Agent................45
SECTION 7.06. Indemnification..................................45
SECTION 7.07. Credit Decision..................................46
SECTION 7.08. Successor Administrative Agent...................46
SECTION 7.09. Administrative Agent's Fees......................46
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair........................................46
SECTION 8.02. Illegality.......................................47
SECTION 8.03. Increased Cost and Reduced Return................48
SECTION 8.04. Taxes............................................49
SECTION 8.05. Base Rate Loans Substituted for Affected
Euro-Dollar Loans...............................51
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices..........................................52
SECTION 9.02. No Waivers.......................................52
SECTION 9.03. Expenses; Indemnification........................52
SECTION 9.04. Sharing of Set-Offs..............................53
SECTION 9.05. Amendments and Waivers...........................53
SECTION 9.06. Successors and Assigns...........................54
SECTION 9.07. Collateral.......................................56
SECTION 9.08. Governing Law; Submission to Jurisdiction........56
SECTION 9.09. Counterparts.....................................56
SECTION 9.10. WAIVER OF JURY TRIAL.............................56
Commitment Schedule
Pricing Schedule
Exhibit A - Note
Exhibit B - 1 Opinion of Special Counsel for the Borrower
Exhibit B-2 - Opinion of General Counsel for the Borrower
Exhibit C - Opinion of Davis Polk & Wardwell, Special Counsel for
the Administrative Agent
Exhibit D - Assignment and Assumption Agreement
Exhibit E - Pledge Agreement
TERM LOAN AGREEMENT
AGREEMENT dated as of October 25, 1999 among RITE AID CORPORATION,
the BANKS from time to time parties hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks under the Loan Documents, and
its successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative
Agent and submitted to the Administrative Agent (with a copy to the
Borrower) duly completed by such Bank.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"ASSET SALE" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by the
Borrower or any of its Subsidiaries of any asset, but excluding (i) any
sale, lease or other disposition by PCS or any of its Subsidiaries, (ii)
the sale or other disposition of capital stock of PCS (or of any non-cash
proceeds thereof), (iii) dispositions of inventory, cash, cash equivalents
and other cash management investments and obsolete, unused or unnecessary
equipment, in each case in the ordinary course of business, (iv)
dispositions to the Borrower or a Wholly-Owned Consolidated Subsidiary, (v)
any Sale and Leaseback Transaction and (vi) sales of accounts receivable
pursuant to the Rite Aid Funding LLC receivables securitization facility in
existence on the date hereof, or any successor receivables securitization
facility, if and to the extent that the amount of financing available
thereunder is not increased above that available on the date hereof.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"ATTRIBUTABLE DEBT" means, as to any particular Sale and Leaseback
Transaction under which the Borrower or any Subsidiary is at the time
liable, at any date as of which the amount thereof is to be determined (i)
in the case of any such transaction involving a Capital Lease, the amount
on such date of the Capital Lease Obligation thereunder, or (ii) in the
case of any other Sale and Leaseback Transaction, the then present value of
the minimum rental obligations under such Sale and Leaseback Transaction
during the remaining term thereof (after giving effect to any extensions at
the option of the lessor) computed by discounting the respective rental
payments at the actual interest factor included in such payments or, if
such interest factor cannot be readily determined, at the rate of 14% per
annum. The amount of any rental payment required to be made under any such
Sale and Leaseback Transaction not involving a Capital Lease may exclude
amounts required to be paid by the lessee on account of maintenance and
repairs, insurance, taxes, assessments, utilities, operating and labor
costs and similar charges.
"AVAILABILITY PERIOD" means the period from and including the Closing
Date to and including November 15, 1999 (or such earlier date on which the
unused amount of the Commitments is reduced to zero).
"BANK" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means a Loan that bears interest at a rate per
annum, based on the Base Rate pursuant to the Notice of Borrowing, a Notice
of Interest Rate Election, the last sentence of Section 2.07(a) or Article
8.
"BASE RATE MARGIN" has the meaning specified in the Pricing
Schedule.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWER" means Rite Aid Corporation, a Delaware corporation, and its
successors.
"BORROWER'S 1999 FORM 10-K" means the Borrower's annual report on
Form 10-K for the fiscal year ended February 27, 1999, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended.
"BORROWING" means the aggregation of Loans to be made to the Borrower
by the Banks pursuant to Article 2 on a single date and for a single
Interest Period. A Borrowing is a "BASE RATE BORROWING" if such Loans are
Base Rate Loans or a "EURO-DOLLAR BORROWING" if such Loans are Euro-Dollar
Loans.
"BUSINESS ACQUISITION" means (i) an Investment by the Borrower or any
of its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such
Person shall become a Subsidiary or shall be merged into or consolidated
with the Borrower or any of its Subsidiaries or (ii) an acquisition by the
Borrower or any of its Subsidiaries of the property and assets of any
Person (other than the Borrower or any of its Subsidiaries) that constitute
substantially all the assets of such Person or any division or other
business unit of such Person.
"CAPITAL LEASE" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's balance sheet; and "CAPITAL LEASE OBLIGATION" means the amount of
the liability so capitalized in respect of a Capital Lease.
"CAPITAL MARKETS TRANSACTION" means the receipt by the Borrower or a
Subsidiary of proceeds of (a) an issuance in the public or private capital
markets of long-term debt securities, of equity securities or of
equity-linked (e.g., trust preferred) securities (other than the LPG
Transaction), (b) a Sale and Leaseback Transaction (other than a Sale and
Leaseback Transaction (i) between the Borrower and a Wholly-Owned
Consolidated Subsidiary or between Wholly-Owned Consolidated Subsidiaries
or (ii) entered into in respect of property acquired by the Borrower or a
Subsidiary if such Sale and Leaseback Transaction is entered into within 24
months from the date of such acquisition) or (c) bank borrowings under
facilities entered into after the Closing Date, to the extent the aggregate
incremental financing available thereunder exceeds $200,000,000.
"CLOSING DATE" means the date designated by the Borrower pursuant to
Section 2.02 as the date of the first borrowing hereunder.
"CLOSING PRICE" on any day, with respect to publicly traded
securities, means (a) if such securities are listed or admitted for trading
on a national securities exchange, the reported last sales price regular
way or, if no such reported sale occurs on such day, the average of the
closing bid and asked prices regular way on such day, in each case on the
principal national securities exchange on which such securities are listed
or admitted to trading, or (b) if such securities are not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices in the over-the-counter market on such day as
reported by NASDAQ or any comparable system or, if not so reported, as
reported by any New York Stock Exchange member firm selected by the
Administration Agent for such purpose.
"COLLATERAL" means collateral subject to the Collateral
Documents.
The "COLLATERAL TEST" will be deemed to have been met for purposes of
Section 2.09 if either (i) there shall have been no sale or other
disposition by the Borrower of the capital stock of PCS and the Required
Banks shall not have notified the Borrower of their determination that
there has been a material decline in the value of the capital stock of PCS
or (ii) the capital stock of PCS shall have been sold for consideration
consisting in whole or in part of publicly traded securities held as
Collateral under the Loan Documents, and the aggregate Closing Price at the
date of determination of such Collateral is at least 200% of the aggregate
amount of the Credit Exposures at such date.
"COLLATERAL DOCUMENTS" means the Pledge Agreement, any additional
pledge agreements required to be delivered pursuant to the Loan Documents
and any other instruments or agreements executed pursuant to the
foregoing.
"COMMITMENT" means (i) with respect to each Bank listed in the
Commitment Schedule, the amount set forth opposite the name of such Bank in
the Commitment Schedule as its Commitment and (ii) with respect to each
Assignee which becomes a Bank pursuant to Section 9.06(c), the amount of
the Commitment thereby assumed by it, in each case as such amount may be
changed from time to time pursuant to Sections 2.09 and 9.06(c).
"COMMITMENT SCHEDULE" means the Schedule attached hereto
identified as such.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of expenditures by the Borrower and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction permitted by Section 5.09.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"CONSOLIDATED EBITDA" for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining Consolidated Net Income
for such period, the aggregate amount of (i) Consolidated Interest Charges,
(ii) provision for income taxes, (iii) depreciation and amortization and
(iv) charges incurred in connection with store closings not in excess of
$48,000,000 and $20,000,000 during the fiscal years ending on or closest to
February 28, 2000 and February 28, 2001, respectively; provided that if
there shall have been an acquisition or disposition of operations during
such period, Consolidated EBITDA shall be calculated on a pro forma basis
giving effect thereto as if such acquisition or disposition had occurred on
the first day of such period.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the aggregate
amount of interest charges, whether expensed or capitalized, incurred or
accrued by the Borrower and its Consolidated Subsidiaries during such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries (exclusive of (a)
any non-cash loss on account of a sale of any drugstore and (b)
extraordinary items of gain or loss and other non-recurring items of gain
or loss, but only to the extent that such non-recurring items of loss do
not (i) involve any cash expenditure by the Borrower during such period or
any future period or (ii) exceed $50,000,000 in any fiscal year),
determined on a consolidated basis for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
(less applicable reserves and other properly deductible items) which under
generally accepted accounting principles would be included on a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries after deducting therefrom (i) all liabilities and liability
items, including amounts in respect of obligations or guarantees of
obligations under leases, which under generally accepted accounting
principles would be included on such balance sheet, except Funded Debt,
capital stock and surplus, surplus reserves and provisions for deferred
income taxes, and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included
on such consolidated balance sheet.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"CONSOLIDATED RENT" means, for any period, the consolidated rental
expense of the Borrower and its Consolidated Subsidiaries for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"CREDIT EXPOSURE" means, with respect to any Bank, the amount of such
Bank's Commitment, if still in existence, or the aggregate outstanding
principal amount of such Bank's Loans, if its Commitment is not in
existence.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles,
(v) all non-contingent obligations (and, for purposes of Section 5.10 and
the definitions of Material Debt and Material Financial Obligations, all
contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and
(vii) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including
any option with respect to any of the foregoing transactions) or any
combination of the foregoing transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Administrative Agent.
"DRUGSTORE.COM" means drugstore.com, inc., a Delaware
corporation, and its successors.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings
in dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office
by notice to the Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan that bears interest at a Euro-Dollar
Rate pursuant to the Notice of Borrowing or a Notice of Interest
Rate Election.
"EURO-DOLLAR MARGIN" has the meaning specified in the Pricing
Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.06(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.14.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of
January 21, 1999 among the Borrower, the banks party thereto and Morgan
Guaranty Trust Company of New York, as administrative agent.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Administrative Agent.
"FIXED CHARGE COVERAGE RATIO" means at any date, the ratio of (i)
Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated Interest
Charges plus Consolidated Rent, in each case for the period of four
consecutive fiscal quarters most recently ended on or prior to such date.
"FUNDED DEBT" means any Debt maturing more than one year after the
date of determination thereof and any Debt, regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include:
(a) any Debt for the payment, redemption or satisfaction of which
money (or evidences of indebtedness, if permitted under the instrument
creating such indebtedness) in the necessary amount shall have been
deposited in trust with a trustee or proper depository either at or
before maturity or redemption date thereof; or
(b) guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising, in the ordinary
course of business, out of installment or conditional sales to or by,
or transactions involving title retention with, distributors, dealers
or other customers of merchandise, equipment or services or guarantees
other than guarantees of indebtedness for borrowed money.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of
(i) all Loans which are Base Rate Loans at such time and (ii) all
Euro-Dollar Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Bank is converted to or made as a Base
Rate Loan pursuant to Article 8, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INDENTURES" means (i) the Indenture dated as of December 21, 1998
between the Borrower and Harris Trust and Savings Bank, as trustee, (ii)
the Indenture dated as of September 22, 1998 between the Borrower and
Harris Trust and Savings Bank, as trustee and (iii) the Indenture dated as
of August 1, 1993, between the Borrower and First Trust of New York,
National Association, as successor trustee.
"INFORMATION" means, collectively, (i) the information provided to
the Banks in connection with the waiver dated as of September 29, 1999 to
the Existing Credit Agreement and (ii) the information presented to the
Banks at meetings in New York City on October 4, 1999 and October 18, 1999
among the Borrower and certain financial institutions.
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in an applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter,
as the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) no Interest Period may end after the Maturity Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise. Any
repurchase by the Borrower of its own capital stock shall not constitute an
Investment for purposes of this Agreement. The amount of any Investment
shall be the original principal or capital amount thereof less all returns
of principal or equity thereon (and without adjustment by reason of the
financial condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal, to the fair market
value of such property at the time of such transfer or exchange.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease or other title retention agreement relating
to such asset.
"LOAN" means a Base Rate Loan or a Euro-Dollar Loan and "LOANS" means
Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Notes and the Collateral
Documents.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.06(b).
"LPG COMMITMENT" means the Commitment with Respect to Investment in
Rite Aid Corporation dated October 18, 1999 between the Borrower and Green
Equity Investors III.
"LPG TRANSACTION" means the purchase and sale of 3,000,000 shares of
8% Convertible Pay-In-Kind Preferred Stock of the Borrower for a purchase
price of $100.00 per share pursuant to the LPG Commitment.
"MATERIAL FINANCIAL OBLIGATIONS" means (i) a principal or face amount
of Debt (except Debt outstanding hereunder) and/or (ii) payment or
collateralization obligations in respect of Derivatives Obligations and/or
(iii) payment or collateralization obligations in respect of leases (other
than Capital Leases, which are Debt) of the Borrower and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"MATURITY DATE" means November 1, 2000.
"MORGAN PRO RATA EXPOSURE" means the $300,000,000 Demand Promissory
Note dated June 15, 1999 issued by the Borrower to the order of J.P. Morgan
Ventures Corporation.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"NET CASH PROCEEDS" means, with respect to any Reduction Event, an
amount equal to the cash proceeds received by the Borrower or any of its
Subsidiaries from or in respect of such Reduction Event (including, when
received, any cash proceeds received as income or other proceeds of any
noncash proceeds of any Asset Sale), less (x) any investment banking and
underwriting fees and any other expenses reasonably incurred by such Person
in respect of such Reduction Event, (y) if such Reduction Event is an Asset
Sale, (I) the amount of any Debt secured by a Lien on any asset disposed of
in such Asset Sale and discharged from the proceeds thereof and (II) any
taxes actually paid or to be payable by such Person (as estimated in good
faith by the senior financial or accounting officer of the Borrower, giving
effect to the overall tax position of the Borrower) in respect of such
Asset Sale and (z) if such Reduction Event is an Asset Sale, the portion
(which may be all) of such Net Cash Proceeds required by the terms of the
Pro Rata Facilities to be applied to the prepayment of loans and/or
reduction of commitments thereunder.
"1996 LOAN DOCUMENTS" means the "Loan Documents" as defined in the Pro
Rata Credit Agreement.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "NOTE" means any one of such promissory notes issued
hereunder.
"NOTICE OF BORROWING" means a Notice of Borrowing (as defined in
Section 2.02).
"OCTOBER SPECIAL CHARGES" means the special charges in the aggregate
pre-tax amount of $660,000,000 reflected in the Information.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PCS" means PCS Holding Corporation, a Delaware corporation, and its
successors.
"PCS EVENT" means (i) the sale or other disposition of capital stock
of PCS (or of any non-cash proceeds thereof) or (ii) any sale, lease or
other disposition by PCS or any of its Subsidiaries of any asset which
would constitute an Asset Sale but for clause (i) of the definition of such
term.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as of the
date hereof between the Borrower and Morgan Guaranty Trust Company of New
York, as agent thereunder, in substantially the form of Exhibit E.
"PRICING SCHEDULE" means the Schedule attached hereto
identified as such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"PRO RATA CREDIT AGREEMENT" means the $1,000,000,000 Amended and
Restated Credit Agreement dated as of July 19, 1996 and amended and
restated as of October 25, 1999 among the Borrower, the banks listed
therein and Morgan Guaranty Trust Company of New York, as administrative
agent thereunder.
"PRO RATA FACILITIES" means, collectively, the Pro Rata Credit
Agreement, the Prudential Pro Rata Exposure and the Morgan Pro Rata
Exposure.
"PRUDENTIAL PRO RATA EXPOSURE" means the 7.30% Senior Secured Notes
due February 28, 2002 issued by Finco, Inc. and guaranteed by the Borrower.
"QUARTERLY DATE" means the last day of each Quarterly Period.
"QUARTERLY PERIOD" means a three-month period consisting of (i)
February, March and April, (ii) May, June and July, (iii) August, September
and October or (iv) November, December and January.
"REDUCTION EVENT" means the receipt on or after October 15, 1999 by
the Borrower or a Subsidiary of proceeds of (i) a PCS Event, (ii) a Capital
Markets Transaction or (iii) an Asset Sale.
"REFERENCE BANKS" means the principal London offices of Citibank,
N.A., Bank of America, N. A. and Morgan Guaranty Trust Company of New York.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Credit Exposures.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely
in shares of its capital stock) or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock (other than such payments in
connection with employee benefit plans in the ordinary course of business).
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in Section
5.09.
"SEC" means the Securities and Exchange Commission, or any Person
succeeding to its functions under the Securities Exchange Act of 1934, as
amended.
"SECURED DEBT" means Debt which is secured by a Lien on property of
the Borrower or any Subsidiary, but shall not include guarantees arising in
connection with the sale, discount, guarantee or pledge of notes, chattel
mortgages, leases, accounts receivable, trade acceptances and other papers
arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or
services.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 8% of the consolidated assets of the
Borrower and its Consolidated Subsidiaries at such time.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"SUPER MAJORITY BANKS" means at any time Banks having at least 90% of
the aggregate amount of the Credit Exposures.
"SYNTHETIC LEASE" means a lease which is treated as an operating
lease under generally accepted accounting principles but as ownership of
the leased asset by the lessee for purposes of the Internal Revenue Code.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial
paper rated at least A-1 by S&P (as defined in the Pricing Schedule) and
P-1 by Moody's (as defined in the Pricing Schedule), (iii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000,
(iv) repurchase agreements with respect to securities described in clause
(i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, provided in each case that
such Investment matures within one year from the date of acquisition
thereof by the Borrower or a Subsidiary or (v) money market mutual funds at
least 90% the assets of which are held in Investments referred to in
clauses (i) through (iv) above (except that the maturities of certain
Investments held by any such money market funds may exceed one year so long
as the dollar-weighted average life of the Investments of such money market
mutual fund is less than one year).
"TOTAL CAPITAL" means, at any date, the sum of Consolidated Debt and
Consolidated Net Worth, each determined as of such date.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii)
the fair market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but unpaid contributions),
all determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. (a) Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared
in accordance with generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the
most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Administrative Agent that the Borrower wishes to
amend any covenant in Article 5 to eliminate the effect of any change in
generally accepted accounting principles on the operation of such covenant
(or if the Administrative Agent notifies the Borrower that the Required
Banks wish to amend Article 5 for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant
change in generally accepted accounting principles became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
(b) All financial determinations hereunder shall be adjusted to
eliminate the effect of the October Special Charge for all fiscal periods
ended prior to the date hereof.
SECTION 1.03. Other Definitional Provisions. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01
may, unless the context otherwise requires, be used in the singular or
plural depending on the reference. "Include" or "includes" and "including"
shall be deemed to be followed by "without limitation" whether or not they
are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing and other means of
reproducing words in a visible form. References to any agreement or
contract are to such agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and
thereof; provided that amendments, modifications or supplements to the 1996
Loan Documents or the Pro Rata Facilities shall be effective for purposes
of references thereto in the Loan Documents only if such amendments are
consented to in writing for such purpose by the Super-Majority Banks.
References to any Person include the successors and assigns of such Person.
References "from" or "through" any date mean, unless otherwise specified,
"from and including" or "through and including", respectively.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Availability Period
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower from time to time in amounts
requested by the Borrower in accordance with the terms of this Agreement,
provided that the aggregate principal amount of Loans made by such Bank
shall not exceed the amount of its Commitment. Each Borrowing under this
Section shall be in an aggregate principal amount of $10,000,000 or any
larger multiple of $1,000,000 (except that any such Borrowing may be in the
aggregate amount of the unused Commitments) and shall be made from the
several Banks ratably in proportion to their respective Commitments. The
Commitments are not revolving in nature, and amounts repaid or prepaid may
not be reborrowed. The Commitments shall terminate at the close of business
on the last day of the Availability Period (or at the close of business on
October 29, 1999, if the Closing Date shall not have occurred on or prior
to such date).
SECTION 2.02. Notice of Borrowing. The Borrower shall give the
Administrative Agent notice (a "NOTICE OF BORROWING") not later than 10:30
A.M. (New York City time) on (x) the date of each Base Rate Borrowing and
(y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(d) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.03. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Bank of the contents thereof, and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing, in Federal or other
funds immediately available in New York City, to the Administrative Agent
at its address referred to in Section 9.01. Unless the Administrative Agent
determines that any applicable condition specified in Article 3 has not
been satisfied, the Administrative Agent will make the funds so received
from the Banks available to the Borrower at the Administrative Agent's
aforesaid address.
(c) Each Bank shall apply a portion of the Loan(s) to be made by it on
the Closing Date equal to the outstanding principal amount of its loans
under the Existing Credit Agreement as an extension and renewal of such
outstanding loans, and only an amount equal to the excess, if any, of its
share of the Borrowing on the Closing Date over the amount of its
outstanding loans under the Existing Credit Agreement shall be made
available by such Bank to the Administrative Agent as provided in
subsection (b).
(d) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing,
the Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.03 and the
Administrative Agent may, in reliance upon such assumption, make available
to the Borrower on such date a corresponding amount. If and to the extent
that such Bank shall not have so made such share available to the
Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.06 and (ii) in the case of such
Bank, the Federal Funds Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.04. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Loans of a particular type be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount
of such Loans. Each such Note shall be in substantially the form of Exhibit
A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference in this
Agreement to the "NOTE" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(d), the
Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.05. Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable, on the Maturity Date.
SECTION 2.06. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to
the sum of the Base Rate Margin plus the Base Rate for such day. Such
interest shall be payable monthly in arrears on the last day of each
calendar month and on the Maturity Date and, with respect to the principal
amount of any Base Rate Loan that is prepaid or converted to a Euro-Dollar
Loan, on the date of such prepayment or conversion. Any overdue principal
of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the applicable London Interbank Offered Rate for
such Interest Period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before
the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro-Dollar Loan of such Reference Bank to
which such Interest Period is to apply and for a period of time comparable
to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan and (ii) the Euro-Dollar Margin for such day plus
the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar
Business Days, then for such other period of time not longer than six
months as the Administrative Agent may select) deposits in dollars in an
amount approximately equal to such overdue payment due to each of the
Reference Banks are offered to such Reference Bank in the London interbank
market for the applicable period determined as provided above by (y) 1.00
minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per
annum equal to the sum of 2% plus the rate applicable to Base Rate Loans
for such day).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If
any Reference Bank does not furnish a timely quotation, the Administrative
Agent shall determine the relevant interest rate on the basis of the
quotation or quotations furnished by the remaining Reference Bank or Banks
or, if none of such quotations is available on a timely basis, the
provisions of Section 8.01 shall apply.
SECTION 2.07. Method of Electing Interest Rates. (a) The Loans
included in each Group of Loans shall bear interest initially at the type
of rate specified by the Borrower in the Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject to Section 2.07(d) and
the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert such Loans to Euro-Dollar Loans as of any
Euro-Dollar Business Day; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans as of any Domestic
Business Day or may elect to continue such Loans as Euro-Dollar
Loans, as of the end of any Interest Period applicable thereto,
for an additional Interest Period, subject to Section 2.12 if any
such conversion is effective on any day other than the last day
of an Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF
INTEREST RATE ELECTION") to the Administrative Agent not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective. A
Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies,
and the remaining portion to which it does not apply, are each at least
$100,000,000 (unless such portion is comprised of Base Rate Loans). If no
such notice is timely received before the end of an Interest Period for any
Group of Euro-Dollar Loans, the Borrower shall be deemed to have elected
that such Group of Loans be converted to Base Rate Loans at the end of such
Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of Section 2.07(a);
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if the Loans resulting from such conversion are
to be Euro-Dollar Loans, the duration of the next succeeding Interest
Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for
an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to Section 2.07(a), the Administrative Agent shall
notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amount of any Group of Euro-Dollar
Loans created or continued as a result of such election would be less than
$100,000,000 or (ii) a Default shall have occurred and be continuing when
the Borrower delivers notice of such election to the Administrative Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such
date on the principal amount being converted.
SECTION 2.08. Fees. (a) Participation Fees. On the Closing Date, the
Borrower shall pay to the Administrative Agent for the account of each Bank
a participation fee in an amount equal to the sum of (i) 0.50% of the
amount of such Bank's Commitment plus (ii) 0.25% of the excess, if any, of
the amount (if any) that such Bank committed to provide to the Borrower
during the syndication of this Agreement (whether or not accepted by the
Borrower) over the amount of the commitment of such Bank under the Existing
Credit Agreement.
(b) Commitment Fees. The Borrower shall pay to the Agent for the
account of the Banks ratably a commitment fee accruing at the rate of 0.50%
per annum on the daily unused amount of the Commitments. Accrued commitment
fees shall be payable upon the date of termination of the Commitments in
their entirety.
SECTION 2.09. Reduction Events; Mandatory Prepayments and Commitment
Reductions. (a) In the event that the Borrower or any of its Subsidiaries
shall at any time, or from time to time, receive any Net Cash Proceeds of
any Reduction Event, (x) the Borrower shall, not later than the Domestic
Business Day following the date of receipt of such Net Cash Proceeds,
notify the Administrative Agent of such fact and of the amount of such Net
Cash Proceeds, (y) the Borrower shall, not later than the Domestic Business
Day following the date of receipt of such Net Cash Proceeds, cause the same
to be transferred to the Administrative Agent to be held in an escrow
account pending application in accordance with the provisions of this
Agreement and (z) the Borrower shall apply an amount equal to the largest
multiple of $1,000,000 which does not exceed the amount of such Net Cash
Proceeds to the ratable reduction of the Credit Exposures; provided that
(i) if the amount of the Net Cash Proceeds in respect of any
Reduction Event is less than $5,000,000, then, unless the Required
Banks otherwise elect, the application thereof shall be deferred until
receipt of proceeds such that, together with all other such amounts
received and not previously applied, the amount of such Net Cash
Proceeds is equal to at least $5,000,000;
(ii) so long as the Collateral Test would be met after giving
effect to any such election, each Bank shall have the right,
exercisable by notice to such effect to the Administrative Agent not
less than two Euro-Dollar Business Days prior to the date of any
prepayment required pursuant to this Section by reason of a Capital
Markets Transaction, to decline to accept the portion of such
prepayment otherwise allocable to the Loans of such Bank, in which
case the Loans of such Bank shall not be prepaid and the portion of
the Net Cash Proceeds of such Capital Markets Transaction which would
otherwise have been applied to the prepayment of the Loans of such
Bank shall instead be available for application in accordance with the
Pro Rata Facilities or, if the Pro Rata Facilities shall have been
prepaid in full and the commitments thereunder shall have been
terminated, such portion shall be returned to the Borrower. Any such
election shall be made by each Bank individually and in its sole
discretion, and no such election with respect to any particular
prepayment required hereunder shall be applicable to any subsequent
prepayment. The absence of a timely notice as contemplated by this
paragraph shall constitute an election to receive the prepayment in
question. In the event a Bank elects to decline one or more
prepayments of its Loans, the aggregate principal amount of its Loans
which would otherwise have been so prepaid shall bear additional
interest, payable quarterly in arrears on each Quarterly Date, at the
rate of 0.25% per annum;
(iii) Net Cash Proceeds applied to the Credit Exposures pursuant
to this Section shall be applied, FIRST, to reduce ratably the unused
amount of the Commitments and, SECOND, if the Commitments shall have
terminated or been fully utilized, to the ratable prepayment of the
Loans;
(iv) any reduction of the Commitments hereunder shall be
effective on the Domestic Business Day following the date of receipt
of the related Net Cash Proceeds, and any required prepayment of the
Loans shall be made on the third Euro-Dollar Business Day following
the date of receipt of such Net Cash Proceeds; and
(v) the ratable allocation among the Banks contemplated by this
Section 2.09 shall be done on a basis which disregards the effect of
any election by a Bank to decline to accept a prepayment of its Loans
pursuant to Section 2.09(a)(ii) above.
(b) Upon receipt from the Borrower of a notice pursuant to Section
2.09(a)(y), the Administrative Agent will promptly notify each Bank of the
contents thereof, and of the date of the related reduction required
hereunder. Any required prepayment shall be made together with accrued
interest on the amount prepaid, and shall be applied first to the Group of
Base Rate Loans and then to such Group or Groups of outstanding Euro-Dollar
Loans as the Borrower may elect in such notice, or failing such election as
the Administrative Agent may determine in its discretion.
(c) Amounts held by the Administrative Agent in escrow pending
application as contemplated by this Section 2.09 shall be invested upon the
instruction of the Borrower in Temporary Cash Investments for the account
of the Borrower.
(d) It is expressly understood and agreed that the provisions of this
Section 2.09 are not intended to, and do not, create a Lien in any Net Cash
Proceeds (except to the extent the same represent proceeds of Collateral).
(e) Net Cash Proceeds of a Reduction Event received by the Borrower or
a Subsidiary prior to the Closing Date shall be deemed for purposes of this
Section to have been received on the Closing Date.
SECTION 2.10. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Loans to Section 2.12 and so long as no loans are outstanding
under the Pro Rata Credit Agreement and the commitments thereunder have
been terminated, the Borrower may (i) upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Base Rate Borrowing or
(ii) upon at least three Euro-Business Days' notice to the Administrative
Agent, prepay any Euro-Dollar Borrowing, in each case in whole at any time,
or from time to time in part in amounts aggregating $10,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the
several Banks included in such Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.11. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City,
to the Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Base Rate Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If and
to the extent that the Borrower shall not have so made such payment, each
Bank shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal
Funds Rate.
SECTION 2.12. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article 2, 6 or
8 or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to
Section 2.06(c), or if the Borrower fails to borrow, prepay, continue or
convert any Euro-Dollar Loans after notice has been given to any Bank in
accordance with Section 2.03(a), 2.07(c), 2.09(b) or 2.10(b), the Borrower
shall reimburse each Bank within 15 days after demand for any resulting
loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment
or failure to borrow, prepay, continue or convert, provided that such Bank
shall have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
clearly demonstrable error.
SECTION 2.13. Computation of Interest. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest
and fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding
the last day).
SECTION 2.14. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Bank at a rate per annum determined by such Bank up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered
Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii)
the applicable London Interbank Offered Rate. Any Bank wishing to require
payment of such additional interest (x) shall so notify the Borrower and
the Administrative Agent, in which case such additional interest on the
Euro-Dollar Loans of such Bank shall be payable to such Bank at the place
indicated in such notice with respect to each Interest Period commencing at
least three Euro-Dollar Business Days after the giving of such notice, and
(y) shall notify the Borrower at least five Euro-Dollar Business Days prior
to each date on which interest is payable on the Euro-Dollar Loans of the
amount then due it under this Section.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category
of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents).
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing Date. The obligation of any Bank to make a Loan
on the Closing Date is subject to the satisfaction of the following
conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02;
(b) the fact that, immediately after such Borrowing, no Default shall
have occurred and be continuing;
(c) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true in all material respects on and
as of the date of such Borrowing;
(d) receipt by the Administrative Agent for the account of each Bank
of a duly executed Note dated on or before the Closing Date complying with
the provisions of Section 2.04;
(e) receipt by the Administrative Agent of duly executed counterparts
of the Pledge Agreement;
(f) receipt by the Administrative Agent of opinions of (i) Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel for the Borrower,
substantially in the form of Exhibit B-1 hereto, and (ii) Elliot S. Gerson,
General Counsel of the Borrower, substantially in the form of Exhibit B-2
hereto, and covering in each case such additional matters relating to the
transactions contemplated hereby as the Required Banks may be reasonably
request;
(g) receipt by the Administrative Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Administrative Agent, substantially in
the form of Exhibit C hereto and covering such additional matters relating
to the transactions contemplated hereby as the Required Banks may
reasonably request;
(h) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement, the Pledge Agreement and
the Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agent;
(i) receipt by the Administrative Agent of evidence satisfactory to it
that the Borrower shall have paid all participation fees payable pursuant
to Section 2.08;
(j) receipt by the Administrative Agent of evidence satisfactory to it
that all loans outstanding under the Existing Credit Agreement shall have
been renewed and extended hereunder and that all interest and fees accrued
under the Existing Credit Agreement to but excluding the Closing Date and
all other amounts (if any) then due and payable by the Borrower thereunder
shall have been paid in full;
(k) receipt by the Administrative Agent of evidence satisfactory to it
that the LPG Transaction shall have been consummated in accordance with the
LPG Commitment, and the Borrower shall have received $300,000,000 gross
cash proceeds pursuant thereto; and
(l) receipt by the Administrative Agent of evidence satisfactory to it
that the Pro Rata Credit Agreement shall have become effective in
accordance with its terms without waiver of any material condition
specified therein.
On the Closing Date, the commitments under the Existing Credit Agreement
shall terminate automatically, without any further action by any party to
the Existing Credit Agreement. Upon receipt of its Note, each Bank which is
a party to the Existing Credit Agreement shall mark the note issued to it
pursuant to the Existing Credit Agreement "renewed".
SECTION 3.02. Subsequent Borrowings. The obligation of any Bank to
make a Loan on the occasion of any Borrowing subsequent to the Closing Date
is subject to the satisfaction of the conditions specified in clauses (a),
(b) and (c) of Section 3.01. Each Borrowing hereunder shall be deemed to be
a representation and warranty by the Borrower on the date of such Borrowing
as to the facts specified in clauses (b) and (c) of Section 3.01.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of
the Loan Documents are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement or instrument evidencing or
governing Debt of the Borrower or any Subsidiary or any other material
agreement, instrument, judgment, injunction, order or decree binding upon
the Borrower or any Subsidiary or result in the creation or imposition of
any Lien on any asset of the Borrower or any Subsidiary pursuant to any
such agreement, instrument, judgment, injunction, order or decree (other
than the Liens created by the Pledge Agreement).
SECTION 4.03. Binding Effect. This Agreement and the Pledge Agreement
each constitutes a valid and binding agreement of the Borrower and each
Note, when executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms.
SECTION 4.04. Financial Information. Except as disclosed in the
Information:
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 27, 1999 and the related
consolidated statements of income and cash flows for the fiscal year then
ended, reported on by KPMG Peat Marwick LLP and set forth in the Borrower's
1999 Form 10-K, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of May 29, 1999 and the related consolidated
statements of income and cash flows for the fiscal period then ended, set
forth in the Borrower's quarterly report on Form 10-Q for the fiscal
quarter then ended, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements
referred to in subsection (a), the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal period,
subject to normal year-end adjustments.
(c) Since May 29, 1999, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement, including the Information, do not and will not contain any
untrue statement of material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
The Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect the business, operations or condition,
financial or otherwise, of the Borrower and its Subsidiaries or the
Borrower's ability to perform its obligations under this Agreement.
SECTION 4.06. Litigation. Except as disclosed in the Borrower's 1999
Form 10-K, there is no action, suit or proceeding pending against, or to
the knowledge of the Borrower threatened against or affecting, the Borrower
or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect
the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries or which in
any manner draws into question the validity or enforceability of any Loan
Document.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect
of any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns, and the Borrower and its
Significant Subsidiaries have filed all other material tax returns, which
are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Consolidated Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of
the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Significant Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.10. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the
Borrower and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction
in the level of or change in the nature of operations conducted thereat,
any costs or liabilities in connection with off-site disposal of wastes or
hazardous substances, and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.11. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of
the Borrower and each of its Subsidiaries (including those areas affected
by suppliers and vendors) that could be adversely affected by the "YEAR
2000 PROBLEM") (that is, the risk that computer applications used by it or
any of its Subsidiaries (or their respective supplier and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented such plan in accordance with
such timetable. The Borrower reasonably believes that all computer
applications that are material to the business or operations of the
Borrower or any of its Subsidiaries will on a timely basis be able to
perform properly date-sensitive functions for all dates before and from and
after January 1, 2000, except to the extent that a failure to do so could
not reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.12. Pledge Agreement. The representations and warranties of
the Borrower set forth in the Pledge Agreement are true and correct.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days (or within
such longer period of time, not greater than 120 days, to which the SEC may
extend the filing deadline for the Borrower's Annual Report on Form 10-K)
after the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on without material
qualification by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days (or (x) in
the case of the fiscal quarter most recently ended prior to the date
hereof, within 65 days or (y) in the case of any subsequent fiscal quarter,
within such longer period of time, not greater than 60 days, to which the
SEC may extend the filing deadline for the Borrower's Quarterly Report on
Form 10-Q) after the end of each of the first three quarters of each fiscal
year of the Borrower, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and for
the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.08 to 5.15, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the SEC;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any
such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer, any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives notice of withdrawal
from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
Information required to be delivered pursuant to Section 5.01(a),
5.01(b), 5.01(f) or 5.01(g) above shall be deemed to have been delivered on
the date on which the Borrower provides notice to the Banks that such
information has been posted on the Borrower's website on the Internet at
the website address listed on the signature pages hereof, at
sec.gov/edaux/searches.htm or at another website identified in such notice
and accessible by the Banks without charge; provided that (i) such notice
may be included in a certificate delivered pursuant to Section 5.01(c) and
(ii) the Borrower shall deliver paper copies of the information referred to
in Section 5.01(a), 5.01(b), 5.01(f) or 5.01(g) to any Bank which requests
such delivery.
SECTION 5.02. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, pay and discharge, as the same shall
become due and payable, (i) all material claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons prior
to the time such claims or demands give rise to a Lien upon any of its
property or assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or assets, except
where any of the items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Borrower or such Subsidiary, as
the case may be, shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves, if any, for
the accrual of any such items.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own
name) with financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute engaged
in the same or a similar business; and will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in this Agreement, the Borrower will
continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Borrower and
its Significant Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Significant Subsidiary (except where
such Significant Subsidiary merges into the Borrower or any other
Subsidiary) to preserve, renew and keep in full force and effect their
respective legal existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a material
adverse effect on the business, financial position or results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and
will permit, and will cause each Subsidiary to permit, representatives of
any Bank at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often
as may reasonably be desired.
SECTION 5.07. Restriction on Other Agreements. The Borrower will not,
and will not permit any Subsidiary to, enter into any agreement (other than
the Loan Documents and the 1996 Loan Documents) which imposes a limitation
on incurrence by the Borrower and its Subsidiaries of Liens that is more
restrictive than the limitation on Liens set forth in the Indentures (other
than agreements with respect to Debt secured by Liens permitted by Section
5.10(a) containing restrictions on the ability to transfer or grant Liens
on the assets securing such Debt and other than customary restrictions
contained in purchase and sale agreements limiting the transfer of the
subject assets pending closing and customary non-assignment provisions in
leases and other contracts entered into in the ordinary course of business)
or which imposes other covenants more restrictive than those set forth in
this Agreement.
SECTION 5.08. Restriction on Debt of Subsidiaries. The Borrower will
not permit any Subsidiary to create, issue, incur, assume, or in any other
way become liable for any unsecured Debt unless immediately prior thereto
the Borrower would be entitled under Section 5.10(e) to create Secured Debt
not specifically permitted under Section 5.10 but for subsection (e)
thereof in an amount equal to such Debt; provided that the foregoing
restriction shall not prevent (i) any Subsidiary from becoming liable to
the Borrower or to a Wholly-Owned Consolidated Subsidiary for Debt or (ii)
the extension, renewal or refunding of any Debt of any Subsidiary so long
as Consolidated Debt is not thereby increased.
SECTION 5.09. Restriction on Sales with Leases Back. Except for a
sale or transfer by a Subsidiary to the Borrower or a Wholly-Owned
Consolidated Subsidiary, the Borrower will not, and will not permit any
Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail
store or equipment now or hereafter owned and operated by the Borrower or a
Subsidiary, with the intention that the Borrower or any Subsidiary take
back a lease thereof, except a lease for a period, including renewals, not
exceeding 24 months, by the end of which period it is intended that the use
of such property or equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "SALE AND LEASEBACK
TRANSACTION"); provided that, notwithstanding the foregoing, the Borrower
or any Subsidiary may enter into a Sale and Leaseback Transaction if the
Borrower or a Subsidiary would be entitled under Section 5.10(e) to create
Secured Debt not specifically permitted under Section 5.10 but for Section
5.10(e) in an amount equal to the Attributable Debt respecting such Sale
and Leaseback Transaction; provided further that, notwithstanding the
foregoing, the Borrower or any Subsidiary may enter into a Sale and
Leaseback Transaction if entered into in respect of property acquired by
the Borrower or a Subsidiary if such Sale and Leaseback Transaction is
entered into within 24 months from the date of such acquisition; and
provided still further that, notwithstanding the foregoing, the Borrower or
any Subsidiary may enter into a Sale and Leaseback Transaction so long as
the Net Cash Proceeds thereof are applied as contemplated by Section 2.09
hereof.
SECTION 5.10. Restriction on Liens. The Borrower will not, and will
not permit any Subsidiary to, create, issue, incur, assume or guarantee any
Secured Debt; provided that the foregoing covenant shall not apply to the
following:
(a) (i) Any Lien on any property acquired or constructed by the
Borrower or a Subsidiary and created contemporaneously with, or within 24
months after, such acquisition or the completion of such construction and
commencement of full operation of such property, whichever is later, to
secure or provide for the payment of any part of the purchase or
construction price of such property, or (ii) the acquisition by the
Borrower or a Subsidiary of property subject to any Lien upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Borrower or such Subsidiary, or (iii) any conditional sales agreement or
other title retention agreement with respect to any property hereafter
acquired; provided that the Lien does not spread to other property except
unimproved real property previously owned upon which any new construction
has taken place and subsequent additions to such acquired or constructed
property;
(b) Any Lien created for the sole purpose of extending, renewing or
refunding, in whole or part, any Lien permitted by this Section 5.10 or any
Lien securing the Debt of the Borrower or of any Subsidiary on the date of
this Agreement or of a corporation at the time such corporation becomes a
Subsidiary, or any extensions, renewals or refundings of any such Lien;
provided that the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such extension,
renewal or refunding and that such extension, renewal or refunding Lien
shall be limited to all or that part of the same property which secured the
Debt so extended, renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the Borrower or a
Wholly-Owned Consolidated Subsidiary;
(d) Any Lien created by the Loan Documents or the 1996 Loan Documents;
and
(e) Secured Debt of the Borrower and its Subsidiaries which would
otherwise be prohibited by the foregoing restrictions (not including
Secured Debt permitted to be secured under subsections (a) through (d)
above) so long as the sum of any such Secured Debt hereafter incurred and
outstanding at the time plus Attributable Debt of the Borrower and any
Subsidiaries in respect of Sale and Leaseback Transactions hereafter
entered into and outstanding at the time (excluding Attributable Debt
incurred in respect of any Sale and Leaseback Transaction (i) entered into
in respect of property acquired by the Borrower or a Subsidiary not more
than 24 months prior to the date such Sale and Leaseback Transaction is
entered into or (ii) if the Borrower, within 120 days before or after such
Sale and Leaseback Transaction is entered into applies an amount equal to
the greater of (A) the net proceeds of the sale of the property so sold and
leased back or (B) the fair market value of such property at the date such
arrangement is entered into to the retirement of Secured Debt (other than
at maturity or pursuant to any mandatory payment provision) or to reduction
of the Commitments) plus unsecured Debt of any Subsidiary hereafter
incurred and outstanding at the time (excluding unsecured Debt incurred
through the extension, renewal or refunding of Debt of such Subsidiary
where Consolidated Debt was not thereby increased and excluding any Debt
owed to the Borrower or a Wholly-Owned Consolidated Subsidiary) does not at
the time exceed 5% of Consolidated Net Tangible Assets.
SECTION 5.11. Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures for any period set forth below shall not
exceed the amount set forth below opposite such period:
FISCAL YEAR ENDING ON AMOUNT
OR CLOSEST TO
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
SECTION 5.12. Capitalization Leverage Ratio. At no time during any
period set forth below shall the ratio of (i) Consolidated Debt at such
time to (ii) Total Capital at such time, exceed the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 0.635
February 29, 2000 0.635
May 31, 2000 and 0.620
thereafter
SECTION 5.13. Cash Flow Leverage Ratio. At no time during any period
set forth below shall the ratio of (i) Consolidated Debt at such time to
(ii) Consolidated EBITDA for the four consecutive fiscal quarters then most
recently ended at or prior to such time, exceed the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 6.30
February 29, 2000 6.00
May 31, 2000 5.75
August 31, 2000 4.75
SECTION 5.14. Fixed Charge Coverage. At no time during any period set
forth below shall the Fixed Charge Coverage Ratio be less than the ratio
set forth below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 1.35
February 29, 2000 1.35
May 31, 2000 1.35
August 31, 2000 1.45
SECTION 5.15. Limitation on Investments and Acquisitions. (a) Neither
the Borrower nor any Consolidated Subsidiary will make or acquire any
Investment in any Person other than:
(i) Investments in Consolidated Subsidiaries; provided, that
Investments (exclusive of inter-company payables owing to the Borrower
or a Subsidiary arising from cash management transactions in the
ordinary course of business) in PCS, whether existing on the date
hereof or hereafter made, may be made only by the Borrower and only in
the form of a contribution to the capital of PCS and without issuance
of additional shares of capital stock therefor, and provided further
that no such Investment may be made in any Subsidiary of PCS except by
PCS or another Subsidiary of PCS;
(ii) Temporary Cash Investments;
(iii) Investments received as consideration for sale or other
disposition of the capital stock of PCS or drugstore.com permitted by
Section 5.16;
(iv) Investments in drugstore.com existing on the date hereof;
and
(v) Any Investment not otherwise permitted by the foregoing
clauses of this Section if, immediately after such Investment is made
or acquired, the aggregate net book value of all Investments permitted
by this clause (c) does not exceed 10% of Consolidated Net Worth.
(b) The Borrower will not, and will not permit any Subsidiary to,
consummate any Business Acquisition to the extent that the aggregate
consideration paid or payable by the Borrower or any Subsidiary in
connection with all such Business Acquisitions on or after the Closing Date
would exceed $15,000,000.
SECTION 5.16. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person,
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person or (iii) sell, lease or otherwise transfer
any Collateral to any other Person; provided that (x) the Borrower may
merge with another Person if (A) the Borrower is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no
Default shall have occurred and be continuing and (y) the Borrower may sell
or otherwise dispose of the capital stock of PCS or drugstore.com, in whole
but not in part, so long as the consideration therefor is not less than the
fair market value of such capital stock and shall consist solely of a
combination of cash and publicly traded securities payable and deliverable
at the closing of such sale.
SECTION 5.17. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower solely to repay commercial
paper maturing on or prior to the date of the related Borrowing hereunder
or to extend and renew loans outstanding under the Existing Credit
Agreement, the proceeds of which loans were used solely to repay commercial
paper (or to refund other borrowings the proceeds of which were used solely
to repay commercial paper), which commercial paper provided funds for the
payment of the purchase price of the capital stock of PCS. No such use of
proceeds will be, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "MARGIN STOCK"
within the meaning of Regulation U, other than publicly traded securities
issued to the Borrower in connection with the sale of the capital stock of
PCS. The Borrower will ensure that no such use of proceeds violates
Regulation T, U or X.
SECTION 5.18. Restricted Payments. After the date hereof, neither the
Borrower nor any Subsidiary will declare or make any Restricted Payment.
SECTION 5.19. Synthetic Leases. Neither the Borrower nor any
Subsidiary will enter into any Synthetic Lease if, after giving effect
thereto, the aggregate amount financed under all Synthetic Leases entered
into in any period of twelve consecutive calendar months commencing after
the date hereof would exceed $35,000,000.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan,
or shall fail to pay within five days of the due date thereof any interest,
fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform (i) any covenant
contained in Sections 5.08 to 5.19, inclusive or (ii) any covenant
contained in Section 3(b) or 5(b) of the Pledge Agreement;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in the Loan Documents (other than those covered by
clause (a) or (b) above) for 30 days after written notice thereof has been
given to the Borrower by the Administrative Agent at the request of any
Bank;
(d) any material representation, warranty, certification or statement
made (or deemed made) by the Borrower in any Loan Document or in any
certificate, financial statement or other document delivered pursuant to
any Loan Document shall prove to have been incorrect in any material
respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Financial Obligations or
enables (or, if such event or condition does not otherwise give rise to a
Default hereunder, which with the giving of notice or lapse of time or both
would enable) the holder of such Material Financial Obligations or any
Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Significant Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $5,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or to cause a trustee to be appointed to administer, any
Material Plan; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or
a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one or more members
of the ERISA Group to incur a current payment obligation in excess of
$25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a period
of 30 days;
(k) any Lien created by the Pledge Agreement shall at any time fail to
constitute a valid and (to the extent required by the Pledge Agreement)
perfected Lien on all of the Collateral purported to be subject thereto,
securing the obligations purported to be secured thereby, with the priority
required by the Loan Documents, or the Borrower shall so assert in writing;
or
(l) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the SEC under said Act) of 20% or more of the outstanding shares of
common stock of the Borrower; or, during any period of 12 consecutive
calendar months, individuals who were directors of the Borrower on the
first day of such period shall cease to constitute a majority of the board
of directors of the Borrower;
then, and in every such event, the Administrative Agent shall (i) if
requested by the Required Banks, by notice to the Borrower terminate the
Commitments (if still in existence) and they shall thereupon terminate, and
(ii) if requested by Banks holding Notes evidencing more than 50% in
aggregate principal amount of the Loans, by notice to the Borrower declare
the Notes (together with accrued interest thereon) to be, and the Notes
(together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to
the Borrower or any other act by the Administrative Agent or the Banks, the
Commitments (if still in existence) shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Administrative Agent by the terms
thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.02. Administrative Agent and Affiliates. Morgan Guaranty
Trust Company of New York shall have the same rights and powers under the
Loan Documents as any other Bank and may exercise or refrain from
exercising the same as though it were not the Administrative Agent, and
Morgan Guaranty Trust Company of New York and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of business
with the Borrower or any Subsidiary or affiliate of the Borrower as if it
were not the Administrative Agent.
SECTION 7.03. Action by Administrative Agent. The obligations of the
Administrative Agent under the Loan Documents are only those expressly set
forth therein. Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6 and in the Pledge
Agreement.
SECTION 7.04. Consultation with Experts. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Administrative Agent. Neither the
Administrative Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action
taken or not taken by it or any of them in connection herewith (i) with the
consent or at the request of the Required Banks (or such other number or
percentage of Banks as may be specified in the Loan Documents for
particular purposes) or (ii) in the absence of its or their own gross
negligence or willful misconduct. Neither the Administrative Agent nor any
of its affiliates nor any of their respective directors, officers, agents
or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made
in connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article 3,
except receipt of items required to be delivered to the Administrative
Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Administrative Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex or similar writing) believed
by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Credit Exposure, indemnify the Administrative Agent, its
affiliates and their respective directors, officers, agents and employees
(to the extent not reimbursed by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any
action under this Agreement.
SECTION 7.08. Successor Administrative Agent. The Administrative Agent
may resign at any time by giving notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the
right, with (so long as no Default shall have occurred and be continuing)
the consent of the Borrower, to appoint a successor Administrative Agent.
If no successor Administrative Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent gives notice of resignation, then
the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall be a commercial bank organized
or licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $50,000,000.
Upon the acceptance of its appointment as Administrative Agent by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of
the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under the Loan
Documents. After any retiring Administrative Agent's resignation hereunder
as Administrative Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.
SECTION 7.09. Administrative Agent's Fees. The Borrower shall pay to
the Administrative Agent for its own account fees in the amounts and at the
times previously agreed upon between the Borrower and the Administrative
Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are not being
offered to the Reference Banks in the London interbank market for such
Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Credit Exposures advise the Administrative Agent that the London
Interbank Offered Rate as determined by the Administrative Agent will
not adequately and fairly reflect the cost to such Banks of funding
their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies
the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligations of the Banks to make Euro-Dollar Loans, or to
continue or convert outstanding Loans as or into Euro-Dollar Loans, shall
be suspended, and each outstanding Euro-Dollar Loan shall be converted into
a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Agent at least two
Domestic Business Days before the date of any Euro-Dollar Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. (a) If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency
shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such
Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative
Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as
Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the
need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank.
(b) If such notice is given, each Euro-Dollar Loan of such Bank then
outstanding shall be converted to a Base Rate Loan either (a) on the last
day of the then current Interest Period applicable to such Euro-Dollar Loan
if such Bank may lawfully continue to maintain and fund such Loan as a
Euro-Dollar Loan to such day or (b) immediately if such Bank shall
determine that it may not lawfully continue to maintain and fund such Loan
as a Euro-Dollar Loan to such day. Interest and principal on any such Base
Rate Loan shall be payable on the same dates as, and on a pro rata basis
with, the interest and principal payable on the related Euro-Dollar Loans
of the other Banks.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
the date hereof, the adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any such requirement with respect to
which such Bank is entitled to compensation for the relevant Interest
Period under Section 2.14), special deposit, insurance assessment or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or on the London
interbank market any other condition affecting its Euro-Dollar Loans, its
Note or its obligation to make Euro-Dollar Loans and the result of any of
the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then,
within 15 days after demand by such Bank (with a copy to the Administrative
Agent), the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank
to be material, then from time to time, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
clearly demonstrable error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or
for the account of any Bank or the Administrative Agent hereunder or under
any Note shall be made free and clear of and without deduction for any and
all present or future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Bank and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each
Bank, taxes imposed on its income, and franchise or similar taxes imposed
on it, by the jurisdiction of such Bank's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or
under any Note to any Bank or the Administrative Agent, (i) the sum payable
shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 8.04) such Bank or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and
(iv) the Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 9.01, the original or a certified copy of a receipt
evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or otherwise with
respect to, any Loan Document (hereinafter referred to as "OTHER TAXES").
(c) The Borrower agrees to indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 8.04) paid by such Bank
or the Administrative Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 15 days from the
date such Bank or the Administrative Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank listed on the signature pages
hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Bank remains lawfully
able to do so), shall provide the Borrower with Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Bank is entitled to benefits
under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying
that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States. If
the form provided by a Bank at the time such Bank first becomes a party to
this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded
from "TAXES" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless
such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(a) with respect to Taxes imposed by the United States; provided,
however, that should a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate
or reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless
and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) Euro-Dollar Loans shall be made
instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the
other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Euro-Dollar Loans shall be applied to repay its Base Rate Loans
instead.
If such Bank notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist, the principal
amount of each such Base Rate Loan shall be converted into a Euro-Dollar
Loan on the first day of the next succeeding Interest Period applicable to
the related Euro-Dollar Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Administrative Agent, at its
address or telex number set forth on the signature pages hereof, (y) in the
case of any Bank, at its address or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address or telex number as such party may hereafter specify for the purpose
by notice to the Administrative Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when delivered at the address specified in this Section;
provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Administrative
Agent or any Bank in exercising any right, power or privilege under any
Loan Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies provided in the Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Administrative Agent,
including fees and disbursements of special counsel for the Administrative
Agent, in connection with the preparation and administration of the Loan
Documents, any waiver or consent thereunder or any amendment thereof or any
Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Administrative Agent and
each Bank, including fees and disbursements of counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Administrative Agent and each
Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of this Agreement or any
actual or proposed use of proceeds of Loans hereunder; provided that no
Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a
participation in a Note acquired pursuant to the foregoing arrangements may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a
direct creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Administrative Agent
are affected thereby, by the Administrative Agent); provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) increase or
decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation,
(ii) reduce the principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for termination of any
Commitment (iv) change Section 9.04 or (v) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or
the number of Banks, which shall be required for the Banks or any of them
to take any action under this Section or any other provision of this
Agreement; and provided further that no such amendment or waiver may modify
Section 2.09 (or the defined terms used therein) in a manner which (i)
increases the amount of Net Cash Proceeds available for application under
the Pro Rata Facilities or (ii) permits application of cash proceeds of
Collateral to a use other than payment of the Loans, in either case without
the written consent of all Banks.
(b) Any provision of any Collateral Document may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by
the Borrower and the Administrative Agent with the consent of the Required
Banks; provided that no such amendment or waiver shall, unless signed by
all the Banks, (i) alter in a manner adverse to the Banks the priorities
specified in Section 13 of the Pledge Agreement or (ii) effect or permit a
release of any of the Collateral under the Plege Agreement. Notwithstanding
the foregoing, Collateral shall be released from the Lien of the Pledge
Agreement from time to time as necessary to effect any sale of Collateral
permitted by the Loan Documents, and the Administrative Agent shall execute
and deliver all release documents reasonably requested to evidence such
release; provided that arrangements satisfactory to the Administrative
Agent shall have been made for application of the cash proceeds thereof in
accordance with Section 2.09 hereof and for the pledge of any non-cash
proceeds thereof pursuant to the Collateral Documents.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower and the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 9.05 without the consent
of the Participant. The Borrower agrees that each Participant shall, to the
extent provided in its participation agreement, be entitled to the benefits
of Article 8 with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall
be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of
its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit D
hereto executed by such Assignee and such transferor Bank, with (and
subject to) notice to, and the subscribed consent of, the Borrower, so long
as no Default shall have occurred and be continuing, and the Administrative
Agent (such consent of the Borrower and the Administrative Agent not to be
unreasonably withheld); provided that (i) if an Assignee is an affiliate of
such transferor Bank or is a Bank prior to giving effect to such
assignment, such notice shall be given but no such consent shall be
required. Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee, such Assignee
shall be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by
any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Administrative
Agent and the Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500.
If the Assignee is not incorporated under the laws of the United States of
America or a state thereof, it shall, prior to the first date on which
interest or fees are payable hereunder for its account, deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in
accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise
to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is
not relying upon any "MARGIN STOCK" (as defined in Regulation U) as
collateral in the extension of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.09. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: /s/ Richard Varmecky
---------------------------------------
Name: Richard Varmecky
Title: Senior Vice President - Finance
Address: 30 Hunter Lane
Camp Hill, PA 17011
Attention: Chief Financial Officer
Telephone No.: (717) 975-5750
Facsimile No.: (717) 975-3764
Website: www.riteaid.com
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Glenda Winter-Irving
----------------------------------
Name: Glenda Winter-Irving
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ Timothy Spanos
-----------------------------------
Name: Timothy Spanos
Title: Managing Director
CITIBANK, N.A.
By: /s/ Bradly I. Dietz
----------------------------------
Name: Bradly I. Dietz
Title: Vice President
BANK ONE, NA
(Main Office - Chicago)
By: /s/ Eve Drinis
----------------------------------
Name: Eve Drinis
Title: Assistant Vice President
ABN AMRO BANK N.V.
By: /s/ Louis K. McLinden Jr.
----------------------------------
Name: Louis K. McLinden Jr.
Title: Vice President
By: /s/ Jim Janorsky
----------------------------------
Name: Jim Janorsky
Title: Group Vice President
FIRST UNION NATIONAL BANK
By: /s/ Mark S. Supple
----------------------------------
Name: Mark S. Supple
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Brennan T. Danile
----------------------------------
Name: Brennan T. Danile
Title: Assistant Vice President
WACHOVIA BANK, N.A.
By: /s/ James McCreary
---------------------------------------------
Name: James McCreary
Title: Senior Vice President/Group Executive
BANK OF MONTREAL
By: /s/ Jeffrey McConnell
--------------------------------
Name: Jeffrey McConnell
Title: Director
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
--------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
COMMERZBANK AG, NEW YORK BRANCH
By: /s/ Sean M. Harrigan
--------------------------------
Name: Sean M. Harrigan
Title: Senior Vice President
FLEET NATIONAL BANK
By: /s/ Robert Storer
--------------------------------
Name: Robert Storer
Title: Senior Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Daniel Lolly
--------------------------------
Name: Daniel Lolly
Title: Assistant Vice President
MELLON BANK, N.A.
By: /s/ Richard Schaich
--------------------------------
Name: Richard Schaich
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Elliot Jaffre
--------------------------------
Name: Elliot Jaffre
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Timothy Streb
-------------------------------
Name: Timothy Streb
Title: Vice President
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Michael Swanson
-------------------------------
Name: Michael Swanson
Title: Authorized Signatory
HSBC BANK USA
By: /s/ Joseph Salonia
-------------------------------
Name: Joseph Salonia
Title: Vice President
AMSOUTH BANK
By: /s/ Darlene Chandler
-------------------------------
Name: Darlene Chandler
Title: Vice President
ARAB BANK, PLC GRAND CAYMAN
By: /s/ Emanuel Caravanos
------------------------------
Name: Emanuel Cravanos
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Howard Bascom Jr.
------------------------------
Name: Howard Bascom Jr.
Title: Vice President
ALLFIRST BANK, N.A.
By: /s/ Theodore Oswald
------------------------------
Name: Theodore Oswald
Title: Vice President
HIBERNIA NATIONAL BANK
By: /s/ Christopher Pitre
------------------------------
Name: Christopher Pitre
Title: Vice President
THE HUNTINGTON NATIONAL BANK
By: /s/ David Leger
------------------------------
Name: David Leger
Title: Senior Vice President
NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ Bruce Shearer
------------------------------
Name: Bruce Shearer
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Stephen Hunter
------------------------------
Name: Stephen Hunter
Title: Senior Vice President
THE NORTHERN TRUST COMPANY
By: /s/ Donald Dabisch
-----------------------------
Name: Donald Dabisch
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ C. Michael Garrido
----------------------------
Name: C. Michael Garrido
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By: /s/ David Wisdom
----------------------------
Name: David Wisdom
Title: Vice President
By:
---------------------------
Name:
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ M. R. Morron
---------------------------
Name: M. R. Morron
Title: Vice President
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By: /s/ Tim Miller
---------------------------
Name: Tim Miller
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Administrative Agent
By: /s/ Glenda Winter-Irving
---------------------------
Name: Glenda Winter-Irving
Title: Vice President
Address: 60 Wall Street
New York, New York
10260-0060
Attention: Loan Department
Telex number: 177615
COMMITMENT SCHEDULE
BANK COMMITMENT
- ---- ----------
Morgan Guaranty Trust Company of New York $ 73,000,000.00
Bank of America, N.A. 73,000,000.00
Citibank, N.A. 73,000,000.00
Bank One, NA (Main Office - Chicago) 73,000,000.00
ABN AMRO Bank N.V. 61,000,000.00
First Union National Bank 61,000,000.00
PNC Bank, National Association 61,000,000.00
Wachovia Bank, N.A. 61,000,000.00
Bank of Montreal 52,000,000.00
The Bank of Nova Scotia 52,000,000.00
Commerzbank AG, New York Branch 52,000,000.00
Fleet National Bank 52,000,000.00
KeyBank National Association 52,000,000.00
Mellon Bank, N.A. 52,000,000.00
U.S. Bank National Association 52,000,000.00
Union Bank of California, N.A. 49,000,000.00
Lehman Commercial Paper Inc. 44,000,000.00
HSBC Bank USA 44,000,000.00
AmSouth Bank 22,000,000.00
Arab Bank, PLC Grand Cayman 22,000,000.00
The Bank of New York 22,000,000.00
Allfirst Bank, N.A. 22,000,000.00
Hibernia National Bank 22,000,000.00
The Huntington National Bank 22,000,000.00
National City Bank of Pennsylvania 22,000,000.00
Norddeutsche Landesbank Girozentrale 22,000,000.00
The Northern Trust Company 22,000,000.00
The Sumitomo Bank, Limited 22,000,000.00
SunTrust Bank, Atlanta 22,000,000.00
Bank of Tokyo-Mitsubishi Trust Company 12,000,000.00
First Tennessee Bank National Association 9,000,000.00
--------------
TOTAL COMMITMENTS $ 1,300,000,000.00
PRICING SCHEDULE
The "BASE RATE MARGIN" and "EURO-DOLLAR MARGIN" for any day are the
respective percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day.
Status Level I Level II Level III
- -----------------------------------------------------------------------------
Base Rate Margin 1.00% 1.50% 2.00%
- -----------------------------------------------------------------------------
Euro-Dollar Margin 2.00% 2.50% 3.00%
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if (i) such date is on or after
May 1, 2000 and (ii) at such date, the Borrower's long-term debt is rated
BBB- or higher by S&P and Baa3 or higher by Moody's.
"LEVEL II STATUS" exists at any date if, at such date, (a) the
Borrower's long-term debt is rated BB+ or higher by S&P and Ba1 or higher
by Moody's and (b) Level I Status does not exist.
"LEVEL III STATUS" exists at any date if, at such date, no other
Status exists.
"MOODY'S" means Moody's Investors Service, Inc., or any successor to
its business of rating debt securities.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor to its business of rating
debt securities.
"STATUS" refers to the determination of which of Level I Status,
Level II Status or Level III Status exists at any date.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating assigned to
any other debt security of the Borrower shall be disregarded. The rating in
effect at any date is that in effect at the close of business on such date.
If Asset Sales generating Net Cash Proceeds of at least $500.0 million
(excluding the sale by the Borrower of certain of its assets to Longs Drug
Stores Corp. publicly announced prior to the date of this Agreement, but
including solely for purposes of this sentence a sale or other disposition
of capital stock of PCS) are not consummated by February 15, 2000, the
Euro-Dollar Margin and Base Rate Margin applicable for any day thereafter
shall be the Euro-Dollar Margin and Base Rate Margin, respectively, set
forth above for such day, plus, in each case, 0.50%.
EXHIBIT A
NOTE
New York, New York
October __, 1999
For value received, RITE AID CORPORATION, a Delaware corporation (the
"BORROWER"), promises to pay to the order of ________________________________
(the "BANK"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Loan Agreement referred to below on November 1, 2000. The Borrower
promises to pay interest on the unpaid principal amount of each such Loan
on the dates and at the rate or rates provided for in the Loan Agreement.
All such payments of principal and interest shall be made in lawful money
of the United States in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made
a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Loan Agreement.
This note is one of the Notes referred to in the $1,300,000,000 Term
Loan Agreement dated as of October 25, 1999 among the Borrower, the Banks
from time to time parties thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent (as the same may be amended from time to
time, the "LOAN AGREEMENT"). Terms defined in the Loan Agreement are used
herein with the same meanings. Reference is made to the Loan Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
Payment of principal and interest on this Note is secured by security
interests in certain collateral pursuant to the Collateral
Documents.
RITE AID CORPORATION
By ___________________________________
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Notation
Date Loan Loan Repaid Made By
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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EXHIBIT B-1
October __, 1999
To the Banks and the Administrative Agent
Referred to Below
c/o Morgan Guaranty Trust Company of New York,
as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Re: Rite Aid Corporation
Ladies and Gentlemen:
We have acted as special counsel to Rite Aid Corporation, a
Delaware corporation (the "BORROWER"), in connection with the preparation,
execution and delivery of the $1,300,000,000 Term Loan Agreement dated as
of October 25, 1999 (the "LOAN AGREEMENT") among the Borrower, the Banks
from time to time parties thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent (the "ADMINISTRATIVE AGENT"). Terms defined
in the Loan Agreement are used herein as therein defined. This opinion is
being delivered pursuant to Section 3.01(f)(i) of the Loan Agreement.
In our examination we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. As to any
facts material to this opinion which we did not independently establish or
verify, we have relied upon statements and representations of the Borrower
and its officers and other representatives and of public officials,
including the facts set forth in the Borrower's Certificate described
below.
In rendering the opinions set forth herein, we have examined
and relied on originals or copies of the following:
(1) the Loan Agreement;
(2) the Notes issued pursuant thereto;
(3) the Pledge Agreement dated as of October __, 1999 (the
"PLEDGE AGREEMENT") between the Borrower and the Administrative Agent;
(iv) each of the other Applicable Agreements (as defined below);
(v) the certificate of the Borrower dated the date hereof, a
copy of which is attached as Exhibit A hereto (the "BORROWER'S
Certificate"); and
(vi) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
Members of our firm are admitted to the Bar in the State of New
York, and we do not express any opinion as to the laws of any other
jurisdiction other than the Delaware General Corporation Law, the Uniform
Commercial Code as in effect on the date hereof in the State of Delaware
(the "DELAWARE UCC") and the laws of the United States of America to the
extent specifically referred to herein.
Unless otherwise indicated, references to the "UCC" shall mean
(i) with respect to the validity of the security interest, the Uniform
Commercial Code as in effect on the date hereof in the State of New York,
and (ii) with respect to the perfection and the effect of perfection or
non-perfection of the security interest, the Delaware UCC.
Nancy A. Lieberman, a member of this firm, is a director and
shareholder of the Borrower.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. Each Loan Document (other than the Notes) constitutes the
valid and binding agreement of the Borrower and each Note constitutes a
valid and binding obligation of the Borrower, in each case, enforceable
against the Borrower in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity
or at law).
In connection with our opinion set forth in this paragraph 1, we call to
your attention our opinion set forth in paragraph 2 below.
2. The execution and delivery by the Borrower of each Loan
Document, and the performance by the Borrower of its obligations under each
Loan Document in accordance with its terms, do not conflict with the
Certificate of Incorporation or By-laws of the Borrower.
3. Neither the execution, delivery or performance by the
Borrower of any Loan Document nor the compliance by the Borrower with the
terms and provisions thereof will contravene any provision of any of the
Applicable Agreements (as hereinafter defined). "APPLICABLE AGREEMENTS"
shall mean the agreements set forth in Schedule B hereto, together with the
instruments issued by the Borrower in connection therewith, in each case as
in effect as of the date hereof.
In rendering the opinions set forth in this paragraph 3, we
have considered and relied upon the fact that (i) the shares of capital
stock represented by the share certificate identified on Schedule A hereto
(the "PLEDGED SECURITIES") were acquired by the Borrower within 24 months
of the date hereof with the proceeds of commercial paper issued thereby and
(ii) the proceeds of the Loans are being used exclusively to repay
commercial paper maturing on or prior to the date of the related Borrowing
under the Loan Agreement or to repay or prepay the loans outstanding under
the Existing Credit Agreement, the proceeds of which loans were used solely
to repay commercial paper (or to refund other borrowings the proceeds of
which were used solely to repay commercial paper).
4. The provisions of the Pledge Agreement are effective to
create, in favor of the Administrative Agent for the benefit of the Banks
to secure all amounts payable by the Borrower under the Pledge Agreement,
the Loan Agreement and the Notes (all such amounts, the "OBLIGATIONS"), a
valid security interest in the Pledged Securities (as defined in each
Pledge Agreement).
5. Upon delivery of the Pledged Securities to the
Administrative Agent for the benefit of the Banks in the State of Delaware,
the security interest of the Agent for the benefit of the Banks in the
Pledged Securities
will be perfected.
6. Neither the execution, delivery or performance by the
Borrower of any Loan Document nor the compliance by the Borrower with the
terms and provisions thereof will contravene any provision of any
Applicable Law (as hereinafter defined). "APPLICABLE LAWS" shall mean those
laws, rules and regulations of the State of New York and of the United
States of America (including, without limitation, Regulations U and X of
the Board of Governors of Federal Reserve System) or pursuant to the
Delaware General Corporation Law which, in our experience, are normally
applicable to transactions of the type contemplated by the Loan Documents.
7. No Governmental Approval (as hereinafter defined), which has
not been obtained or taken and is not in full force and effect, is required
to authorize or is required in connection with the execution, delivery or
performance of any of the Loan Documents by the Borrower. "GOVERNMENTAL
APPROVAL" means any consent, approval, license, authorization or validation
of, or filing, recording or registration with, any Governmental Authority
(as hereinafter defined) pursuant to Applicable Laws. "GOVERNMENTAL
AUTHORITY" means any New York or federal legislative, judicial,
administrative or regulatory body.
8. Neither the execution, delivery or performance by the
Borrower of its obligations under the Loan Documents nor compliance by the
Borrower with the terms thereof will contravene any Applicable Order (as
hereinafter defined) against the Borrower. "APPLICABLE ORDERS" means those
orders, judgments or decrees of Governmental Authorities identified in
paragraph 2 of the Borrower's Certificate.
In rendering the foregoing opinions, we have assumed, with your
consent, that:
(i) each Loan Document has been duly executed and
delivered by the Borrower;
(ii) the execution, delivery and performance of any of
the Borrower's obligations under the Loan Documents does not and will
not conflict with, contravene, violate or constitute a default under
(i) any lease, indenture, instrument or other agreement to which the
Borrower or its property is subject (other than Applicable Agreements
as to which we express our opinion in paragraph 3 herein), (ii) any
rule, law or regulation to which the Borrower is subject (other than
Applicable Laws as to which we express our opinion in paragraph 6
herein) or (iii) any judicial or administrative order or decree of
any governmental authority (other than Applicable Orders as to which
we express our opinion in paragraph 8 herein); and
(iii) no authorization, consent or other approval of,
notice to or filing with any court, governmental authority or
regulatory body (other than Governmental Approvals as to which we
express our opinion in paragraph 7 herein) is required to authorize
or is required in connection with the execution, delivery or
performance by the Borrower of the Loan Documents or the transactions
contemplated thereby.
We understand that you are separately receiving an
opinion, dated as of the date hereof, with respect to certain of the
foregoing from Elliot S. Gerson, Esq. (the "GENERAL COUNSEL OPINION") and
we are advised that such opinion contains qualifications. Our opinions
herein stated are based on the assumptions specified above and we express
no opinion as to the effect on the opinions herein stated of the
qualifications contained in the General Counsel Opinion.
Our opinions are also subject to the following assumptions and
qualifications:
(a) we have assumed that each of the Loan Documents constitutes
the legal, valid and binding obligation of each party thereto (other
than the Borrower) enforceable against such party (other than the
Borrower) in accordance with its terms; and
(b) we express no opinion as to the effect on the opinions
expressed herein of (i) the compliance or non-compliance of any party
(other than the Borrower) to the any Loan Document with any state,
federal or other laws or regulations applicable to it or (ii) the
legal or regulatory status or the nature of the business of any party
(other than the Borrower) to any Loan Document.
(c) we express no opinion as to the enforceability of any rights
to contribution or indemnification provided for in the Loan Documents
which are violative of the public policy underlying any law, rule or
regulation (including any federal or state securities law, rule or
regulation);
(d) certain of the remedial provisions, including waivers, with
respect to the exercise of remedies against the Pledged Securities
contained in the Pledge Agreement may be unenforceable in whole or in
part, but the inclusion of such provisions does not affect the
validity of the Pledge Agreement, taken as a whole, and the Pledge
Agreement, taken as a whole, together with applicable law, contains
adequate provisions for the practical realization of the benefits of
the security interest created thereby;
(e) we express no opinion as to the effect on the opinions
expressed herein of (1) the compliance or non-compliance of the
Administrative Agent for the benefit of the Banks or any party (other
than the Borrower) to the Loan Documents with any state, federal or
other laws or regulations applicable to them or (2) the legal or
regulatory status or the nature of the business of the Agent for the
benefit of the Banks; and
In addition to the foregoing, our opinions with respect to the
security interest of the Administrative Agent for the benefit of the Banks
in the Pledged Securities are subject to the following qualifications:
(a) we have assumed that the Borrower owns, or with respect to
after-acquired property will own, the Pledged Securities, and we
express no opinion as to the nature or extent of the Borrower's rights
in, or title to, any of the Pledged Securities and we note that with
respect to any after-acquired property, the security interest will not
attach until the Borrower acquires ownership thereof;
(b) our opinions with respect to the interest of the
Administrative Agent for the benefit of the Banks are limited to
Article 8 and Article 9 of the UCC, and such opinions do not address
(i) laws of jurisdictions other than New York and Delaware, and of New
York and Delaware except for Article 8 and Article 9 of the UCC, (ii)
collateral of a type not subject to Article 8 and Article 9 of the
UCC, and (iii) what law governs perfection or priority of the security
interests granted in the Pledged Securities covered by this opinion;
(c) we call to your attention that under the UCC, events
occurring subsequent to the date hereof may affect any security
interest subject to the UCC including, but not limited to, factors of
the type identified in Section 9-306 with respect to proceeds; Section
9-402 with respect to changes in name, structure and corporate
identity; Section 9-103 with respect to changes in the location of the
Pledged Securities and the location of a debtor; Section 9-316 with
respect to subordination agreements; Section 9-403 with respect to
continuation statements; and Sections 9-307, 9-308 and 9-309 with
respect to subsequent purchasers of the Pledged Securities. In
addition, actions taken by a secured party (e.g., releasing or
assigning the security interest, delivering possession of the Pledged
Securities to a debtor or another person and voluntarily subordinating
a security interest) may affect any security interest subject to the
UCC;
(d) we have assumed that the Pledged Securities are the
Subsidiary Shares as defined in the Pledge Agreement; and
(e) we express no opinion with respect to the priority of the
security interest of the Administrative Agent for the benefit of the
Banks in any of the Pledged Securities.
This opinion is being furnished only to you and is solely for
your benefit and is not to be relied upon by anyone else or for any
other purpose without our prior written consent.
Very truly yours,
Schedule A
Certificate Type of Number of
Issuer Number Stock Shares
------ ----------- ------- ---------
PCS Holdings Corporation A-2 Class A, 565 Shares
par value $1.00
per share
Schedule B
1. Note Agreement dated as of September 30, 1996 among FINCO,
INC, The Prudential Insurance Company of America and PRUCO Life Insurance
Company ($79,560,908.91 7.30% Senior Secured Notes due February 28, 2002).
2. Master Tax Ownership Operating Lease dated as of March 19,
1998 by and among Rite Aid Realty Corp. as Lessee, Rite Aid Corporation, as
Guarantor, RAC Leasing LLC, as Lessor, Sumitomo Bank, Limited, New York
Branch, as Liquidity Agent and Collateral Agent, and RA Funding II
Corporation as Lease Receivables Purchaser.
3. Senior Loan Agreement dated as of March 11, 1998 between RAC
Leasing LLC and The Lenders Parties hereto, as Lenders and Sumitomo Bank
Leasing and Finance, Inc. as Agent.
4. Master Tax Ownership Operating Lease dated as of May 30,
1997 by and among Rite Aid Realty Corp., as Lessee, Rite Aid Corporation,
as Guarantor, Sumitomo Bank Leasing and Finance, Inc., as Lessor, Sumitomo
Bank, Limited, New York Branch as Liquidity Agent and Collateral Agent, RA
Funding Corporation, as Lease Receivables Purchaser, and Madison Funding
Corporation, as Conduit.
5. Receivables Purchase Agreement dated as of November 26, 1997
among Rite Aid Funding LLC as the Seller, and Corporate Asset Funding
Company, Inc. and Corporate Receivables Corporation as the Investors, and
Citibank, N.A. and Citicorp North America, Inc. as the Agent and Rite Aid
Corporation as Collection Agent.
6. Indenture, dated as of December 21, 1998, between the Borrower
and Harris Trust and Savings Bank, as Trustee.
7. Indenture, dated as of September 22, 1998, by and among the
Borrower and Harris Trust and Savings Bank, as Trustee.
8. Indenture dated August 1, 1993, between the Borrower and
First Trust of New York, National Association, as successor Trustee.
EXHIBIT B-2
OPINION OF
GENERAL COUNSEL FOR THE BORROWER
--------------------------------
To the Banks and the Administrative Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am General Counsel of Rite Aid Corporation (the "Borrower"), and I
have advised the Borrower in connection with the $1,300,000,000 Term Loan
Agreement (the "LOAN AGREEMENT") dated as of October __, 1999 among the
Borrower, the Banks from time to time parties thereto and Morgan Guaranty
Trust Company of New York, as Administrative Agent. Terms defined in the
Loan Agreement are used herein as therein defined. This opinion is being
rendered to you at the request of our client pursuant to Section
3.01(f)(ii) of the Loan Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of the Loan Agreement, the Notes issued
pursuant thereto, the Pledge Agreement and such other documents, corporate
records, certificates of public officials and other instruments and have
conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the Loan
Documents are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of (i) any agreement or instrument evidencing or
governing Debt of the Borrower or any Subsidiary, (ii) any agreement
material to the business, financial condition, results of operations or
prospects of the Borrower, or (iii) any other material instrument,
judgment, injunction, order or decree binding upon the Borrower or any
Subsidiary or result in the creation or imposition of any Lien on any asset
of the Borrower or any Subsidiary pursuant to any such agreement,
instrument, judgment, injunction, order or decree.
3. Each Loan Document (other than the Notes) constitutes a valid and
binding agreement of the Borrower and each Note constitutes a valid and
binding obligation of the Borrower, in each case enforceable in accordance
with its terms except as the same may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and by general
principles of equity.
4. Except as described in the Borrower's Annual Report on Form 10-K
for the fiscal year ended February 27, 1999, there is no action, suit or
proceeding pending against, or to the best of my knowledge threatened
against or affecting, the Borrower or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official, in which
there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated financial position
or consolidated results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole or which in any manner draws into
question the validity or enforceability of the Loan Documents.
5. Each of the Borrower's corporate Significant Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
In giving the foregoing opinion, I express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New
York and the State of Pennsylvania) in which any Bank is located which
limits the rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without my prior written consent.
Very truly yours,
EXHIBIT C
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE ADMINISTRATIVE AGENT
To the Banks and the Administrative Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the $1,300,000,000 Term
Loan Agreement (the "LOAN AGREEMENT") dated as of October 25, 1999 among
Rite Aid Corporation, a Delaware corporation (the "BORROWER"), the Banks
from time to time parties thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent, and have acted as special counsel for the
Administrative Agent for the purpose of rendering this opinion pursuant to
Section 3.01(g) of the Loan Agreement. Terms defined in the Loan Agreement
are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Loan Agreement, the Notes issued
pursuant thereto, the Pledge Agreement and such other documents, corporate
records, certificates of public officials and other instruments and have
conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Loan Documents are within the Borrower's corporate powers and have been
duly
authorized by all necessary corporate action.
2. Each Loan Document (other than the Notes) constitutes a valid and
binding agreement of the Borrower and each Note constitutes a valid and
binding obligation of the Borrower, in each case enforceable in accordance
with its terms except as the same may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws
of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion
as to the effect (if any) of any law of any jurisdiction (except the State
of New York) in which any Bank is located which limits the rate of interest
that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 19__ among [ASSIGNOR] (the
"ASSIGNOR"), [ASSIGNEE] (the "ASSIGNEE"), [RITE AID CORPORATION (the
"BORROWER")] and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the $1,300,000,000 Term Loan Agreement dated as of October __,
1999 among [Rite Aid Corporation (the "BORROWER")] [the Borrower], the
Assignor and the other Banks parties thereto, as Banks, and the
Administrative Agent (as amended from time to time, the "LOAN AGREEMENT");
[WHEREAS, as provided under the Loan Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount
not to exceed $_________;]
[WHEREAS, Loans made to the Borrower by the Assignor under the Loan
Agreement in the aggregate principal amount of $_______ are outstanding at
the date hereof;] and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Loan Agreement in respect of a portion of
its [Commitment][Loans] thereunder in an amount equal to $___________ (the
"ASSIGNED AMOUNT"), [together with a corresponding portion of its
outstanding Loans,] and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Loan Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Loan Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Loan Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of
the principal amount of the Loans made by the Assignor outstanding at the
date hereof. Upon the execution and delivery hereof by the Assignor, the
Assignee, the Borrower and the Administrative Agent and the payment of the
amounts specified in Section 3 required to be paid on the date hereof [(i)]
the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Loan Agreement
with [a Commitment][outstanding Loans] in an amount equal to the Assigned
Amount, and (ii) [the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and] the Assignor released from its
obligations under the Loan Agreement to the extent such obligations have
been assumed by the Assignee. The assignment provided for herein shall be
without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds an amount equal to $_______.1 [It is
understood that commitment fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof in respect of the Assigned Amount are for the account of the
Assignee.] Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Loan Agreement which is for the account of
the other party hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
SECTION 4. Consent of [the Borrower and] the Administrative Agent.
This Agreement is conditioned upon the consent of [the Borrower and] the
Administrative Agent pursuant to Section 9.06(c) of the Loan Agreement. The
execution of this Agreement by [the Borrower and] the Administrative Agent
is evidence of this consent. Pursuant to Section 9.06(c) the Borrower
agrees to execute and deliver a Note payable to the order of the Assignee
to evidence the assignment and assumption provided for herein.
SECTION 5. Non-reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Loan Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance
on the Assignor, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of
the Borrower. -------- 1 Amount should combine principal together with
accrued interest and breakage compensation, if any, to be paid by the
Assignee, net of any portion of any upfront fee to be paid by the Assignor
to the Assignee. It may be preferable in an appropriate case to specify
these amounts generically or by formula rather than as a fixed sum.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By ____________________________________
Title:
[ASSIGNEE]
By ____________________________________
Title:
[RITE AID CORPORATION
By______________________________________
Title:]
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By _____________________________________
Title:
EXHIBIT E
PCS PLEDGE AGREEMENT
AGREEMENT dated as of October 25, 1999 between RITE AID CORPORATION
(with its successors, the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("MORGAN"), as agent hereunder (the "AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of January 21, 1999 (as
heretofore amended, the "ORIGINAL 1999 CREDIT AGREEMENT"); and
WHEREAS, the Borrower and Morgan, as agent, have entered into the
Pledge Agreement dated as of September 29, 1999 (the "FIRST PLEDGE
AGREEMENT"), pursuant to which the Borrower has pledged the Collateral (as
hereinafter defined) to secure its obligations under the Original 1999
Credit Agreement and the Notes issued pursuant thereto; and
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of July 19, 1996 (as
heretofore amended, the "ORIGINAL 1996 CREDIT AGREEMENT"); and
WHEREAS, the Borrower and Morgan, as agent, are parties to a PCS
Junior Pledge Agreement dated as of October 19, 1999 (the "SECOND PLEDGE
AGREEMENT"), pursuant to which the Borrower has granted a junior security
interest in the Collateral to secure certain of its obligations under the
Original 1996 Credit Agreement; and
WHEREAS, the Borrower proposes to enter into a Term Loan Agreement of
even date herewith with the parties to the Original 1999 Credit Agreement
(as the same may be amended from time to time, the "1999 FACILITY"), term
loans under which (the "1999 LOANS") are to refinance loans outstanding
under the Original 1999 Credit Agreement; and
WHEREAS, the Borrower proposes to enter into an Amended and Restated
Credit Agreement of even date amending and restating the Original 1996
Credit Agreement (as the same may be amended from time to time, the "PRO
RATA CREDIT AGREEMENT"); and
WHEREAS, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (i) on a first priority basis, to secure
its obligations under the 1999 Facility, (ii) on a second priority basis,
to secure certain of its obligations under the Pro Rata Credit Agreement,
(iii) on a third priority basis, to secure certain other obligations under
the Pro Rata Credit Agreement as well as the Prudential Pro Rata Exposure
(as defined below), the Morgan Pro Rata Exposure (as defined below) and the
Letter of Credit Exposure (as defined below) and (iv) on a fourth priority
basis, to secure the Synthetic Lease Obligations (as defined below); and
WHEREAS, this Agreement is intended to continue the security
interests created and perfected under the First Pledge Agreement and the
Second Pledge Agreement, but its terms shall supersede the terms thereof;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. (a) Terms defined in the heading and recitals
hereto have the respective meanings provided for therein.
(b) The following terms have the meanings provided for in the Pro Rata
Credit Agreement:
drugstore.com Pledge Agreement
Morgan Pro Rata Exposure
Prudential Pro Rata Exposure
Tranche A Loans
Tranche B Loans
(c) The following additional terms, as used herein, have the
following respective meanings:
"BASE RATE" has the meaning set forth in the Credit Agreements.
"COLLATERAL" has the meaning assigned to such term in Section 2(c)(a).
"CREDIT AGREEMENT" means the 1999 Facility or the Pro Rata Credit
Agreement.
"DEFAULT" means a "Default" as defined in either of the Credit
Agreements.
"EVENT OF DEFAULT" means an "Event of Default" as defined in either
the Credit Agreements.
"FIRST PRIORITY SECURED OBLIGATIONS" means (i) all principal of and
interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any 1999 Loan,
(ii) all other amounts payable by the Borrower under the 1999 Facility and
(iii) any renewals or extensions of any of the foregoing.
"FOURTH PRIORITY SECURED OBLIGATIONS" means (i) the obligations of
the Borrower in respect of the Synthetic Lease Obligations and (ii) any
renewals or extensions of the foregoing.
"INSTRUCTING BANKS" means (i) until all First Priority Secured
Obligations shall have been paid in full, the "Required Banks" as defined
in the 1999 Facility and (ii) thereafter, the "Required Banks" as defined
in the Pro Rata Credit Agreement.
"ISSUER" means PCS Holdings Corporation, and its successors.
"LETTER OF CREDIT EXPOSURE" means the reimbursement obligations of
the Borrower in respect of standby letters of credit issued for the account
of the Borrower set forth in Schedule A hereto, and any replacements
thereof; provided that the issuer of such letter of credit shall have
entered into an agreement with the Borrower and the Agent satisfactory to
the Agent pursuant to which such issuer has agreed to accept the benefits
of and be bound by the terms of this Agreement; provided further that the
Letter of Credit Exposure may not for purposes of this Agreement exceed
$32,750,000; and provided further that the outstanding principal amount of
any such letters of credit which are undrawn shall be deemed to be the face
amount thereof for purposes of this Agreement, subject to the last sentence
of Section 13.
"LIEN" means a "Lien" as defined in either of the Credit Agreements.
"LOAN DOCUMENTS" means the "Loan Documents" as defined in either
Credit Agreement.
"MAXIMUM PRINCIPAL AMOUNT" shall mean that portion of the outstanding
principal amounts of the Partially Secured Obligations secured both
hereunder and under the drugstore.com Pledge Agreement, which principal
amount shall not exceed $399,000,000, it being understood that this
Agreement and the drugstore.com Pledge Agreement each individually, but
also collectively, secure the Partially Secured Obligations to the extent
of such Maximum Principal Amount, and that therefore the Maximum Principal
Amount for purposes of this Agreement shall be reduced by the amount of any
proceeds of Collateral applied to principal of the Partially Secured
Obligations pursuant to Section 13 of the drugstore.com Pledge Agreement.
"PARTIALLY SECURED OBLIGATIONS" means the Tranche B Loans, the
Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure and the Letter
of Credit Exposure.
"PLEDGED STOCK" means (i) the Subsidiary Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section
2(c)(b).
"SECOND PRIORITY SECURED OBLIGATIONS" means (i) all principal of and
interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any Tranche A
Loan, (ii) all other amounts payable by the Borrower hereunder or under the
1996 Loan Documents, to the extent properly allocable to the Tranche A
Loans, and (iii) any renewals or extensions of any of the foregoing.
"SECURED OBLIGATIONS" means the First Priority Secured Obligations,
the Second Priority Secured Obligations, the Third Priority Secured
Obligations, the Fourth Priority Secured Obligations and any amount payable
by the Borrower under this Agreement.
"SECURED PARTIES" means the Agent and the holders from time to time of
the Secured Obligations.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"SUBSIDIARY SHARES" means 565 shares of Class A Stock, par value
$1.00 per share, of the Issuer.
"SYNTHETIC LEASE OBLIGATIONS" means, collectively, (i) the Guaranty
dated as of March 19, 1998 from Rite Aid Corporation to RAC Leasing LLC, as
the same may be amended from time to time, and (ii) the Guaranty dated as
of May 30, 1997 from Rite Aid Corporation to Sumitomo Bank Leasing and
Finance, Inc., as the same may be amended from time to time.
"THIRD PRIORITY SECURED OBLIGATIONS" means (i) all outstanding
principal amounts of Partially Secured Obligations, provided that the
principal amount secured pursuant to this clause (i) shall not exceed the
Maximum Principal Amount; (ii) all interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) on the principal amounts secured pursuant to clause (i) of this
definition, (iii) any Yield-Maintenance Amount payable in respect of the
portion of the Prudential Pro Rata Exposure secured pursuant to clauses (i)
and (ii) of this definition; (iv) any renewals or extensions of any of the
foregoing and (v) to the extent the same may be secured hereunder and under
the drugstore.com Pledge Agreement without contravention of the Indentures,
any and all other amounts payable by the Borrower in respect of the
Partially Secured Obligations. The amounts specified in clauses (i) and
(iv) shall be allocated among the Partially Secured Obligations ratably
based on the unpaid principal amount thereof at the time of determination.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings
therein stated.
SECTION 2. Representations and Warranties. The Borrower represents and
warrants as follows:
(a) Title to Pledged Stock. The Borrower owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests.
The Pledged Stock includes all of the issued and outstanding capital
stock of the Issuer. All of the Pledged Stock has been duly authorized
and validly issued, and is fully paid and non-assessable, and is
subject to no options to purchase or similar rights of any Person. The
Borrower is not and will not become a party to or otherwise bound by
any agreement, other than this Agreement, which restricts in any
manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. The
Agent has valid and perfected security interests in the Collateral
subject to no prior Lien. No registration, recordation or filing with
any governmental body, agency or official is required in connection
with the execution or delivery of this Agreement or necessary for the
validity or enforceability hereof or for the perfection or enforcement
of the Security Interests. Neither the Borrower nor any of its
Subsidiaries has performed or will perform any acts which might
prevent the Agent from enforcing any of the terms and conditions of
this Agreement or which would limit the Agent in any such enforcement.
(c) UCC Filing Locations. The chief executive office of the Borrower
is located at its address set forth on the signature pages of the
Credit Agreement.
SECTION 3. The Security Interests. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all the obligations of the
Borrower hereunder:
(a) The Borrower hereby assigns and pledges to and with the Agent
for the benefit of the Secured Parties and grants to the Agent for the
benefit of the Secured Parties security interests in the Pledged
Stock, and all of its rights and privileges with respect to the
Pledged Stock, and all income and profits thereon, and all dividends
and other payments and distributions with respect thereto, and all
proceeds of the foregoing (the "COLLATERAL"). Prior to the execution
and delivery hereof, the Borrower has delivered the certificate
representing the Subsidiary Shares in pledge hereunder.
(b) In the event that the Issuer at any time issues any
additional or substitute shares of capital stock of any class, the
Borrower will immediately pledge and deposit with the Agent
certificates representing all such shares as additional security for
the Secured Obligations. All such shares constitute Pledged Stock and
are subject to all provisions of this Agreement.
(c) The Security Interests are granted as security only and shall
not subject the Agent or any Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of the Borrower with
respect to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Delivery of Pledged Stock. All certificates representing
Pledged Stock delivered to the Agent by the Borrower pursuant hereto shall
be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances. (a) The Borrower agrees that it will,
at its expense and in such manner and form as the Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary
or desirable, or that the Agent may request, in order to create, preserve,
perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, the Borrower hereby
authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement
or of a financing statement relating to this Agreement) which the Agent in
its sole discretion may deem necessary or appropriate to further perfect
the Security Interests.
(b) The Borrower agrees that it will not change (i) its name, identity
or corporate structure in any manner, (ii) the location of its chief
executive office or (iii) jurisdiction of incorporation unless it shall
have given the Agent not less than 30 days' prior notice thereof.
SECTION 6. Record Ownership of Pledged Stock. The Agent may at any
time or from time to time, in its sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. The Borrower will promptly give to the Agent copies of any notices
or other communications received by it with respect to Pledged Stock
registered in the name of the Borrower and the Agent will promptly give to
the Borrower copies of any notices and communications received by the Agent
with respect to Pledged Stock registered in the name of the Agent or its
nominee.
SECTION 7. Right to Receive Distributions on Collateral. During the
continuance of any Default the Agent shall have the right to receive and to
retain as Collateral hereunder all dividends and other payments and
distributions made upon or with respect to the Collateral and the Borrower
shall take all such action as the Agent may deem necessary or appropriate
to give effect to such right. All such dividends and other payments and
distributions which are received by the Borrower shall be received in trust
for the benefit of the Agent and the Secured Parties and, if the Agent so
directs during the continuance of a Default, shall be segregated from other
funds of the Borrower and shall, forthwith upon demand by the Agent during
the continuance of a Default, be paid over to the Agent as Collateral in
the same form as received (with any necessary endorsement). After all
Defaults have been cured, the Agent's right to retain dividends and other
payments and distributions under this Section 7 shall cease and the Agent
shall pay over to the Borrower any such Collateral retained by it during
the continuance of a Default.
SECTION 8. Right to Vote Pledged Stock. Unless a Default shall have
occurred and be continuing, the Borrower shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock, and the Agent shall, upon receiving a written request
from the Borrower accompanied by a certificate signed by its principal
financial officer stating that no Default has occurred and is continuing,
deliver to the Borrower or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
If a Default shall have occurred and be continuing, the Agent shall
have the right to the extent permitted by law, and the Borrower shall take
all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take
any other action with respect to any or all of the Pledged Stock with the
same force and effect as if the Agent were the absolute and sole owner
thereof.
SECTION 9. General Authority. The Borrower hereby irrevocably
appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Secured Parties
or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of the Borrower, to the extent permitted by law
to exercise, at any time and from time to time while an Event of Default
has occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:
(a) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Borrower not less than ten days'
prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Borrower agree
that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default. If any Event of Default
shall have occurred and be continuing, the Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) apply the cash, if any, then
held by it as Collateral as specified in Section 12 and (ii) if there shall
be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price
or prices as the Agent may deem satisfactory. Any Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection
with any such sale, if it deems it advisable so to do, (A) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a
limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a
view to the distribution or sale of any of such Pledged Stock, (B) to cause
to be placed on certificates for any or all of the Pledged Stock or on any
other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may
not be disposed of in violation of the provision of said Act, and (C) to
impose such other limitations or conditions in connection with any such
sale as the Agent deems necessary or advisable in order to comply with said
Act or any other law. The Borrower will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of
the Borrower which may be waived, and the Borrower, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 9 shall (1)
in the case of a public sale, state the time and place fixed for such sale,
(2) in the case of a sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a
private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Agent may determine. The
Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in the case of the failure of such purchaser to take up
and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The
Agent, instead of exercising the power of sale herein conferred upon it,
may proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
SECTION 11. Expenses. The Borrower agrees that it will forthwith upon
demand pay to the Agent:
(a) the amount of any taxes which the Agent may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including
the fees and disbursements of counsel, which the Agent may incur in
connection with (i) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection, rank and value
of any Security Interest, (ii) the collection, sale or other
disposition of any of the Collateral, (iii) the exercise by the Agent
of any of the rights conferred upon it hereunder or (iv) any Default.
Any such amount not paid on demand shall bear interest at a rate per annum
equal to Base Rate plus 4.50% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected
by the Agent in good faith.
SECTION 13. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held
shall be applied by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent is to be reimbursed pursuant to Section
10 hereof;
SECOND, to the ratable payment of unpaid principal of the First
Priority Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest on
the First Priority Secured Obligations in accordance with the terms
thereof;
FOURTH, to the ratable payment of all other First Priority
Secured Obligations, until all First Priority Secured Obligations
shall have been paid in full;
FIFTH, to the ratable payment of unpaid principal of the Second
Priority Secured Obligations,
SIXTH, to the ratable payment of accrued but unpaid interest on
the Second Priority Secured Obligations in accordance with the terms
thereof;
SEVENTH, to the ratable payment of all other Second Priority
Secured Obligations, until all Second Priority Secured Obligations
shall have been paid in full;
EIGHTH, to the ratable payment of unpaid principal of the Third
Priority Secured Obligations;
NINTH, to the ratable payment of accrued but unpaid interest on
Third Priority Secured Obligations in accordance with the terms
thereof;
TENTH, to the ratable payment of all other Third Priority Secured
Obligations, until all Third Priority Secured Obligations shall have
been paid in full;
ELEVENTH, to the ratable payment of all Fourth Priority Secured
Obligations, until all Fourth Priority Secured Obligations have been
paid in full;
FINALLY, to payment to the Borrower or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof. Any amount distributable
pursuant to this Section 13 in respect of any Letter of Credit Exposure
consisting of undrawn letters of credit shall be retained by the Agent for
payment to the Secured Parties that are issuers thereof at such time as
such letters of credit are drawn and then only to the extent of any such
draw. To the extent that any such letter of credit expires undrawn, any
amount then held by the Agent pursuant to the preceding sentence in respect
thereof shall be distributed in accordance with the priorities established
by this Section 13, it being understood that any reimbursement obligations
in respect of such expired letter of credit shall not be included in
Secured Obligations for purposes of such distribution.
SECTION 14. Concerning the Agent. The provisions of Article 7 of each
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the Secured Parties in such respect. In
furtherance and not in derogation of the rights, privileges and immunities
of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is
provided to be taken by it as Agent hereunder and all other action
reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and
methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the
Instructing Banks or, in the absence of such instructions, in
accordance with its discretion.
(b) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in
any of the Collateral, whether impaired by operation of law or by
reason of any action or omission to act on its part hereunder. The
Agent shall have no duty to ascertain or inquire as to the performance
or observance of any of the terms of this Agreement by the Borrower.
SECTION 15. Appointment of Co-agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent may
appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination
of the Commitments under the Credit Agreements, the Security Interests
shall terminate and all rights to the Collateral shall revert to the
Borrower. At any time and from time to time prior to such termination of
the Security Interests, the Agent may release any of the Collateral in
accordance with the applicable provisions of the Credit Agreements. Upon
any such termination of the Security Interests or release of Collateral,
the Agent will, at the expense of the Borrower, execute and deliver to the
Borrower such documents as the Borrower shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 17. Notices. All notices hereunder shall be given in
accordance with Section 9.01 of the Credit Agreements.
SECTION 18. Waivers, Non-Exclusive Remedies. No failure on the part
of the Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or
any Secured Party of any right under any Loan Document or any other
document relating to the Secured Obligations owing to such Secured Party
preclude any other or further exercise thereof or the exercise of any other
right. The rights under the Loan Documents and such other documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns. This Agreement is for the benefit
of the Secured Parties and their successors and assigns, and in the event
of an assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Borrower and its successors and assigns.
SECTION 20. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Borrower and the Agent with the consent
of the Required Banks under each Credit Agreement. No such amendment shall
by its terms materially adversely affect the rights of holders of any of
the Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure, the Letter
of Credit Exposure or the Fourth Priority Secured Obligations in a manner
different from its effect on the rights of holders of any other Secured
Obligations, except with the written consent of such affected holder (or of
the requisite majority of the affected holders specified in the documents
governing such affected holders' Secured Obligations).
SECTION 21. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except
as otherwise required by mandatory provisions of law and except to the
extent that remedies provided by the laws of any jurisdiction other than
New York are governed by the laws of such jurisdiction.
SECTION 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Agent
and the Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. Acceptance of Appointment. Morgan hereby accepts its
appointment as agent for each of the Secured Parties; provided that neither
such appointment or such acceptance shall impose on Morgan any duties other
than the express duties of the Agent hereunder and subject in any case to
the provisions of Section 7 hereof and Article 7 of the Credit Agreement,
which shall be binding on all Secured Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: /s/ Richard Varmecky
---------------------------------------
Name: Richard Varmecky
Title: Senior Vice President - Finance
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Agent
By: /s/ Glenda Winter-Irving
------------------------------------------
Name: Glenda Winter-Irving
Title: Vice President
SCHEDULE A
Letters of Credit
-----------------
<TABLE>
<CAPTION>
L/C Ref # Beneficiary Amount Date Issued Expiry Date
- --------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
ISSUED BY MELLON
BANK, N.A.:
8571380 National Union Fire $ 20,861,000.00 20-Feb-98 31-Dec-99
Insurance
8554730 Insurance Co. of North 1,186,255.00 03-Nov-97 22-Nov-99
America
8533170 Commonwealth of PA 75,000.00 11-Jul-97 11-Jul-00
8531390 Joseph Brozek, Jr. 250,000.00 25-Jun-97 25-Jun-00
8159320 Continental Casualty Company 1,027,000.00 19-Feb-92 01-Jan-00
8478300 United States Fidelity and 1,250,000.00 15-May-98 31-Dec-99
Trust
8578810 Travelers Indemnity Co. (TPI) 225,000.00 16-Apr-98 31-Dec-99
8578580 LA Dept. of Labor 350,000.00 15-Apr-98 31-Dec-99
8586190 Reliance Insurance Co. 300,000.00 20-May-98 31-Dec-99
8614310 City of Grand Junction, CO 117,680.00 28-Dec-98 21-Apr-00
8642610 Capital Blue Cross 749.458.87 08-Jul-99 31-Dec-99
8464810 Baltimore County, MD 38,973.00 08-May-96 08-Nov-99
--------------
26,430,366.87
ISSUED BY
CITIBANK,
N.A.:
13863/30019259 MLTC Funding 5,800,000.00 12-Dec-96 22-Oct-00
ISSUED BY AMSOUTH
BANK OF ALABAMA:
S309510 AmSouth Bank of Alabama 477,320.73 05-Sep-95 01-Jan-00
----------------
Total standby letters 32,707,687.60
of credit outstanding
----------------
</TABLE>
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
TARGET PULL-DOWN LIST.
(This list is for the use of the wordprocessor only, is not a part of this
document and may be discarded.)
<TABLE>
<S> <C> <C> <C>
ARTICLE/SECTIONTARGET NAME ARTICLE/SECTIONTARGET NAME ARTICLE/SECTIONTARGET NAMEARTICLE/SECTIONTARGET NAME
</TABLE>
1....................................def
2................................rep.war
2(c).............................sec.int
4.............................del.pl.sec
5..............................fur.assur
6.........................rec.own.pl.stk
5.19........................synth.leases
7........................rt.rec.dist.col
7................................rt.vote
9..............................gen.autho
9.04.......................shrg.set.offs
9(d).......................rem.event.def
10..............................expenses
11(b)(iv)...................lim.duty.agt
12..............................appl.pro
14..............................conc.agt
14(b)........................appt.co.agt
15..........................term.sec.int
9.01, 16.........................notices
17...............................waivers
18...........................succ.assign
19.............................chg.write
20................................ny.law
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Exhibit 10.3
$1,000,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
October 25, 1999
among
Rite Aid Corporation,
The Banks from time to time
parties hereto
and
Morgan Guaranty Trust Company of New York,
as Agent
------------------------------------
JP Morgan Securities Inc.,
Lead Arranger and Book Runner
TABLE OF CONTENTS(1)
PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................1
SECTION 1.02. Accounting Terms and Determinations.......................17
SECTION 1.03. Classes and Types of Loans................................17
SECTION 1.04. Other Definitional Provisions.............................18
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1 The Table of Contents is not a part of this Agreement.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend.......................................18
SECTION 2.02. Notice of Borrowings......................................19
SECTION 2.03. Notice to Banks; Funding of Loans.........................19
SECTION 2.04. Notes.....................................................20
SECTION 2.05. Maturity of Loans.........................................21
SECTION 2.06. Interest Rates............................................21
SECTION 2.07. Fees......................................................23
SECTION 2.08. Optional Termination or Reduction of Commitments..........23
SECTION 2.09. Scheduled Termination of Commitments......................23
SECTION 2.10. Reduction Events; Mandatory Prepayments and
Commitment Reductions...................................23
SECTION 2.11. Optional Prepayments......................................26
SECTION 2.12. General Provisions as to Payments.........................26
SECTION 2.13. Funding Losses............................................27
SECTION 2.14. Computation of Interest and Fees..........................27
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness.............................................27
SECTION 3.02. Borrowings................................................29
SECTION 3.03. Transition................................................29
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power.............................30
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention...........................................30
SECTION 4.03. Binding Effect............................................30
SECTION 4.04. Financial Information.....................................30
SECTION 4.07. Compliance with ERISA.....................................32
SECTION 4.11. Year 2000 Compliance......................................33
SECTION 4.12. Pledge Agreements.........................................33
ARTICLE 5
COVENANTS
SECTION 5.02. Payment of Obligations....................................36
SECTION 5.03. Maintenance of Property; Insurance........................36
SECTION 5.04. Conduct of Business and Maintenance of Existence..........36
SECTION 5.06. Inspection of Property, Books and Records.................37
SECTION 5.07. Restriction on Other Agreements...........................37
SECTION 5.08. Restriction on Debt of Subsidiaries.......................37
SECTION 5.09. Restriction on Sales with Leases Back.....................38
SECTION 5.10. Restriction on Liens......................................38
SECTION 5.11. Capital Expenditures......................................39
SECTION 5.12. Capitalization Leverage Ratio.............................40
SECTION 5.13. Cash Flow Leverage Ratio..................................40
SECTION 5.14. Fixed Charge Coverage.....................................40
SECTION 5.16. Consolidations, Mergers and Sales of Assets...............41
SECTION 5.17. Use of Proceeds...........................................42
SECTION 5.18. Restricted Payments.......................................42
SECTION 5.19. Synthetic Leases..........................................42
SECTION 5.20. Tranche A Limitations.....................................42
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default.........................................43
SECTION 6.02. Notice of Default.........................................45
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization.............................46
SECTION 7.02. Agent and Affiliates......................................46
SECTION 7.03. Action by Agent...........................................46
SECTION 7.05. Liability of Agent........................................46
SECTION 7.07. Credit Decision...........................................47
SECTION 7.08. Successor Agent...........................................47
SECTION 7.09. Agent's Fee...............................................48
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair..................................................48
SECTION 8.02. Illegality................................................48
SECTION 8.05. Base Rate Loans Substituted for Affected
Euro-Dollar Loans.......................................52
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices...................................................52
SECTION 9.02. No Waivers................................................53
SECTION 9.03. Expenses; Indemnification.................................53
SECTION 9.04. Sharing of Set-Offs.......................................53
SECTION 9.06. Successors and Assigns....................................55
SECTION 9.07. Governing Law; Submission to Jurisdiction.................56
SECTION 9.08. Counterparts; Integration.................................56
SECTION 9.09. WAIVER OF JURY TRIAL......................................57
Commitment Schedule
Pricing Schedule
Exhibit A - Note
Exhibit B-1 - Opinion of Special Counsel for the Borrower
Exhibit B-2 - Opinion of General Counsel of the Borrower
Exhibit C - Opinion of Davis Polk & Wardwell, Special Counsel for
the Agent
Exhibit D - Assignment and Assumption Agreement
Exhibit E - PCS Pledge Agreement
Exhibit F - drugstore.com Pledge Agreement
AMENDED AND RESTATED
CREDIT AGREEMENT
AGREEMENT dated as of October 25, 1999 among RITE AID CORPORATION,
the BANKS from time to time parties hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
W I T N E S S E T H :
WHEREAS, the Borrower (as this and other capitalized terms are
defined in Section 1.01 below), the Banks and the Agent are parties to a
Credit Agreement as dated as of July 19, 1996 (as amended to the Effective
Date, the "ORIGINAL AGREEMENT"); and
WHEREAS, the parties hereto wish to amend the Original Agreement to
provide for collateral security for the Loans, to divide the Commitments
and the Loans into tranches in which the Banks participate ratably, to
increase the rates of interest and fees payable thereunder, to modify the
covenants and to make various other changes as more fully set forth below,
and to restate the Original Agreement as so amended;
NOW, THEREFORE, the parties hereto hereby agree that, on and as of
the Effective Date, the Original Agreement is hereby amended and restated
in its entirety as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ADJUSTED LONDON INTERBANK OFFERED RATE" has the meaning set forth in
Section 2.06(b).
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and
submitted to the Agent (with a copy to the Borrower) duly completed by such
Bank.
"AGENT" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks under the Loan Documents, and its
successors in such capacity.
"AGREEMENT" means the Original Agreement as amended and restated by
this Amended Agreement and as the same may be further amended from time to
time in accordance with the terms hereof.
"AMENDED AGREEMENT" means this Amended and Restated Credit Agreement
dated as of October 25, 1999 among the Borrower, the Banks and the Agent.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"ASSET SALE" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by the
Borrower or any of its Subsidiaries of any asset, but excluding (i) any
sale, lease or other disposition by PCS or any of its Subsidiaries, (ii)
the sale or other disposition of capital stock of PCS (or of any non-cash
proceeds thereof), (iii) dispositions of inventory, cash, cash equivalents
and other cash management investments and obsolete, unused or unnecessary
equipment, in each case in the ordinary course of business, (iv)
dispositions to the Borrower or a Wholly-Owned Consolidated Subsidiary, (v)
any Sale and Leaseback Transaction and (vi) sales of accounts receivable
pursuant to the Rite Aid Funding LLC receivables securitization facility in
existence on the date hereof, or any successor receivables securitization
facility, if and to the extent that the amount of financing available
thereunder is not increased above that available on the date hereof.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"ATTRIBUTABLE DEBT" means, as to any particular Sale and Leaseback
Transaction under which the Borrower or any Subsidiary is at the time
liable, at any date as of which the amount thereof is to be determined (i)
in the case of any such transaction involving a Capital Lease, the amount
on such date of the Capital Lease Obligation thereunder, or (ii) in the
case of any other Sale and Leaseback Transaction, the then present value of
the minimum rental obligations under such Sale and Leaseback Transaction
during the remaining term thereof (after giving effect to any extensions at
the option of the lessor) computed by discounting the respective rental
payments at the actual interest factor included in such payments or, if
such interest factor cannot be readily determined, at the rate of 14% per
annum. The amount of any rental payment required to be made under any such
Sale and Leaseback Transaction not involving a Capital Lease may exclude
amounts required to be paid by the lessee on account of maintenance and
repairs, insurance, taxes, assessments, utilities, operating and labor
costs and similar charges.
"BANK" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means a Loan to be made by a Bank as a Base Rate
Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article 8.
"BASE RATE MARGIN" has the meaning specified in the Pricing Schedule.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWER" means Rite Aid Corporation, a Delaware corporation, and
its successors.
"BORROWER'S 1999 FORM 10-K" means the Borrower's annual report on
Form 10-K for the fiscal year ended February 27, 1999, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended.
"BORROWING" means the aggregation of Loans of the same Class to be
made to the Borrower by the Banks pursuant to Article 2 on a single date
and for a single Interest Period.
"BUSINESS ACQUISITION" means (i) an Investment by the Borrower or any
of its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such
Person shall become a Subsidiary or shall be merged into or consolidated
with the Borrower or any of its Subsidiaries or (ii) an acquisition by the
Borrower or any of its Subsidiaries of the property and assets of any
Person (other than the Borrower or any of its Subsidiaries) that constitute
substantially all the assets of such Person or any division or other
business unit of such Person.
"CAPITAL LEASE" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's balance sheet; and "CAPITAL LEASE OBLIGATION" means the amount of
the liability so capitalized in respect of a Capital Lease.
"CAPITAL MARKETS TRANSACTION" means the receipt by the Borrower or a
Subsidiary of proceeds of (a) an issuance in the public or private capital
markets of long-term debt securities, of equity securities or of
equity-linked (e.g., trust preferred) securities (other than the LPG
Transaction), (b) a Sale and Leaseback Transaction (other than a Sale and
Leaseback Transaction (i) between the Borrower and a Wholly-Owned
Consolidated Subsidiary or between Wholly-Owned Consolidated Subsidiaries
or (ii) entered into in respect of property acquired by the Borrower or a
Subsidiary if such Sale and Leaseback Transaction is entered into within 24
months from the date of such acquisition)or (c) bank borrowings under
facilities entered into after the Effective Date, to the extent the
aggregate incremental financing available thereunder at any time exceeds
$200,000,000.
"CLASS" has the meaning set forth in Section 1.03.
"COLLATERAL" means collateral subject to the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, any additional
pledge agreements required to be delivered pursuant to the Loan Documents
and any other instruments or agreements executed pursuant to the
foregoing.
"COMMITMENT" means a Tranche A Commitment or a Tranche B Commitment,
and "COMMITMENTS" means any two or more of the foregoing, as the context
may require.
"COMMITMENT SCHEDULE" means the Schedule attached hereto identified
as such.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of expenditures by the Borrower and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction permitted by Section 5.08.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"CONSOLIDATED EBITDA" for any period, Consolidated Net Income for
such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Charges, (ii) provision for income taxes, (iii) depreciation and
amortization and (iv) charges incurred in connection with store closings
not in excess of $48,000,000 and $20,000,000 during the fiscal years ending
on or closest to February 28, 2000 and February 28, 2001, respectively;
provided that if there shall have been an acquisition or disposition of
operations during such period, Consolidated EBITDA shall be calculated on a
pro forma basis giving effect thereto as if such acquisition or disposition
had occurred on the first day of such period.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the aggregate
amount of interest charges, whether expensed or capitalized, incurred or
accrued by the Borrower and its Consolidated Subsidiaries during such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries (exclusive of (a)
any non-cash loss on account of a sale of any drugstore and (b)
extraordinary items of gain or loss and other non-recurring items of gain
or loss, but only to the extent that such non-recurring items of loss do
not (i) involve any cash expenditure by the Borrower during such period or
any future period or (ii) exceed $50,000,000 in any fiscal year),
determined on a consolidated basis for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
(less applicable reserves and other properly deductible items) which under
generally accepted accounting principles would be included on a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries after deducting therefrom (i) all liabilities and liability
items, including amounts in respect of obligations or guarantees of
obligations under leases, which under generally accepted accounting
principles would be included on such balance sheet, except Funded Debt,
capital stock and surplus, surplus reserves and provisions for deferred
income taxes, and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included
on such consolidated balance sheet.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date.
"CONSOLIDATED RENT" means, for any period, the consolidated rental
expense of the Borrower and its Consolidated Subsidiaries for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"CREDIT EXPOSURE" means, with respect to any Bank, the sum of its
Tranche A Exposure and its Tranche B Exposure.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles,
(v) all non-contingent obligations (and, for purposes of Section 5.10 and
the definitions of Material Debt and Material Financial Obligations, all
contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and
(vii) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including
any option with respect to any of the foregoing transactions) or any
combination of the foregoing transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Agent.
"DRUGSTORE.COM" means drugstore.com, inc., a Delaware corporation,
and its successors.
"DRUGSTORE.COM PLEDGE AGREEMENT" means the drugstore.com Pledge
Agreement dated as of the date hereof between the Borrower and Morgan
Guaranty Trust Company of New York, as agent thereunder, in substantially
the form of Exhibit F.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings
in dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office
by notice to the Borrower and the Agent.
"EURO-DOLLAR LOAN" means a Loan to be made by a Bank as a Euro-Dollar
Loan in accordance with the applicable Notice of Borrowing.
"EURO-DOLLAR MARGIN" has the meaning set forth in the Pricing
Schedule.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.06(b).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Agent.
"FIXED CHARGE COVERAGE RATIO" means at any date, the ratio of (i)
Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated Interest
Charges plus Consolidated Rent, in each case for the period of four
consecutive fiscal quarters most recently ended on or prior to such date.
"FUNDED DEBT" means any Debt maturing more than one year after the
date of determination thereof and any Debt, regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include:
(a) any Debt for the payment, redemption or satisfaction of
which money (or evidences of indebtedness, if permitted under the
instrument creating such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or proper depository
either at or before maturity or redemption date thereof; or
(b) guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising, in the
ordinary course of business, out of installment or conditional sales
to or by, or transactions involving title retention with,
distributors, dealers or other customers of merchandise, equipment or
services or guarantees other than guarantees of indebtedness for
borrowed money.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INDENTURES" means (i) the Indenture dated as of December 21, 1998
between the Borrower and Harris Trust and Savings Bank, as trustee, (ii)
the Indenture dated as of September 22, 1998 between the Borrower and
Harris Trust and Savings Bank, as trustee and (iii) the Indenture dated as
of August 1, 1993, between the Borrower and First Trust of New York,
National Association, as successor trustee.
"INFORMATION" means, collectively, (i) the information provided to
the Banks in connection with the waiver dated as of September 29, 1999 to
the Existing Credit Agreement and (ii) the information presented to the
Banks at meetings in New York City on October 4, 1999 and October 18, 1999
among the Borrower and certain financial institutions.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending
one, two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (c) below, end on the
last Euro-Dollar Business Day of a calendar month; and
(c) no Interest Period may end after the Termination Date.
(2) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise. Any
repurchase by the Borrower of its own capital stock shall not constitute an
Investment for purposes of this Agreement. The amount of any Investment
shall be the original principal or capital amount thereof less all returns
of principal or equity thereon (and without adjustment by reason of the
financial condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal, to the fair market
value of such property at the time of such transfer or exchange.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease or other title retention agreement relating
to such asset.
"LOAN" means a Tranche A Loan or a Tranche B Loan and "Loans" means
Tranche A Loans or Tranche B Loans or any combination of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Notes and the Collateral
Documents.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.06(b).
"LPG COMMITMENT" means the Commitment with Respect to Investment in
Rite Aid Corporation dated October 18, 1999 between the Borrower and Green
Equity Investors III.
"LPG TRANSACTION" means the purchase and sale of 3,000,000 shares of
8% Convertible Pay-In-Kind Preferred Stock of the Borrower for a purchase
price of $100.00 per share pursuant to the LPG Commitment.
"MATERIAL FINANCIAL OBLIGATIONS" means (i) a principal or face amount
of Debt (except Debt outstanding hereunder) and/or (ii) payment or
collateralization obligations in respect of Derivatives Obligations and/or
(iii) payment or collateralization obligations in respect of leases (other
than Capital Leases, which are Debt) of the Borrower and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"MORGAN PRO RATA EXPOSURE" means the $300,000,000 Demand Promissory
Note dated June 15, 1999 issued by the Borrower to the order of J.P. Morgan
Ventures Corporation.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"NET CASH PROCEEDS" means, with respect to any Reduction Event, an
amount equal to the cash proceeds received by the Borrower or any of its
Subsidiaries from or in respect of such Reduction Event (including, when
received, any cash proceeds received as income or other proceeds of any
noncash proceeds of any Asset Sale), less (x) any investment banking and
underwriting fees and any other expenses reasonably incurred by such Person
in respect of such Reduction Event and (y) if such Reduction Event is an
Asset Sale, (I) the amount of any Debt secured by a Lien on any asset
disposed of in such Asset Sale and discharged from the proceeds thereof and
(II) any taxes actually paid or to be payable by such Person (as estimated
by a senior financial or accounting officer of the Borrower, giving effect
to the overall tax position of the Borrower) in respect of such Asset Sale.
"1999 FACILITY" means the $1,300,000,000 Term Loan Agreement dated as
of the date of this Amended Agreement among Rite Aid Corporation, the banks
listed therein and Morgan Guaranty Trust Company of New York, as
administrative agent thereunder.
"1999 EXPOSURES" means the undrawn commitments and/or the outstanding
loans under the 1999 Facility.
"1999 LOAN DOCUMENTS" means the "Loan Documents" as defined in the
1999 Facility.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "NOTE" means any one of such promissory notes issued
hereunder.
"NOTICE OF BORROWING" means a Notice of Borrowing (as defined in
Section 2.02).
"OCTOBER SPECIAL CHARGES" means the special charges in the aggregate
pre-tax amount of $660,000,000 reflected in the Information.
"ORIGINAL AGREEMENT" has the meaning set forth in the recitals
hereto.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PCS" means PCS Holding Corporation, a Delaware corporation, and its
successors.
"PCS EVENT" means (i) the sale or other disposition of capital stock
of PCS (or of any non-cash proceeds thereof) or (ii) any sale, lease or
other disposition by PCS or any of its Subsidiaries of any asset which
would constitute an Asset Sale but for clause (i) of the definition of such
term.
"PCS PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as of the
date hereof between the Borrower and Morgan Guaranty Trust Company of New
York, as agent thereunder, in substantially the form of Exhibit E.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENTS" means the drugstore.com Pledge Agreement and the
PCS Pledge Agreement.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"PRO RATA EXPOSURES" means the Credit Exposures, the Morgan Pro Rata
Exposure and the Prudential Pro Rata Exposure.
"PRUDENTIAL PRO RATA EXPOSURE" means the 7.30% Senior Secured Notes
due February 28, 2002 issued by Finco, Inc. and guaranteed by the Borrower.
"QUARTERLY DATE" means the last day of each Quarterly Period.
"QUARTERLY PERIOD" means a three-month period consisting of (i)
February, March and April, (ii) May, June and July, (iii) August, September
and October or (iv) November, December and January.
"REDUCTION EVENT" means the receipt on or after October 15, 1999 by
the Borrower or a Subsidiary of proceeds of (i) a PCS Event, (ii) a Capital
Markets Transaction or (iii) an Asset Sale.
"REFERENCE BANKS" means the principal London offices of Citibank,
N.A., Bank of America, N.A. and Morgan Guaranty Trust Company of New York.
"REFUNDING BORROWING" means a Borrowing which, after application of
the proceeds thereof, results in no net increase in the outstanding
principal amount of Loans of any Class made by any Bank.
"REGULATION T, U, OR X" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Credit Exposures.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely
in shares of its capital stock) or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock (other than such payment in
connection with employee benefit plans in the ordinary course of business).
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but not including the Termination Date.
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in Section
5.08.
"SEC" means the Securities and Exchange Commission, or any Person
succeeding to its functions under the Securities Exchange Act of 1934, as
amended.
"SECURED DEBT" means Debt which is secured by a Lien on property of
the Borrower or any Subsidiary, but shall not include guarantees arising in
connection with the sale, discount, guarantee or pledge of notes, chattel
mortgages, leases, accounts receivable, trade acceptances and other papers
arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or
services.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 8% of the consolidated assets of the
Borrower and its Consolidated Subsidiaries at such time.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"SYNTHETIC LEASE" means a lease which is treated as an operating
lease under generally accepted accounting principles but as ownership of
the leased asset by the lessee for purposes of the Internal Revenue Code.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial
paper rated at least A-1 by S&P (as defined in the Pricing Schedule) and
P-1 by Moody's (as defined in the Pricing Schedule), (iii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000,
(iv) repurchase agreements with respect to securities described in clause
(i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, provided in each case that
such Investment matures within one year from the date of acquisition
thereof by the Borrower or a Subsidiary or (v) money market mutual funds at
least 90% the assets of which are held in Investments referred to in
clauses (i) through (iv) above (except that the maturities of certain
Investments held by any such money market funds may exceed one year so long
as the dollar-weighted average life of the Investments of such money market
mutual fund is less than one year).
"TERMINATION DATE" means July 19, 2001, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Termination Date shall be the next preceding Euro-Dollar
Business Day.
"TOTAL CAPITAL" means, at any date, the sum of Consolidated Debt and
Consolidated Net Worth, each determined as of such date.
"TRANCHE A COMMITMENT" means (i) with respect to each Bank listed in
the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche A Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c),
the amount of the Tranche A Commitment thereby assumed by it, in each case
as such amount may be changed from time to time pursuant to Sections 2.08,
2.10 and 9.06(c).
"TRANCHE A EXPOSURE" means, with respect to each Bank, the amount of
its Tranche A Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche A Loans, if its Tranche A
Commitment is no longer in existence.
"TRANCHE A LOAN" means a loan made by a Bank pursuant to Section
2.01(a).
"TRANCHE B COMMITMENT" means (i) with respect to each Bank listed in
the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche B Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c),
the amount of the Tranche B Commitment thereby assumed by it, in each case
as such amount may be changed from time to time pursuant to Sections 2.08,
2.10 and 9.06(c).
"TRANCHE B EXPOSURE" means, with respect to each Bank, the amount of
its Tranche B Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche B Loans, if its Tranche B
Commitment is no longer in existence.
"TRANCHE B LOAN" means a loan made by a Bank pursuant to Section
2.01(b).
"TYPE" has the meaning set forth in Section 1.03.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii)
the fair market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but unpaid contributions),
all determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. (a) Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared
in accordance with generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the
most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Agent that the Borrower wishes to amend any covenant
in Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Banks wish to amend Article 5 for
such purpose), then the Borrower's compliance with such covenant shall be
determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted
accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
(b) All financial determinations hereunder shall be adjusted to
eliminate the effect of the October Special Charge for all fiscal periods
ended prior to the date hereof.
SECTION 1.03. Classes and Types of Loans. Loans hereunder are
distinguished by "CLASS" and by "TYPE". The "CLASS" of a Loan (or of a
Commitment to make such a Loan or of a Borrowing comprised of such Loans)
refers to the determination whether such Loan is a Tranche A Loan or a
Tranche B Loan, each of which constitutes a Class. The "TYPE" of a Loan
refers to the determination whether such Loan is a Euro-Dollar Loan or a
Base Rate Loan. Identification of a Loan (or a Borrowing) by both Class and
Type (e.g., a "Tranche B Euro-Dollar Loan") indicates that such Loan is
both a Tranche B Loan and a Euro-Dollar Loan (or that such Borrowing is
comprised of such Loans).
SECTION 1.04. Other Definitional Provisions. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01
may, unless the context otherwise requires, be used in the singular or
plural depending on the reference. "Include" or "includes" and "including"
shall be deemed to be followed by "without limitation" whether or not they
are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing and other means of
reproducing words in a visible form. References to any agreement or
contract are to such agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and
thereof; provided that amendments to the 1999 Loan Documents or the 1999
Facility shall be effective for purposes of references thereto in this
Agreement only if such amendments are consented to in writing for such
purpose by the Required Banks. References to any Person include the
successors and assigns of such Person. References "from" or "through" any
date mean, unless otherwise specified, "from and including" or "through and
including", respectively.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Tranche A. During the
Revolving Credit Period each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make loans to the Borrower
pursuant to this Section 2.01(a) from time to time in amounts requested by
the Borrower in accordance with the terms of this Agreement, provided that
the aggregate principal amount of Tranche A Loans by such Bank at any one
time outstanding shall not exceed the amount of its Tranche A Commitment.
(b) Tranche B. During the Revolving Credit Period each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to make
loans to the Borrower pursuant to this Section 2.01(b) from time to time in
amounts requested by the Borrower in accordance with the terms of this
Agreement, provided that the aggregate principal amount of Tranche B Loans
by such Bank at any one time outstanding shall not exceed the amount of its
Tranche B Commitment.
(c) Amounts. Each Borrowing under this Section shall be in an
aggregate principal amount of $10,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the aggregate amount
of the unused Commitments of the applicable Class) and shall be made from
the several Banks ratably in proportion to their respective Commitments of
the applicable Class. Within the foregoing limits, the Borrower may borrow
under this Section, repay, or to the extent permitted by Section 2.11,
prepay Loans and reborrow at any time during the Revolving Credit Period
under this Section.
SECTION 2.02. Notice of Borrowings. The Borrower shall give the Agent
notice (a "NOTICE OF BORROWING") not later than 10:30 A.M. (New York City
time) on (x) the date of each Base Rate Borrowing and (y) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) the Class and Type of the Loans comprising such Borrowing, and
(d) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank shall (except as provided in subsection (c) of
this Section) make available its share of such Borrowing, in Federal or
other funds immediately available in New York City, to the Agent at its
address referred to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article 3 has not been satisfied, the
Agent will make the funds so received from the Banks available to the
Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by such
Bank to the Agent as provided in subsection (b), or remitted by the
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such
Bank has made such share available to the Agent on the date of such
Borrowing in accordance with subsections (b) and (c) of this Section 2.03
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Agent, such
Bank and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each
day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to Section 2.06 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay
to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.04. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular Class or Type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such
Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant Class or Type. Each reference in this
Agreement to the "NOTE" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the
Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, Class, Type and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.05. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on
the last day of the Interest Period applicable to such Borrowing.
SECTION 2.06. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to
the sum of the Base Rate Margin plus the Base Rate for such day. Such
interest shall be payable for each Interest Period on the last day thereof.
Any overdue principal of or interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the applicable Adjusted London Interbank Offered
Rate for such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof.
The "ADJUSTED LONDON INTERBANK OFFERED RATE" applicable to any
Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing
(i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business
Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "EUROCURRENCY LIABILITIES" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category
of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The
Adjusted London Interbank Offered Rate shall be adjusted automatically on
and as of the effective date of any change in the Euro-Dollar Reserve
Percentage.
(c) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment,
at a rate per annum equal to the sum of 2% plus the higher of (i) the sum
of the Euro-Dollar Margin for such day plus the Adjusted London Interbank
Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the
next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum
at which one day (or, if such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period of time not longer
than six months as the Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference Bank in the
London interbank market for the applicable period determined as provided
above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist,
at a rate per annum equal to the sum of 2% plus the rate applicable to Base
Rate Loans for such day).
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
Banks of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.07. Fees.
(a) Participation Fees. On the Effective Date, the Borrower shall pay
to the Agent for the account of each Bank a participation fee in an amount
equal to 0.50% of the aggregate amount of such Bank's Commitments.
(b) Commitment Fees. The Borrower shall pay to the Agent for the
account of the Banks ratably a commitment fee accruing at the Commitment
Fee Rate (determined daily in accordance with the Pricing Schedule) on the
daily unused amount of the Commitments of each Class. Accrued commitment
fees with respect to the Commitments of each Class shall be payable
quarterly on each Quarterly Date and upon the date of termination of the
Commitments of such Class in their entirety.
SECTION 2.08. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Commitments
of either Class at any time, if no Loans of such Class are outstanding at
such time or (ii) ratably reduce from time to time by an aggregate amount
of $25,000,000 or any larger multiple thereof, the aggregate amount of the
Commitments of either Class in excess of the aggregate outstanding
principal amount of the Loans of such Class; provided that no such
termination or reduction of the Tranche A Commitments shall be permitted
unless and until the Tranche B Commitments shall have been terminated. Upon
receipt of any such notice, the Agent shall promptly notify the Banks.
SECTION 2.09. Scheduled Termination of Commitments. All Commitments
shall terminate on the Termination Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such
date.
SECTION 2.10. Reduction Events; Mandatory Prepayments and Commitment
Reductions. (a) In the event that the Borrower or any of its Subsidiaries
shall at any time, or from time to time, receive any Net Cash Proceeds of
any Reduction Event, (x) the Borrower shall, not later than the Domestic
Business Day following the date of receipt of such Net Cash Proceeds,
notify the Agent of such fact and of the amount of such Net Cash Proceeds,
(y) the Borrower shall, not later than the Domestic Business Day following
the date of receipt of such Net Cash Proceeds, cause the same to be
transferred to the Agent to be held in an escrow account pending
application in accordance with the provisions of this Agreement and the
1999 Facility and (z) the Borrower shall, on the third Euro-Dollar Business
Day following the date of receipt of such Net Cash Proceeds, apply an
amount equal to the largest multiple of $1,000,000 which does not exceed
the amount of such Net Cash Proceeds to reduction of the 1999 Exposures
and/or the Pro Rata Exposures in accordance with the following provisions
of this Section:
(i) if the amount of the Net Cash Proceeds in respect of any
Reduction Event is less than $5,000,000, then, unless the Required
Banks otherwise elect, the application thereof shall be deferred
until receipt of proceeds such that, together with all other such
amounts received and not previously applied, the amount of such Net
Cash Proceeds is equal to at least $5,000,000;
(ii) if such Reduction Event is a PCS Event, such Net Cash
Proceeds shall FIRST be applied ratably to reduce the 1999 Exposures,
until the same shall have been reduced to zero, then SECOND shall be
applied ratably to reduce the Tranche A Exposures until the Tranche A
Exposures shall have been reduced to zero and then THIRD applied in
accordance with paragraph (iv) below;
(iii) if such Reduction Event is a Capital Markets Transaction,
such Net Cash Proceeds shall first be applied ratably to reduce the
1999 Exposures, subject to Section 2.09(a)(ii) of the 1999 Facility,
until the same shall have been reduced to zero, and then applied in
accordance with paragraph (iv) below;
(iv) if such Reduction Event is not covered by paragraph (ii)
or (iii) above, or if there are Net Cash Proceeds in excess of those
applied in accordance with paragraphs (ii) and (iii) above, such Net
Cash Proceeds shall first be applied ratably to the Pro Rata
Exposures until the Pro Rata Exposures shall have been reduced to
zero, and then ratably to prepay loans outstanding under the 1999
Facility;
(v) the ratable application of Net Cash Proceeds to the Credit
Exposure, Tranche A Exposure or Tranche B Exposure of a Bank shall be
based upon the full amount thereof at the relevant time, and shall be
effected by both a reduction in the amount of such Bank's Commitment
of the relevant Class by its ratable share of the related Net Cash
Proceeds and by the prepayment of its outstanding Loans of the
relevant Class in an equal amount; provided that if its outstanding
Loans of the relevant Class are less than its ratable share of such
Net Cash Proceeds, such Loans shall be prepaid in their entirety and
the excess funds not required for such purpose shall be remitted to
the Borrower; and provided further that if and to the extent any
prepayment of Tranche B Loans required hereunder would result in the
aggregate outstanding principal amount of the Partially Secured
Obligations (as defined in the Pledge Agreements) being less than the
Maximum Principal Amount (as defined in the Pledge Agreements), such
prepayment shall be required only to the extent necessary so that the
aggregate outstanding principal amount of the Tranche B Loans does
not exceed the aggregate amount of the Tranche B Commitments as
reduced;
(vi) Net Cash Proceeds applied to the Credit Exposures pursuant
to paragraph (iv) above shall be applied ratably FIRST to the Tranche
B Exposures until Tranche B Exposures shall have been reduced to zero
and then SECOND to the Tranche A Exposures; and
(vii) no Borrowing may be made on or after the date of any
Reduction Event and prior to the fifth Euro-Dollar Business Day
thereafter if such Borrowing would cause the aggregate outstanding
principal amount of the Loans of any Class to exceed the amount of
the Commitments of such Class after giving effect to any reduction
thereof required pursuant to this Section on such fifth succeeding
Euro-Dollar Business Day.
(b) Upon receipt from the Borrower of a notice pursuant to Section
2.10(a)(y), the Administrative Agent will promptly notify each Bank of the
contents thereof, and of the date of the related reduction required
hereunder. Any required prepayment shall be made together with accrued
interest on the amount prepaid, and (within the Class of Borrowings
determined pursuant to the other provisions of this Section) shall be
applied first to Base Rate Borrowings and then to such outstanding
Euro-Dollar Borrowings as the Borrower may elect in such notice, or failing
such election as the Administrative Agent may determine in its discretion.
(c) Amounts held by the Administrative Agent in escrow pending
application as contemplated by this Section 2.10 shall be invested upon the
instruction of the Borrower in Temporary Cash Investments for the account
of the Borrower.
(d) It is expressly understood and agreed that the provisions of this
Section 2.10 are not intended to, and do not, create a Lien in any Net Cash
Proceeds (except to the extent the same represent proceeds of Collateral).
(e) Net Cash Proceeds of a Reduction Event received by the Borrower
or a Subsidiary prior to the Effective Date shall be deemed for purposes of
this Section to have been received on the Effective Date.
SECTION 2.11. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Loans to Section 2.14, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Agent, prepay any Base Rate Borrowing
or (ii) upon at least three Euro-Business Days' notice to the Agent, prepay
any Euro-Dollar Borrowing, in each case in whole at any time, or from time
to time in part in amounts aggregating $10,000,000 or any larger multiple
of $1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment; provided that no such
optional prepayment of any Tranche A Loan shall be permitted while any
Tranche B Loans remain outstanding. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Banks included in such
Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City,
to the Agent at its address referred to in Section 9.01. The Agent will
promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Base Rate Loans or of fees shall be due
on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall be
due on a day which is not a Euro-Dollar Business Day, the date for payment
thereof shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be
payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that
the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such
Bank. If and to the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from
the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article 2, 6 or
8 or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to
Section 2.07(c), or if the Borrower fails to borrow or prepay any
Euro-Dollar Loans after notice has been given to any Bank in accordance
with Section 2.03(a), 2.10(b) or 2.11(a), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred
by it (or by an existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating
or employing deposits from third parties, but excluding loss of margin for
the period after any such payment or failure to borrow or prepay, provided
that such Bank shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in
the absence of clearly demonstrable error.
SECTION 2.14. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest
and fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding
the last day).
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Amended Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
Borrower and Banks comprising the Required Banks (or, in the case of any
party as to which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic, telex or
other written confirmation from such party of execution of a counterpart
hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note dated on or before the Effective Date complying with the
provisions of Section 2.04;
(c) receipt by the Agent of duly executed counterparts of the Pledge
Agreements, together with certificates evidencing the Collateral pledged
thereunder and such other instruments of assignment and/or financing
statements as the Agent may reasonably request;
(d) receipt by the Agent of opinions of (i) Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel for the Borrower, substantially in the
form of Exhibit B-1 hereto, and (ii) Elliot S. Gerson, General Counsel of
the Borrower, substantially in the form of Exhibit B-2 hereto, and covering
in each case such additional matters relating to the transactions
contemplated hereby as the Required Banks may be reasonably request;
(e) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit C
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(f) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower, the corporate authority for and
the validity of this Agreement, the Pledge Agreements and the Notes, and
any other matters relevant hereto, all in form and substance satisfactory
to the Agent;
(g) receipt by the Agent of evidence satisfactory to it that the
Borrower shall have paid all participation fees payable pursuant to Section
2.08;
(h) receipt by the Agent of evidence satisfactory to it that the
closing under the 1999 Facility shall have occurred, and the loans
contemplated thereby shall have been made, not later than the Effective
Date, without waiver of any material condition specified therein;
(i) receipt by the Agent of evidence satisfactory to it that
amendments to the Morgan Pro Rata Exposure and the Prudential Pro Rata
Exposure shall have become effective, under the terms of which amendments
no payments of principal may be required thereunder prior to November 1,
2000 except (i) as contemplated by Section 2.10 hereof or (ii) in the event
of acceleration upon an Event of Default;
(j) receipt by the Agent for each Bank of a duly executed purpose
statement on Form FR U-1; and
(k) receipt by the Agent of evidence satisfactory to it that the LPG
Transaction shall have been consummated in accordance with the LPG
Commitment, and the Borrower shall have received $300,000,000 gross cash
proceeds pursuant thereto.
On the Effective Date the Original Agreement will be automatically amended
and restated in its entirety to read as set forth herein. On and after the
Effective Date the rights and obligations of the parties hereto shall be
governed by this Amended Agreement; provided the rights and obligations of
the parties hereto with respect to the period prior to the Effective Date
shall continue to be governed by the provisions of the Original Agreement.
The Notes delivered to each Bank under the Original Agreement shall be
canceled and Notes under this Amended Agreement shall be given in
substitution therefor (but not as a novation thereof). The Agent shall
promptly notify the Borrower and each Bank of the effectiveness of this
Amended Agreement, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02;
(b) the fact that, immediately after such Borrowing, no Default shall
have occurred and be continuing; and
(c) the fact that the representations and warranties of the Borrower
contained in this Agreement (except, in the case of a Refunding Borrowing,
the representations and warranties set forth in Sections 4.04(c) and 4.06
as to any matter which has theretofore been disclosed in writing by the
Borrower to the Banks) shall be true in all material respects on and as of
the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Borrowing as to the facts
specified in clauses (b) and (c) of this Section.
SECTION 3.03. Transition. Each Loan outstanding under the Original
Agreement on the Effective Date shall remain outstanding under this Amended
Agreement, with an Interest Period and, in the case of any Euro-Dollar
Loan, a related Adjusted London Interbank Offered Rate as initially
established pursuant to the Original Agreement, but with a Base Rate Margin
or Euro-Dollar Margin determined pursuant to this Amended Agreement for any
date on or after the Effective Date. The Agent shall determine in
consultation with the Borrower which of such outstanding Loans are Tranche
A Loans and which are Tranche B Loans, and shall promptly notify the
Borrower and each Bank of such determination.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of
the Loan Documents are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement or instrument evidencing or
governing Debt of the Borrower or any Subsidiary or any other material
agreement, instrument, judgment, injunction, order or decree binding upon
the Borrower or any Subsidiary or result in the creation or imposition of
any Lien on any asset of the Borrower or any Subsidiary pursuant to any
such agreement, instrument, judgment, injunction, order or decree (other
than the Liens created by the Pledge Agreements).
SECTION 4.03. Binding Effect. This Agreement and each Pledge
Agreement constitutes a valid and binding agreement of the Borrower and
each Note, when executed and delivered in accordance with this Agreement,
will constitute a valid and binding obligation of the Borrower, in each
case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. Except as disclosed in the
Information:
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 27, 1999 and the related
consolidated statements of income and cash flows for the fiscal year then
ended, reported on by KPMG Peat Marwick LLP and set forth in the Borrower's
1999 Form 10-K, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of May 29, 1999 and the related consolidated
statements of income and cash flows for the fiscal period then ended, set
forth in the Borrower's quarterly report on Form 10-Q for the fiscal
quarter then ended, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements
referred to in subsection (a), the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal period,
subject to normal year-end adjustments.
(c) Since May 29, 1999, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement, including the Information, do not and will not contain any
untrue statement of material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
The Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect the business, operations or condition,
financial or otherwise, of the Borrower and its Subsidiaries or the
Borrower's ability to perform its obligations under this Agreement.
SECTION 4.06. Litigation. Except as disclosed in the Borrower's 1999
Form 10-K, there is no action, suit or proceeding pending against, or to
the knowledge of the Borrower threatened against or affecting, the Borrower
or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect
the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries or which in
any manner draws into question the validity or enforceability of any Loan
Document.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect
of any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns, and the Borrower and its
Significant Subsidiaries have filed all other material tax returns, which
are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Consolidated Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of
the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Significant Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.10. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the
Borrower and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction
in the level of or change in the nature of operations conducted thereat,
any costs or liabilities in connection with off-site disposal of wastes or
hazardous substances, and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.11. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of
the Borrower and each of its Subsidiaries (including those areas affected
by suppliers and vendors) that could be adversely affected by the "YEAR
2000 PROBLEM") (that is, the risk that computer applications used by it or
any of its Subsidiaries (or their respective supplier and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented such plan in accordance with
such timetable. The Borrower reasonably believes that all computer
applications that are material to the business or operations of the
Borrower or any of its Subsidiaries will on a timely basis be able to
perform properly date-sensitive functions for all dates before and from and
after January 1, 2000, except to the extent that a failure to do so could
not reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.12. Pledge Agreements. The representations and warranties
of the Borrower set forth in each Pledge Agreement are true and correct.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days (or within
such longer period of time, not greater than 120 days, to which the SEC may
extend the filing deadline for the Borrower's Annual Report on Form 10-K)
after the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on without material
qualification by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days (or (x) in
the case of the fiscal quarter most recently ended prior to the date
hereof, within 65 days or (y) in the case of any subsequent fiscal quarter,
within such longer period of time, not greater than 60 days, to which the
SEC may extend the filing deadline for the Borrower's Quarterly Report on
Form 10-Q) after the end of each of the first three quarters of each fiscal
year of the Borrower, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and for
the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.08 to 5.15, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the SEC;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
Information required to be delivered pursuant to Section 5.01(a),
5.01(b), 5.01(f) or 5.01(g) above shall be deemed to have been delivered on
the date on which the Borrower provides notice to the Banks that such
information has been posted on the Borrower's website on the Internet at
the website address listed on the signature pages hereof, at
sec.gov/edaux/searches.htm or at another website identified in such notice
and accessible by the Banks without charge; provided that (i) such notice
may be included in a certificate delivered pursuant to Section 5.01(c) and
(ii) the Borrower shall deliver paper copies of the information referred to
in Section 5.01(a), 5.01(b), 5.01(f) or 5.01(g) to any Bank which requests
such delivery.
SECTION 5.02. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, pay and discharge, as the same shall
become due and payable, (i) all material claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons prior
to the time such claims or demands give rise to a Lien upon any of its
property or assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or assets, except
where any of the items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Borrower or such Subsidiary, as
the case may be, shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves, if any, for
the accrual of any such items.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own
name) with financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute engaged
in the same or a similar business; and will furnish to the Banks, upon
request from the Agent, information presented in reasonable detail as to
the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in this Agreement, the Borrower will
continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Borrower and
its Significant Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Significant Subsidiary (except where
such Significant Subsidiary merges into the Borrower or any other
Subsidiary) to preserve, renew and keep in full force and effect their
respective legal existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a material
adverse effect on the business, financial position or results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and
will permit, and will cause each Subsidiary to permit, representatives of
any Bank at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often
as may reasonably be desired.
SECTION 5.07. Restriction on Other Agreements. The Borrower will not,
and will not permit any Subsidiary to, enter into any agreement (other than
the Loan Documents and the 1999 Loan Documents) which imposes a limitation
on incurrence by the Borrower and its Subsidiaries of Liens that is more
restrictive than the limitation on Liens set forth in the Indentures (other
than agreements with respect to Debt secured by Liens permitted by Section
5.10(a) containing restrictions on the ability to transfer or grant Liens
on the assets securing such Debt and other than customary restrictions
contained in purchase and sale agreements limiting the transfer of the
subject assets pending closing and customary non-assignment provisions in
leases and other contracts entered into in the ordinary course of business)
or which imposes other covenants more restrictive than those set forth in
this Agreement.
SECTION 5.08. Restriction on Debt of Subsidiaries. The Borrower will
not permit any Subsidiary to create, issue, incur, assume, or in any other
way become liable for any unsecured Debt unless immediately prior thereto
the Borrower would be entitled under Section 5.10(e) to create Secured Debt
not specifically permitted under Section 5.10 but for subsection (e)
thereof in an amount equal to such Debt; provided that the foregoing
restriction shall not prevent (i) any Subsidiary from becoming liable to
the Borrower or to a Wholly-Owned Consolidated Subsidiary for Debt or (ii)
the extension, renewal or refunding of any Debt of any Subsidiary so long
as Consolidated Debt is not thereby increased.
SECTION 5.09. Restriction on Sales with Leases Back. Except for a
sale or transfer by a Subsidiary to the Borrower or a Wholly-Owned
Consolidated Subsidiary, the Borrower will not, and will not permit any
Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail
store or equipment now or hereafter owned and operated by the Borrower or a
Subsidiary, with the intention that the Borrower or any Subsidiary take
back a lease thereof, except a lease for a period, including renewals, not
exceeding 24 months, by the end of which period it is intended that the use
of such property or equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "SALE AND LEASEBACK
TRANSACTION"); provided that, notwithstanding the foregoing, the Borrower
or any Subsidiary may enter into a Sale and Leaseback Transaction if the
Borrower or a Subsidiary would be entitled under Section 5.10(e) to create
Secured Debt not specifically permitted under Section 5.10 but for Section
5.10(e) in an amount equal to the Attributable Debt respecting such Sale
and Leaseback Transaction; provided further that, notwithstanding the
foregoing, the Borrower or any Subsidiary may enter into a Sale and
Leaseback Transaction if entered into in respect of property acquired by
the Borrower or a Subsidiary if such Sale and Leaseback Transaction is
entered into within 24 months from the date of such acquisition; and
provided still further that, notwithstanding the foregoing, the Borrower or
any Subsidiary may enter into a Sale and Leaseback Transaction so long as
the Net Cash Proceeds thereof are applied as contemplated by Section 2.10
hereof.
SECTION 5.10. Restriction on Liens. The Borrower will not, and will
not permit any Subsidiary to, create, issue, incur, assume or guarantee any
Secured Debt; provided that the foregoing covenant shall not apply to the
following:
(a) (i) Any Lien on any property acquired or constructed by the
Borrower or a Subsidiary and created contemporaneously with, or within 24
months after, such acquisition or the completion of such construction and
commencement of full operation of such property, whichever is later, to
secure or provide for the payment of any part of the purchase or
construction price of such property, or (ii) the acquisition by the
Borrower or a Subsidiary of property subject to any Lien upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Borrower or such Subsidiary, or (iii) any conditional sales agreement or
other title retention agreement with respect to any property hereafter
acquired; provided that the Lien does not spread to other property except
unimproved real property previously owned upon which any new construction
has taken place and subsequent additions to such acquired or constructed
property;
(b) Any Lien created for the sole purpose of extending, renewing or
refunding, in whole or part, any Lien permitted by this Section 5.10 or any
Lien securing the Debt of the Borrower or of any Subsidiary on the date of
this Agreement or of a corporation at the time such corporation becomes a
Subsidiary, or any extensions, renewals or refundings of any such Lien;
provided that the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such extension,
renewal or refunding and that such extension, renewal or refunding Lien
shall be limited to all or that part of the same property which secured the
Debt so extended, renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the Borrower or a
Wholly-Owned Consolidated Subsidiary;
(d) Any Lien created by the Loan Documents or the 1999 Loan
Documents; and
(e) Secured Debt of the Borrower and its Subsidiaries which would
otherwise be prohibited by the foregoing restrictions (not including
Secured Debt permitted to be secured under subsections (a) through (d)
above) so long as the sum of any such Secured Debt hereafter incurred and
outstanding at the time plus Attributable Debt of the Borrower and any
Subsidiaries in respect of Sale and Leaseback Transactions hereafter
entered into and outstanding at the time (excluding Attributable Debt
incurred in respect of any Sale and Leaseback Transaction (i) entered into
in respect of property acquired by the Borrower or a Subsidiary not more
than 24 months prior to the date such Sale and Leaseback Transaction is
entered into or (ii) if the Borrower, within 120 days before or after such
Sale and Leaseback Transaction is entered into applies an amount equal to
the greater of (A) the net proceeds of the sale of the property so sold and
leased back or (B) the fair market value of such property at the date such
arrangement is entered into to the retirement of Secured Debt (other than
at maturity or pursuant to any mandatory payment provision) or to reduction
of the Commitments) plus unsecured Debt of any Subsidiary hereafter
incurred and outstanding at the time (excluding unsecured Debt incurred
through the extension, renewal or refunding of Debt of such Subsidiary
where Consolidated Debt was not thereby increased and excluding any Debt
owed to the Borrower or a Wholly-Owned Consolidated Subsidiary) does not at
the time exceed 5% of Consolidated Net Tangible Assets.
SECTION 5.11. Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures for any period set forth below shall not
exceed the amount set forth below opposite such period:
FISCAL YEAR ENDING ON
OR CLOSEST TO AMOUNT
--------------------- ------
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
SECTION 5.12. Capitalization Leverage Ratio. At no time during any
period set forth below shall the ratio of (i) Consolidated Debt at such
time to (ii) Total Capital at such time, exceed the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
--------------------- -----
November 30, 1999 0.635
February 29, 2000 0.635
May 31, 2000 and 0.620
thereafter
SECTION 5.13. Cash Flow Leverage Ratio. At no time during any period
set forth below shall the ratio of (i) Consolidated Debt at such time to
(ii) Consolidated EBITDA for the four consecutive fiscal quarters then most
recently ended at or prior to such time, exceed the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
--------------------- -----
November 30, 1999 6.30
February 29, 2000 6.00
May 31, 2000 5.75
August 31, 2000 4.75
November 30, 2000 4.50
February 28, 2001 and 4.00
thereafter
SECTION 5.14. Fixed Charge Coverage. At no time during any period set
forth below shall the Fixed Charge Coverage Ratio be less than the ratio
set forth below opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
--------------------- -----
November 30, 1999 1.35
February 29, 2000 1.35
May 31, 2000 1.35
August 31, 2000 1.45
November 30, 2000 1.55
February 28, 2001 and 1.60
thereafter
SECTION 5.15. Limitation on Investments and Acquisitions. (a) Neither
the Borrower nor any Consolidated Subsidiary will make or acquire any
Investment in any Person other than:
(i) Investments in Consolidated Subsidiaries; provided, that
Investments (exclusive of inter-company payables owing to the
Borrower or a Subsidiary arising from cash management transactions in
the ordinary course of business) in PCS, whether existing on the date
hereof or hereafter made, may be made only by the Borrower and only
in the form of a contribution to the capital of PCS and without
issuance of additional shares of capital stock therefor, and provided
further that no such Investment may be made in any Subsidiary of PCS
except by PCS or another Subsidiary of PCS;
(ii) Temporary Cash Investments;
(iii) Investments received as consideration for sale or other
disposition of the capital stock of PCS or drugstore.com permitted by
Section 5.16;
(iv) Investments in drugstore.com existing on the date hereof;
and
(v) Any Investment not otherwise permitted by the foregoing
clauses of this Section if, immediately after such Investment is made
or acquired, the aggregate net book value of all Investments
permitted by this clause (c) does not exceed 10% of Consolidated Net
Worth.
(b) The Borrower will not, and will not permit any Subsidiary to,
consummate any Business Acquisition to the extent that the aggregate
consideration paid or payable by the Borrower or any Subsidiary in
connection with all such Business Acquisitions on or after the Closing Date
would exceed $15,000,000.
SECTION 5.16. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person,
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person or (iii) sell, lease or otherwise transfer
any Collateral to any other Person; provided that (x) the Borrower may
merge with another Person if (A) the Borrower is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no
Default shall have occurred and be continuing and (y) the Borrower may sell
or otherwise dispose of the capital stock of PCS or drugstore.com, in whole
but not in part, so long as the consideration therefor is not less than the
fair market value of such capital stock and shall consist solely of a
combination of cash and publicly traded securities payable and deliverable
at the closing of such sale.
SECTION 5.17. Use of Proceeds. The proceeds of the Tranche A Loans
made under this Agreement will be used by the Borrower exclusively to repay
commercial paper (or to refund borrowings the proceeds of which were used
solely to repay commercial paper), which commercial paper provided funds
for the payment of the purchase price of the capital stock of PCS. The
proceeds of the Tranche B Loans made under this Agreement will be used by
the Borrower for the Borrower's general corporate purposes; provided that
no Tranche B Loans may be borrowed for a purpose for which Tranche A Loans
may be borrowed unless the Tranche A Commitments are at the time fully
drawn. No such use of the proceeds will be for the purpose of prepaying
commercial paper prior to the maturity thereof and no such use of proceeds
will be, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "MARGIN STOCK" within the
meaning of Regulation U, other than publicly traded securities issued to
the Borrower in connection with the sale of the capital stock of PCS. The
Borrower will ensure that no such use of proceeds violates Regulation T, U
or X.
SECTION 5.18. Restricted Payments. After the date hereof, neither the
Borrower nor any Subsidiary will declare or make any Restricted Payment.
SECTION 5.19. Synthetic Leases. Neither the Borrower nor any
Subsidiary will enter into any Synthetic Lease if, after giving effect
thereto, the aggregate amount financed under all Synthetic Leases entered
into in any period of twelve consecutive calendar months commencing after
the date hereof would exceed $35,000,000.
SECTION 5.20. Tranche A Limitations. (a) No Tranche A Loans may be
borrowed hereunder unless the commitments under the 1999 Facility are fully
drawn.
(b) The Borrower will not for so long as the Tranche B Commitments
remain in existence use any source of funds other than additional Tranche A
Loans to repay or prepay Tranche A Loans prior to the Termination Date,
except as expressly contemplated by Section 2.10.
(c) If the capital stock of PCS is sold for consideration consisting
in whole or in part of "margin stock" within the meaning of Regulation U,
then for so long as such margin stock is held as substitute collateral
under the PCS Pledge Agreement, the Borrower may not make any Tranche A
Borrowing other than a Refunding Borrowing unless it shall have delivered
to the Agent an opinion of Skadden, Arps, Slate, Meagher & Flom, LLP,
satisfactory in form and substance to the Agent, to the effect that such
Borrowing does not result in a violation of Regulation T, U or X.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or shall fail to pay within five days of the due date thereof any
interest, fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform (i) any covenant
contained in Sections 5.08 to 5.20, inclusive or (ii) any covenant
contained in Section 3(b) or 5(b) of either Pledge Agreement;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in the Loan Documents (other than those covered by
clause (a) or (b) above) for 30 days after written notice thereof has been
given to the Borrower by the Agent at the request of any Bank;
(d) any material representation, warranty, certification or statement
made (or deemed made) by the Borrower in any Loan Document or in any
certificate, financial statement or other document delivered pursuant to
any Loan Document shall prove to have been incorrect in any material
respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Financial Obligations or
enables (or, if such event or condition does not otherwise give rise to a
Default hereunder, which with the giving of notice or lapse of time or both
would enable) the holder of such Material Financial Obligations or any
Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Significant Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer, any Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a period
of 30 days;
(k) any Lien created by either Pledge Agreement shall at any time
fail to constitute a valid and (to the extent required by such Pledge
Agreement) perfected Lien on all of the Collateral purported to be subject
thereto, securing the obligations purported to be secured thereby, with the
priority required by the Loan Documents, or the Borrower shall so assert in
writing; or
(l) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the SEC under said Act) of 20% or more of the outstanding shares of
common stock of the Borrower; or, during any period of 12 consecutive
calendar months, individuals who were directors of the Borrower on the
first day of such period shall cease to constitute a majority of the board
of directors of the Borrower;
then, and in every such event, the Agent shall (i) if requested by the
Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by Banks holding
Notes evidencing more than 50% in aggregate principal amount of the Loans,
by notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes (together with accrued interest thereon)
shall thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived
by the Borrower; provided that in the case of any of the Events of Default
specified in clause (g) or (h) above with respect to the Borrower, without
any notice to the Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower ; and provided further that if the Tranche B
Commitments are then still in existence, the Tranche B Commitments shall
terminate automatically, without any notice to the Borrower or any act by
the Agent or the Banks, immediately prior to any application of proceeds of
Collateral to the Tranche B Loans pursuant to Section 13 of the PCS Pledge
Agreement or Section 13 of the drugstore.com Pledge Agreement.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with all such powers
as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under the Loan Documents as
any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent.
SECTION 7.03. Action by Agent. The obligations of the Agent under the
Loan Documents are only those expressly set forth therein. Without limiting
the generality of the foregoing, the Agent shall not be required to take
any action with respect to any Default, except as expressly provided in
Article 6 and in the Pledge Agreements.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it or any of
them in connection herewith (i) with the consent or at the request of the
Required Banks (or such other number or percentage of Banks as may be
specified in the Loan Documents for particular purposes) or (ii) in the
absence of its or their own gross negligence or willful misconduct. Neither
the Agent nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition
specified in Article 3, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Credit Exposure, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except
such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance
upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right, with (so long as no
Default shall have occurred and be continuing) the consent of the Borrower,
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation, then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent,
which shall be a commercial bank organized or licensed under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of its
appointment as Agent by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure
to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing:
(a) the Agent is advised by the Reference Banks that deposits
in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the London interbank market for such Interest
Period, or
(b) Banks having 50% or more of the aggregate amount of the
Commitments of the relevant Class advise the Agent that the Adjusted
London Interbank Offered Rate as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Agent notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Euro-Dollar Loans shall be suspended.
Unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any Euro-Dollar Borrowing for which a Notice of
Borrowing has previously been given that it elects not to borrow on such
date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended.
Before giving any notice to the Agent pursuant to this Section, such Bank
shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued
interest thereon. Concurrently with prepaying each such Euro-Dollar Loan,
the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks),
and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
the date of this Agreement, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding any such requirement included
in an applicable Euro-Dollar Reserve Percentage), special deposit,
insurance assessment or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its
Euro-Dollar Lending Office) or shall impose on any Bank (or its Euro-Dollar
Lending Office) or on the London interbank market any other condition
affecting its Euro-Dollar Loans, its Note or its obligation to make
Euro-Dollar Loans and the result of any of the foregoing is to increase the
cost to such Bank (or its Euro-Dollar Lending Office) of making or
maintaining any Euro-Dollar Loan, or to reduce the amount of any sum
received or receivable by such Bank (or its Euro-Dollar Lending Office)
under this Agreement or under its Note with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank
to be material, then from time to time, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Euro-Dollar Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of clearly demonstrable error.
In determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or
for the account of any Bank or the Agent hereunder or under any Note shall
be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each
Bank and the Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or any political subdivision
thereof and, in the case of each Bank, taxes imposed on its income, and
franchise or similar taxes imposed on it, by the jurisdiction of such
Bank's Applicable Lending Office or any political subdivision thereof (all
such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). If
the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any Bank or the
Agent, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law and (iv) the Borrower shall furnish to the Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or otherwise with
respect to, any Loan Document (hereinafter referred to as "OTHER TAXES").
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section 8.04) paid by such Bank or the Agent (as the
case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be
made within 15 days from the date such Bank or the Agent (as the case may
be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank listed on the signature pages
hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Bank remains lawfully
able to do so), shall provide the Borrower with Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Bank is entitled to benefits
under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying
that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States. If
the form provided by a Bank at the time such Bank first becomes a party to
this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded
from "TAXES" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless
such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(a) with respect to Taxes imposed by the United States; provided,
however, that should a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate
or reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Agent, at its address or
telex number set forth on the signature pages hereof, (y) in the case of
any Bank, at its address or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex
number as such party may hereafter specify for the purpose by notice to the
Agent and the Borrower. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is transmitted to
the telex number specified in this Section and the appropriate answerback
is received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the
address specified in this Section; provided that notices to the Agent under
Article 2 or Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege under any Loan Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies provided in
the Loan Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Agent, including fees and
disbursements of special counsel for the Agent, in connection with the
preparation and administration of the Loan Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by the Agent and each Bank, including fees and
disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs
and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee
in connection with any administrative or judicial proceeding (whether or
not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee
shall have the right to be indemnified hereunder for such Indemnitee's own
gross negligence or willful misconduct as determined by a court of
competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a
participation in a Note acquired pursuant to the foregoing arrangements may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a
direct creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of
any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan or any fees hereunder, (iii) postpone the
date fixed for any payment of principal of or interest on any Loan or any
fees hereunder or for termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount
of the Notes, or the number of Banks, which shall be required for the Banks
or any of them to take any action under this Section or any other provision
of this Agreement.
(b) Any provision of any Collateral Document may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by
the Borrower and the Administrative Agent with the consent of the Required
Banks; provided that no such amendment or waiver shall, unless signed by
all the Banks, (i) alter in a manner adverse to the Banks the priorities
specified in Section 13 of either Pledge Agreement or (ii) effect or permit
a release of all or substantially all of the Collateral under either Pledge
Agreement. Notwithstanding the foregoing, Collateral shall be released from
the Lien of the Pledge Agreement from time to time as necessary to effect
any sale of Collateral permitted by the Loan Documents, and the
Administrative Agent shall execute and deliver all release documents
reasonably requested to evidence such release; provided that arrangements
satisfactory to the Agent shall have been made for application of the cash
proceeds thereof in accordance with Section 2.10 hereof and for the pledge
of any non-cash proceeds thereof pursuant to the Collateral Documents.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its
Commitments or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, and the Borrower and the
Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii) or (iii) of Section 9.05 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in
its participation agreement, be entitled to the benefits of Article 8 with
respect to its participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect
for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of
its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit D
hereto executed by such Assignee and such transferor Bank, with (and
subject to) notice to, and the subscribed consent of, the Borrower, so long
as no Default shall have occurred and be continuing, and the Agent (such
consent of the Borrower and the Agent not to be unreasonably withheld);
provided that if an Assignee is an affiliate of such transferor Bank or is
a Bank prior to giving effect to such assignment, such notice shall be
given but no such consent shall be required. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank with Commitments as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the
transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$2,500. If the Assignee is not incorporated under the laws of the United
States of America or a state thereof, it shall, prior to the first date on
which interest or fees are payable hereunder for its account, deliver to
the Borrower and the Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with
Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise
to such greater payment did not exist.
SECTION 9.07. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.08. Counterparts; Integration. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
SECTION 9.09. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: /s/ Richard Varmecky
--------------------------------------
Name: Richard Varmecky
Title: Senior Vice President - Finance
Address: 30 Hunter Lane
Camp Hill, PA 17011
Attention: Chief Financial Officer
Telephone No.: (717) 975-5750
Facsimile No.: (717) 975-3764
Website: www.riteaid.com
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Glenda Winter-Irving
-------------------------------
Name: Glenda Winter-Irving
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ Timothy Spanos
-------------------------------
Name: Timothy Spanos
Title: Managing Director
THE CHASE MANHATTAN BANK
By: /s/ Margaret Lane
-------------------------------
Name: Margaret Lane
Title: Vice President
MELLON BANK, N.A.
By: /s/ Richard Schaich
-------------------------------
Name: Richard Schaich
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Brennan Danile
-------------------------------
Name: Brennan Danile
Title: Assistant Vice President
WACHOVIA BANK, N.A.
By: /s/ James McCreary
----------------------------------
Name: James McCreary
Title: Senior Vice President/Group
Executive
SUNTRUST BANK, ATLANTA
By: /s/ Karen Copeland
---------------------------------
Name: Karen Copeland
Title: Vice President
By:
--------------------------------
Name:
Title:
BANK ONE, NA
(Main Office - Chicago)
By: /s/ Eva Drinis
--------------------------------
Name: Eva Drinis
Title: Assistant Vice President
ABN AMRO BANK N.V.
By: /s/ Louis McLinden, Jr.
--------------------------------
Name: Louis McLinden, Jr.
Title: Vice President
By: /s/ Jim Janovsky
--------------------------------
Name: Jim Janovsky
Title: Group Vice President
BANK OF MONTREAL
By: /s/ Geoffrey McConnell
--------------------------------
Name: Geoffrey McConnell
Title: Director
THE BANK OF NEW YORK
By: /s/ Howard Bascom
--------------------------------
Name: Howard Bascom
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
--------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ M. R. Marron
-------------------------------
Name: M. R. Marron
Title: Vice President & Manager
COMMERZBANK AG, NEW YORK BRANCH
By: /s/ Sean Harrigan
-------------------------------
Name: Sean Harrigan
Title: Senior Vice President
By: /s/ Andrew Lusk
-------------------------------
Name: Andrew Lusk
Title: Assistant Treasurer
FIRST UNION NATIONAL BANK
By: /s/ Mark Supple
------------------------------
Name: Mark Supple
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Robert Storer
-----------------------------
Name: Robert Storer
Title: Senior Vice President
THE FUJI BANK LIMITED
By: /s/ Raymond Ventura
-----------------------------
Name: Raymond Ventura
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN TRUST
COMPANY
By: /s/ J. Kenneth Biegan
------------------------------
Name: J. Kenneth Biegan
Title: Senior Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Daniel Lally
-------------------------------
Name: Daniel Lally
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY
By: /s/ Donald Dabisch
------------------------------
Name: Donald Dabisch
Title: Vice President
ROYAL BANK OF CANADA
By: /s/ Lori Ross
------------------------------
Name: Lori Ross
Title: Manager
THE SANWA BANK, LIMITED, NEW YORK
BRANCH
By: /s/ Joseph Leo
------------------------------
Name: Joseph Leo
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ C. Michael Garrido
-----------------------------
Name: C. Michael Garrido
Title: Senior Vice President
THE TOKAI BANK, LIMITED
By: /s/ Shinichi Nakatani
-------------------------------
Name: Shinichi Nakatani
Title: Assistant General Manger
UBS AG STAMFORD BRANCH
By: /s/ Wilfred Saint
------------------------------
Name: Wilfred Saint
Title: Assistant Director
CITIBANK, N.A.
By: /s/ Bradley Dietz
-----------------------------
Name: Bradley Dietz
Title: Vice President
ALLFIRST BANK, N.A.
By: /s/ Theodore Oswald
-----------------------------
Name: Theodore Oswald
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Glenda Winter-Irving
-----------------------------
Name: Glenda Winter-Irving
Title: Vice President
Address: 60 Wall Street
New York, NY 10260-0060
Attention: Loan Department
Telex number: 177615
<TABLE>
<CAPTION>
COMMITMENT SCHEDULE
BANK TRANCHE A TRANCHE B TOTAL
- ----- --------------- --------------- -----------------
<S> <C> <C> <C>
Morgan Guaranty Trust Company of New York $ 12,800,000.00 $ 51,200,000.00 $ 64,000,000.00
Bank of America, N.A 23,200,000.00 92,800,000.00 116,000,000.00
The Chase Manhattan Bank 9,600,000.00 38,400,000.00 48,000,000.00
Mellon Bank, N.A 9,600,000.00 38,400,000.00 48,000,000.00
PNC Bank, National Association 9,600,000.00 38,400,000.00 48,000,000.00
Wachovia Bank, N.A 9,600,000.00 38,400,000.00 48,000,000.00
SunTrust Bank, Atlanta 8,000,000.00 32,000,000.00 40,000,000.00
Bank One, NA (Main Office - Chicago) 6,000,000.00 24,000,000.00 30,000,000.00
ABN AMRO Bank N.V 6,000,000.00 24,000,000.00 30,000,000.00
Bank of Montreal 6,000,000.00 24,000,000.00 30,000,000.00
The Bank of New York 6,000,000.00 24,000,000.00 30,000,000.00
The Bank of Nova Scotia 6,000,000.00 24,000,000.00 30,000,000.00
Bank of Tokyo-Mitsubishi Trust Company 6,000,000.00 24,000,000.00 30,000,000.00
Commerzbank AG, New York Branch 6,000,000.00 24,000,000.00 30,000,000.00
First Union National Bank 6,000,000.00 24,000,000.00 30,000,000.00
Fleet National Bank 6,000,000.00 24,000,000.00 30,000,000.00
The Fuji Bank Limited 6,000,000.00 24,000,000.00 30,000,000.00
The Industrial Bank of Japan Trust Company 6,000,000.00 24,000,000.00 30,000,000.00
KeyBank National Association 6,000,000.00 24,000,000.00 30,000,000.00
The Northern Trust Company 6,000,000.00 24,000,000.00 30,000,000.00
Royal Bank of Canada 6,000,000.00 24,000,000.00 30,000,000.00
The Sanwa Bank, Limited, New York Branch 6,000,000.00 24,000,000.00 30,000,000.00
The Sumitomo Bank, Limited 6,000,000.00 24,000,000.00 30,000,000.00
The Tokai Bank, Limited 6,000,000.00 24,000,000.00 30,000,000.00
UBS AG Stamford Branch 6,000,000.00 24,000,000.00 30,000,000.00
Citibank, N.A 5,600,000.00 22,400,000.00 28,000,000.00
Allfirst Bank, N.A 4,000,000.00 16,000,000.00 20,000,000.00
-------------- --------------- -----------------
TOTAL COMMITMENTS $200,000,00.000 $800,000,000.00 $1,000,000,000.00
=============== =============== =================
</TABLE>
PRICING SCHEDULE
The "COMMITMENT FEE RATE", "BASE RATE MARGIN" and "EURO-DOLLAR
MARGIN" for any day are the respective percentages set forth below in the
applicable row under the column corresponding to the Status that exists on
such day.
STATUS LEVEL I LEVEL II LEVEL III
------ ------- -------- ---------
Commitment Fee Rate 0.45% 0.50% 0.50%
Base Rate Margin 1.25% 1.75% 2.50%
Euro-Dollar Margin 2.25% 2.75% 3.50%
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if (i) such date is on or after
May 1, 2000 and (ii) at such date, the Borrower's long-term debt is rated
BBB- or higher by S&P and Baa3 or higher by Moody's.
"LEVEL II STATUS" exists at any date if, at such date, (a) the
Borrower's long-term debt is rated BB+ or higher by S&P and Ba1 or higher
by Moody's and (b) Level I Status does not exist.
"LEVEL III STATUS" exists at any date if, at such date, no other
Status exists.
"MOODY'S" means Moody's Investors Service, Inc., or any successor to
its business of rating debt securities.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor to its business of rating
debt securities.
"STATUS" refers to the determination of which of Level I Status,
Level II Status or Level III Status exists at any date.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating assigned to
any other debt security of the Borrower shall be disregarded. The rating in
effect at any date is that in effect at the close of business on such date.
If Asset Sales generating Net Cash Proceeds of at least $500.0 million
(excluding the sale by the Borrower of certain of its assets to Longs Drug
Stores Corp. publicly announced prior to the date of this Agreement, but
including solely for purposes of this sentence a sale or other disposition
of capital stock of PCS) are not consummated by February 15, 2000, the
Euro-Dollar Margin and Base Rate Margin applicable for any day thereafter
shall be the Euro-Dollar Margin and Base Rate Margin, respectively, set
forth above for such day, plus, in each case, 0.50%.
EXHIBIT A
NOTE
New York, New York
October __, 1999
For value received, Rite Aid Corporation, a Delaware corporation (the
"BORROWER"), promises to pay to the order of _________________________ (the
"BANK"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to
the Credit Agreement referred to below on the last day of the Interest
Period relating to such Loan. The Borrower promises to pay interest on the
unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal
or other immediately available funds at the office of Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective Classes, Types and
maturities thereof and all repayments of the principal thereof shall be
recorded by the Bank and, if the Bank so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding may
be endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement
shall not affect the obligations of the Borrower hereunder or under the
Credit Agreement.
This note is one of the Notes referred to in the $1,000,000,000
Amended and Restated Credit Agreement dated as of October 25, 1999 among
the Borrower, the Banks from time to time parties thereto and Morgan
Guaranty Trust Company of New York, as Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
Payment of principal and interest on this Note is secured by security
interests in certain collateral pursuant to the Collateral Documents.
RITE AID CORPORATION
By: ___________________________________
Name:
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
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Class and Amount of
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EXHIBIT B-1
October __, 1999
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company of New York,
as Agent
60 Wall Street
New York, New York 10260-0060
Re: Rite Aid Corporation
Ladies and Gentlemen:
We have acted as special counsel to Rite Aid Corporation, a Delaware
corporation (the "BORROWER"), in connection with the preparation, execution
and delivery of the $1,000,000,000 Amended and Restated Credit Agreement
dated as of October 25, 1999 (the "CREDIT AGREEMENT") among the Borrower,
the Banks from time to time parties thereto and Morgan Guaranty Trust
Company of New York, as Agent (the "AGENT"). Terms defined in the Credit
Agreement are used herein as therein defined. This opinion is being
delivered pursuant to Section 3.01(d)(i) of the Credit Agreement.
In our examination we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to
this opinion which we did not independently establish or verify, we have
relied upon statements and representations of the Borrower and its officers
and other representatives and of public officials, including the facts set
forth in the Borrower's Certificate described below.
In rendering the opinions set forth herein, we have examined and
relied on originals or copies of the following:
(i) the Credit Agreement;
(ii) the Notes issued pursuant thereto;
(iii) the Pledge Agreements;
(iv) each of the Applicable Agreements (as defined below);
(v) the certificate of the Borrower dated the date hereof, a
copy of which is attached as Exhibit A hereto (the "BORROWER'S
CERTIFICATE"); and
(vi) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
Members of our firm are admitted to the Bar in the State of New York,
and we do not express any opinion as to the laws of any other jurisdiction
other than the Delaware General Corporation Law, the Uniform Commercial
Code as in effect on the date hereof in the State of Delaware (the
"DELAWARE UCC") and the laws of the United States of America to the extent
specifically referred to herein.
Unless otherwise indicated, references to the "UCC" shall mean (i)
with respect to the validity of the security interest, the Uniform
Commercial Code as in effect on the date hereof in the State of New York,
and (ii) with respect to the perfection and the effect of perfection or
non-perfection of the security interest, the Delaware UCC.
Nancy A. Lieberman, a member of this firm, is a director and
shareholder of the Borrower.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. Each Loan Document (other than the Notes) constitutes the valid
and binding agreement of the Borrower and each Note constitutes a valid and
binding obligation of the Borrower, in each case, enforceable against the
Borrower in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity
or at law).
In connection with our opinion set forth in this paragraph 1, we call
to your attention our opinion set forth in paragraph 2 below.
2. The execution and delivery by the Borrower of each Loan Document,
and the performance by the Borrower of its obligations under each Loan
Document in accordance with its terms, do not conflict with the Certificate
of Incorporation or By-laws of the Borrower.
3. Neither the execution, delivery or performance by the Borrower of
any Loan Document nor the compliance by the Borrower with the terms and
provisions thereof will contravene any provision of any of the Applicable
Agreements (as hereinafter defined). "APPLICABLE AGREEMENTS" shall mean the
agreements set forth in Schedule B hereto, together with the instruments
issued by the Borrower in connection therewith, in each case as in effect
as of the date hereof.
In rendering the opinions set forth in this paragraph 3, we have
considered and relied upon the fact that (i) the shares of capital stock of
PCS Holding Corporation represented by the share certificates identified on
Schedule A hereto (the "PLEDGED SECURITIES") were acquired by the Borrower
within 24 months of the date hereof with the proceeds of commercial paper
issued thereby and (ii) the proceeds of the Tranche A Loans are being used
exclusively to repay commercial paper (or to refund borrowings the proceeds
of which were used solely to repay commercial paper) that has matured on or
prior to the date of the borrowing of such Tranche A Loans.
4. The provisions of each of the Pledge Agreements are effective to
create, in favor of the Agent for the benefit of the Banks to secure all
amounts payable by the Borrower under each of the Pledge Agreements, the
Credit Agreement and the Notes (all such amounts, the "OBLIGATIONS"), a
valid security interest in the Pledged Securities (as defined in each
Pledge Agreement).
5. Upon delivery of the Pledged Securities to the Administrative
Agent for the benefit of the Banks in the State of New York or the State of
Delaware, the security interest of the Agent for the benefit of the Banks
in the Pledged Securities will be perfected.
6. Neither the execution, delivery or performance by the Borrower of
any Loan Document nor the compliance by the Borrower with the terms and
provisions thereof will contravene any provision of any Applicable Law (as
hereinafter defined). "APPLICABLE LAWS" shall mean those laws, rules and
regulations of the State of New York and of the United States of America
(including, without limitation, Regulations U and X of the Board of
Governors of Federal Reserve System) or pursuant to the Delaware General
Corporation Law which, in our experience, are normally applicable to
transactions of the type contemplated by the Loan Documents.
7. No Governmental Approval (as hereinafter defined), which has not
been obtained or taken and is not in full force and effect, is required to
authorize or is required in connection with the execution, delivery or
performance of any of the Loan Documents by the Borrower. "GOVERNMENTAL
APPROVAL" means any consent, approval, license, authorization or validation
of, or filing, recording or registration with, any Governmental Authority
(as hereinafter defined) pursuant to Applicable Laws. "GOVERNMENTAL
AUTHORITY" means any New York or federal legislative, judicial,
administrative or regulatory body.
8. Neither the execution, delivery or performance by the Borrower of
its obligations under the Loan Documents nor compliance by the Borrower
with the terms thereof will contravene any Applicable Order (as hereinafter
defined) against the Borrower. "APPLICABLE ORDERS" means those orders,
judgments or decrees of Governmental Authorities identified in paragraph 2
of the Borrower's Certificate.
In rendering the foregoing opinions, we have assumed, with your
consent, that:
(i) each Loan Document has been duly executed and delivered by
the Borrower;
(ii) the execution, delivery and performance of any of the
Borrower's obligations under the Loan Documents does not and will not
conflict with, contravene, violate or constitute a default under (i)
any lease, indenture, instrument or other agreement to which the
Borrower or its property is subject (other than Applicable Agreements
as to which we express our opinion in paragraph 3 herein), (ii) any
rule, law or regulation to which the Borrower is subject (other than
Applicable Laws as to which we express our opinion in paragraph 6
herein) or (iii) any judicial or administrative order or decree of
any governmental authority (other than Applicable Orders as to which
we express our opinion in paragraph 8 herein); and
(iii) no authorization, consent or other approval of, notice to
or filing with any court, governmental authority or regulatory body
(other than Governmental Approvals as to which we express our opinion
in paragraph 7 herein) is required to authorize or is required in
connection with the execution, delivery or performance by the
Borrower of the Loan Documents or the transactions contemplated
thereby.
We understand that you are separately receiving an opinion, dated as
of the date hereof, with respect to certain of the foregoing from Elliot S.
Gerson, Esq. (the "GENERAL COUNSEL OPINION") and we are advised that such
opinion contains qualifications. Our opinions herein stated are based on
the assumptions specified above and we express no opinion as to the effect
on the opinions herein stated of the qualifications contained in the
General Counsel Opinion.
Our opinions are also subject to the following assumptions and
qualifications:
(a) we have assumed that each of the Loan Documents constitutes
the legal, valid and binding obligation of each party thereto (other
than the Borrower) enforceable against such party (other than the
Borrower) in accordance with its terms; and
(b) we express no opinion as to the effect on the opinions
expressed herein of (i) the compliance or non-compliance of any party
(other than the Borrower) to the any Loan Document with any state,
federal or other laws or regulations applicable to it or (ii) the
legal or regulatory status or the nature of the business of any party
(other than the Borrower) to any Loan Document.
(c) we express no opinion as to the enforceability of any
rights to contribution or indemnification provided for in the Loan
Documents which are violative of the public policy underlying any
law, rule or regulation (including any federal or state securities
law, rule or regulation);
(d) certain of the remedial provisions, including waivers, with
respect to the exercise of remedies against the Pledged Securities
contained in the Pledge Agreements may be unenforceable in whole or
in part, but the inclusion of such provisions does not affect the
validity of the Pledge Agreements, taken as a whole, and each of the
Pledge Agreements, taken as a whole, together with applicable law,
contains adequate provisions for the practical realization of the
benefits of the security interest created thereby;
(e) we express no opinion as to the effect on the opinions
expressed herein of (1) the compliance or non-compliance of the Agent
for the benefit of the Banks or any party (other than the Borrower)
to the Loans Documents with any state, federal or other laws or
regulations applicable to them or (2) the legal or regulatory status
or the nature of the business of the Agent for the benefit of the
Banks; and
In addition to the foregoing, our opinions with respect to the
security interest of the Agent for the benefit of the Banks in the Pledged
Securities are subject to the following qualifications:
(a) we have assumed that the Borrower owns, or with respect to
after-acquired property will own, the Pledged Securities, and we
express no opinion as to the nature or extent of the Borrower's
rights in, or title to, any of the Pledged Securities and we note
that with respect to any after-acquired property, the security
interest will not attach until the Borrower acquires ownership
thereof;
(b) our opinions with respect to the interest of the Agent for
the benefit of the Banks are limited to Article 8 and Article 9 of
the UCC, and such opinions do not address (i) laws of jurisdictions
other than New York and Delaware, and of New York and Delaware except
for Article 8 and Article 9 of the UCC, (ii) collateral of a type not
subject to Article 8 and Article 9 of the UCC, and (iii) what law
governs perfection or priority of the security interests granted in
the Pledged Securities covered by this opinion;
(c) we call to your attention that under the UCC, events
occurring subsequent to the date hereof may affect any security
interest subject to the UCC including, but not limited to, factors of
the type identified in Section 9-306 with respect to proceeds;
Section 9-402 with respect to changes in name, structure and
corporate identity; Section 9-103 with respect to changes in the
location of the Pledged Securities and the location of a debtor;
Section 9-316 with respect to subordination agreements; Section 9-403
with respect to continuation statements; and Sections 9-307, 9-308
and 9-309 with respect to subsequent purchasers of the Pledged
Securities. In addition, actions taken by a secured party (e.g.,
releasing or assigning the security interest, delivering possession
of the Pledged Securities to a debtor or another person and
voluntarily subordinating a security interest) may affect any
security interest subject to the UCC;
(d) we have assumed that the Pledged Securities are the
Subsidiary Shares as defined in each of the Pledge Agreements; and
(e) we express no opinion with respect to the priority of the
security interest of the Agent for the benefit of the Banks in any of
the Pledged Securities.
This opinion is being furnished only to you and is solely for your
benefit and is not to be relied upon by anyone else or for any other
purpose without our prior written consent.
Very truly yours,
SCHEDULE A
CERTIFICATE TYPE OF NUMBER OF
ISSUER NUMBER STOCK SHARES
------ ----------- ------- ---------
PCS Holdings Corporation A-2 Class A, 565 Shares
par value $1.00
per share
drugstore.com, inc. ____ Class ___, ___Shares
par value $___
per share
SCHEDULE B
1. Note Agreement dated as of September 30, 1996 among FINCO,
INC, The Prudential Insurance Company of America and PRUCO Life Insurance
Company ($79,560,908.91 7.30% Senior Secured Notes due February 28, 2002).
2. Master Tax Ownership Operating Lease dated as of March 19,
1998 by and among Rite Aid Realty Corp. as Lessee, Rite Aid Corporation, as
Guarantor, RAC Leasing LLC, as Lessor, Sumitomo Bank, Limited, New York
Branch, as Liquidity Agent and Collateral Agent, and RA Funding II
Corporation as Lease Receivables Purchaser.
3. Senior Loan Agreement dated as of March 11, 1998 between RAC
Leasing LLC and The Lenders Parties hereto, as Lenders and Sumitomo
Bank Leasing and Finance, Inc. as Agent.
4. Master Tax Ownership Operating Lease dated as of May 30,
1997 by and among Rite Aid Realty Corp., as Lessee, Rite Aid Corporation,
as Guarantor, Sumitomo Bank Leasing and Finance, Inc., as Lessor, Sumitomo
Bank, Limited, New York Branch as Liquidity Agent and Collateral Agent, RA
Funding Corporation, as Lease Receivables Purchaser, and Madison Funding
Corporation, as Conduit.
5. Receivables Purchase Agreement dated as of November 26, 1997
among Rite Aid Funding LLC as the Seller, and Corporate Asset Funding
Company, Inc. and Corporate Receivables Corporation as the Investors, and
Citibank, N.A. and Citicorp North America, Inc. as the Agent and Rite Aid
Corporation as Collection Agent.
6. Indenture, dated as of December 21, 1998, between the
Borrower and Harris Trust and Savings Bank, as Trustee.
7. Indenture, dated as of September 22, 1998, by and among the
Borrower and Harris Trust and Savings Bank, as Trustee.
8. Indenture dated August 1, 1993, between the Borrower and
First Trust of New York, National Association, as successor Trustee.
EXHIBIT B-2
OPINION OF
GENERAL COUNSEL OF THE BORROWER
October __, 1999
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am Senior General Counsel of Rite Aid Corporation (the "BORROWER"),
and I have advised the Borrower in connection with the $1,000,000,000
Amended and Restated Credit Agreement (the "CREDIT AGREEMENT") dated as of
October 25, 1999 among the Borrower, the Banks from time to time parties
thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms
defined in the Credit Agreement are used herein as therein defined. This
opinion is being rendered to you at the request of our client pursuant to
Section 3.01(d)(ii) of the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of the Credit Agreement, the Notes issued
pursuant thereto, the Pledge Agreements and such other documents, corporate
records, certificates of public officials and other instruments and have
conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of each of
the Loan Documents are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of (i) any agreement or instrument evidencing or
governing Debt of the Borrower or any Subsidiary, (ii) any agreement
material to the business, financial condition, results of operations or
prospects of the Borrower, or (iii) any other material instrument,
judgment, injunction, order or decree binding upon the Borrower or any
Subsidiary or result in the creation or imposition of any Lien on any asset
of the Borrower or any Subsidiary pursuant to any such agreement,
instrument, judgment, injunction, order or decree.
3. Each of the Loan Documents (other than the Notes) constitutes a
valid and binding agreement of the Borrower and each Note constitutes a
valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by
general principles of equity.
4. Except as described in the Borrower's Annual Report on Form 10-K
for the fiscal year ended February 27, 1999, there is no action, suit or
proceeding pending against, or to the best of my knowledge threatened
against or affecting, the Borrower or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official, in which
there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, consolidated financial position
or consolidated results of operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole or which in any manner draws into
question the validity or enforceability of any of the Loan Documents or the
Notes.
5. Each of the Borrower's corporate Significant Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
In giving the foregoing opinion, I express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New
York and the State of Pennsylvania) in which any Bank is located which
limits the rate of interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without my prior written consent.
Very truly yours,
EXHIBIT C
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
October __, 1999
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the $1,000,000,000 Amended
and Restated Credit Agreement (the "CREDIT AGREEMENT") dated as of October
25, 1999 among Rite Aid Corporation, a Delaware corporation (the
"BORROWER"), the Banks from time to time parties thereto and Morgan
Guaranty Trust Company of New York, as Agent, and have acted as special
counsel for the Agent for the purpose of rendering this opinion pursuant to
Section 3.01(e) of the Credit Agreement. Terms defined in the Credit
Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Credit Agreement, the Notes issued
pursuant thereto, the Pledge Agreements and such other documents, corporate
records, certificates of public officials and other instruments and have
conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of each of
the Loan Documents and the Notes are within the Borrower's corporate powers
and have been duly authorized by all necessary corporate action.
2. Each of the Loan Documents constitutes a valid and binding
agreement of the Borrower and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws
of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion
as to the effect (if any) of any law of any jurisdiction (except the State
of New York) in which any Bank is located which limits the rate of interest
that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT D
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 19__ among [ASSIGNOR] (the
"ASSIGNOR"), [ASSIGNEE] (the "ASSIGNEE")[, RITE AID CORPORATION (the
"BORROWER")] and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the $1,000,000,000 Amended and Restated Credit Agreement dated
as of October __, 1999 among [RITE AID CORPORATION (the "BORROWER")] [the
Borrower,] the Assignor and the other Banks parties thereto, as Banks, and
the Agent (as amended from time to time, the "CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount
at any time outstanding not to exceed $_________;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit
Agreement in the aggregate principal amount of $_______ are outstanding at
the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $___________ (the
"ASSIGNED AMOUNT"), together with a corresponding portion of its
outstanding Loans, and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of
the principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by
the Assignor, the Assignee, the Borrower and the Agent and the payment of
the amounts specified in Section 3 required to be paid on the date hereof
(i) the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee.
The assignment provided for herein shall be without recourse to the
Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds an amount equal to $_______.(2) It is
understood that facility fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof in respect of the Assigned Amount are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of
the other party hereto, it shall receive the same for the account of such
other party to the extent of such other party's interest therein and shall
promptly pay the same to such other party.
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(2) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the Assignee.
It may be preferable in an appropriate case to specify these amounts
generically or by formula rather than as a fixed sum.
SECTION 4. Consent of [the Borrower and] the Agent. This Agreement is
conditioned upon the consent of [the Borrower and] the Agent pursuant to
Section 9.06(c) of the Credit Agreement. The execution of this Agreement by
the Borrower and the Agent is evidence of this consent. Pursuant to Section
9.06(c) the Borrower agrees to execute and deliver a Note payable to the
order of the Assignee to evidence the assignment and assumption provided
for herein.
SECTION 5. Non-reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
obligations of the Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance
on the Assignor, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of
the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By ____________________________________
Title:
[ASSIGNEE]
By ____________________________________
Title:
[RITE AID CORPORATION
By ____________________________________
Title:]
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By ____________________________________
Title:
EXHIBIT E
PCS PLEDGE AGREEMENT
AGREEMENT dated as of October 25, 1999 between RITE AID CORPORATION
(with its successors, the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("MORGAN"), as agent hereunder (the "AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of January 21, 1999 (as
heretofore amended, the "ORIGINAL 1999 CREDIT AGREEMENT"); and
WHEREAS, the Borrower and Morgan, as agent, have entered into the
Pledge Agreement dated as of September 29, 1999 (the "FIRST PLEDGE
AGREEMENT"), pursuant to which the Borrower has pledged the Collateral (as
hereinafter defined) to secure its obligations under the Original 1999
Credit Agreement and the Notes issued pursuant thereto; and
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of July 19, 1996 (as
heretofore amended, the "ORIGINAL 1996 CREDIT AGREEMENT"); and
WHEREAS, the Borrower and Morgan, as agent, are parties to a PCS
Junior Pledge Agreement dated as of October 19, 1999 (the "SECOND PLEDGE
AGREEMENT"), pursuant to which the Borrower has granted a junior security
interest in the Collateral to secure certain of its obligations under the
Original 1996 Credit Agreement; and
WHEREAS, the Borrower proposes to enter into a Term Loan Agreement of
even date herewith with the parties to the Original 1999 Credit Agreement
(as the same may be amended from time to time, the "1999 FACILITY"), term
loans under which (the "1999 LOANS") are to refinance loans outstanding
under the Original 1999 Credit Agreement; and
WHEREAS, the Borrower proposes to enter into an Amended and Restated
Credit Agreement of even date amending and restating the Original 1996
Credit Agreement (as the same may be amended from time to time, the "PRO
RATA CREDIT AGREEMENT"); and
WHEREAS, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (i) on a first priority basis, to secure
its obligations under the 1999 Facility, (ii) on a second priority basis,
to secure certain of its obligations under the Pro Rata Credit Agreement,
(iii) on a third priority basis, to secure certain other obligations under
the Pro Rata Credit Agreement as well as the Prudential Pro Rata Exposure
(as defined below), the Morgan Pro Rata Exposure (as defined below) and the
Letter of Credit Exposure (as defined below) and (iv) on a fourth priority
basis, to secure the Synthetic Lease Obligations (as defined below); and
WHEREAS, this Agreement is intended to continue the security
interests created and perfected under the First Pledge Agreement and the
Second Pledge Agreement, but its terms shall supersede the terms thereof;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. (a) Terms defined in the heading and recitals
hereto have the respective meanings provided for therein.
(b) The following terms have the meanings provided for in the Pro
Rata Credit Agreement:
drugstore.com Pledge Agreement
Morgan Pro Rata Exposure
Prudential Pro Rata Exposure
Tranche A Loans
Tranche B Loans
(c) The following additional terms, as used herein, have the
following respective meanings:
"BASE RATE" has the meaning set forth in the Credit Agreements.
"COLLATERAL" has the meaning assigned to such term in Section 3(a).
"CREDIT AGREEMENT" means the 1999 Facility or the Pro Rata Credit
Agreement.
"DEFAULT" means a "Default" as defined in either of the Credit
Agreements.
"EVENT OF DEFAULT" means an "Event of Default" as defined in either
the Credit Agreements.
"FIRST PRIORITY SECURED OBLIGATIONS" means (i) all principal of and
interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any 1999 Loan,
(ii) all other amounts payable by the Borrower under the 1999 Facility and
(iii) any renewals or extensions of any of the foregoing.
"FOURTH PRIORITY SECURED OBLIGATIONS" means (i) the obligations of
the Borrower in respect of the Synthetic Lease Obligations and (ii) any
renewals or extensions of the foregoing.
"INSTRUCTING BANKS" means (i) until all First Priority Secured
Obligations shall have been paid in full, the "Required Banks" as defined
in the 1999 Facility and (ii) thereafter, the "Required Banks" as defined
in the Pro Rata Credit Agreement.
"ISSUER" means PCS Holdings Corporation, and its successors.
"LETTER OF CREDIT EXPOSURE" means the reimbursement obligations of
the Borrower in respect of standby letters of credit issued for the account
of the Borrower set forth in Schedule A hereto, and any replacements
thereof; provided that the issuer of such letter of credit shall have
entered into an agreement with the Borrower and the Agent satisfactory to
the Agent pursuant to which such issuer has agreed to accept the benefits
of and be bound by the terms of this Agreement; provided further that the
Letter of Credit Exposure may not for purposes of this Agreement exceed
$32,750,000; and provided further that the outstanding principal amount of
any such letters of credit which are undrawn shall be deemed to be the face
amount thereof for purposes of this Agreement, subject to the last sentence
of Section 13.
"LIEN" means a "Lien" as defined in either of the Credit Agreements.
"LOAN DOCUMENTS" means the "Loan Documents" as defined in either
Credit Agreement.
"MAXIMUM PRINCIPAL AMOUNT" shall mean that portion of the outstanding
principal amounts of the Partially Secured Obligations secured both
hereunder and under the drugstore.com Pledge Agreement, which principal
amount shall not exceed $399,000,000, it being understood that this
Agreement and the drugstore.com Pledge Agreement each individually, but
also collectively, secure the Partially Secured Obligations to the extent
of such Maximum Principal Amount, and that therefore the Maximum Principal
Amount for purposes of this Agreement shall be reduced by the amount of any
proceeds of Collateral applied to principal of the Partially Secured
Obligations pursuant to Section 13 of the drugstore.com Pledge Agreement.
"PARTIALLY SECURED OBLIGATIONS" means the Tranche B Loans, the
Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure and the Letter
of Credit Exposure.
"PLEDGED STOCK" means (i) the Subsidiary Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section 3(b).
"SECOND PRIORITY SECURED OBLIGATIONS" means (i) all principal of and
interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any Tranche A
Loan, (ii) all other amounts payable by the Borrower hereunder or under the
1996 Loan Documents, to the extent properly allocable to the Tranche A
Loans, and (iii) any renewals or extensions of any of the foregoing.
"SECURED OBLIGATIONS" means the First Priority Secured Obligations,
the Second Priority Secured Obligations, the Third Priority Secured
Obligations, the Fourth Priority Secured Obligations and any amount payable
by the Borrower under this Agreement.
"SECURED PARTIES" means the Agent and the holders from time to time
of the Secured Obligations.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"SUBSIDIARY SHARES" means 565 shares of Class A Stock, par value
$1.00 per share, of the Issuer.
"SYNTHETIC LEASE OBLIGATIONS" means, collectively, (i) the Guaranty
dated as of March 19, 1998 from Rite Aid Corporation to RAC Leasing LLC, as
the same may be amended from time to time, and (ii) the Guaranty dated as
of May 30, 1997 from Rite Aid Corporation to Sumitomo Bank Leasing and
Finance, Inc., as the same may be amended from time to time.
"THIRD PRIORITY SECURED OBLIGATIONS" means (i) all outstanding
principal amounts of Partially Secured Obligations, provided that the
principal amount secured pursuant to this clause (i) shall not exceed the
Maximum Principal Amount; (ii) all interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) on the principal amounts secured pursuant to clause (i) of this
definition, (iii) any Yield-Maintenance Amount payable in respect of the
portion of the Prudential Pro Rata Exposure secured pursuant to clauses (i)
and (ii) of this definition; (iv) any renewals or extensions of any of the
foregoing and (v) to the extent the same may be secured hereunder and under
the drugstore.com Pledge Agreement without contravention of the Indentures,
any and all other amounts payable by the Borrower in respect of the
Partially Secured Obligations. The amounts specified in clauses (i) and
(iv) shall be allocated among the Partially Secured Obligations ratably
based on the unpaid principal amount thereof at the time of determination.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings
therein stated.
SECTION 2. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) Title to Pledged Stock. The Borrower owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests. The
Pledged Stock includes all of the issued and outstanding capital stock of
the Issuer. All of the Pledged Stock has been duly authorized and validly
issued, and is fully paid and non-assessable, and is subject to no options
to purchase or similar rights of any Person. The Borrower is not and will
not become a party to or otherwise bound by any agreement, other than this
Agreement, which restricts in any manner the rights of any present or
future holder of any of the Pledged Stock with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. The
Agent has valid and perfected security interests in the Collateral subject
to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. Neither the Borrower nor any of its Subsidiaries has performed
or will perform any acts which might prevent the Agent from enforcing any
of the terms and conditions of this Agreement or which would limit the
Agent in any such enforcement.
(c) UCC Filing Locations. The chief executive office of the Borrower
is located at its address set forth on the signature pages of the
Credit Agreement.
SECTION 3. The Security Interests. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all the obligations of the
Borrower hereunder:
(a) The Borrower hereby assigns and pledges to and with the Agent for
the benefit of the Secured Parties and grants to the Agent for the benefit
of the Secured Parties security interests in the Pledged Stock, and all of
its rights and privileges with respect to the Pledged Stock, and all income
and profits thereon, and all dividends and other payments and distributions
with respect thereto, and all proceeds of the foregoing (the "COLLATERAL").
Prior to the execution and delivery hereof, the Borrower has delivered the
certificate representing the Subsidiary Shares in pledge hereunder.
(b) In the event that the Issuer at any time issues any additional or
substitute shares of capital stock of any class, the Borrower will
immediately pledge and deposit with the Agent certificates representing all
such shares as additional security for the Secured Obligations. All such
shares constitute Pledged Stock and are subject to all provisions of this
Agreement.
(c) The Security Interests are granted as security only and shall not
subject the Agent or any Secured Party to, or transfer or in any way affect
or modify, any obligation or liability of the Borrower with respect to any
of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock. All certificates representing
Pledged Stock delivered to the Agent by the Borrower pursuant hereto shall
be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances. (a) The Borrower agrees that it will,
at its expense and in such manner and form as the Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary
or desirable, or that the Agent may request, in order to create, preserve,
perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, the Borrower hereby
authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement
or of a financing statement relating to this Agreement) which the Agent in
its sole discretion may deem necessary or appropriate to further perfect
the Security Interests.
(b) The Borrower agrees that it will not change (i) its name,
identity or corporate structure in any manner, (ii) the location of its
chief executive office or (iii) jurisdiction of incorporation unless it
shall have given the Agent not less than 30 days' prior notice thereof.
SECTION 6. Record Ownership of Pledged Stock. The Agent may at any
time or from time to time, in its sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. The Borrower will promptly give to the Agent copies of any notices
or other communications received by it with respect to Pledged Stock
registered in the name of the Borrower and the Agent will promptly give to
the Borrower copies of any notices and communications received by the Agent
with respect to Pledged Stock registered in the name of the Agent or its
nominee.
SECTION 7. Right to Receive Distributions on Collateral. During the
continuance of any Default the Agent shall have the right to receive and to
retain as Collateral hereunder all dividends and other payments and
distributions made upon or with respect to the Collateral and the Borrower
shall take all such action as the Agent may deem necessary or appropriate
to give effect to such right. All such dividends and other payments and
distributions which are received by the Borrower shall be received in trust
for the benefit of the Agent and the Secured Parties and, if the Agent so
directs during the continuance of a Default, shall be segregated from other
funds of the Borrower and shall, forthwith upon demand by the Agent during
the continuance of a Default, be paid over to the Agent as Collateral in
the same form as received (with any necessary endorsement). After all
Defaults have been cured, the Agent's right to retain dividends and other
payments and distributions under this Section 7 shall cease and the Agent
shall pay over to the Borrower any such Collateral retained by it during
the continuance of a Default.
SECTION 8. Right to Vote Pledged Stock. Unless a Default shall have
occurred and be continuing, the Borrower shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock, and the Agent shall, upon receiving a written request
from the Borrower accompanied by a certificate signed by its principal
financial officer stating that no Default has occurred and is continuing,
deliver to the Borrower or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
If a Default shall have occurred and be continuing, the Agent shall
have the right to the extent permitted by law, and the Borrower shall take
all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take
any other action with respect to any or all of the Pledged Stock with the
same force and effect as if the Agent were the absolute and sole owner
thereof.
SECTION 9. General Authority. The Borrower hereby irrevocably
appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Secured Parties
or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of the Borrower, to the extent permitted by law
to exercise, at any time and from time to time while an Event of Default
has occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent
were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Borrower not less than ten days'
prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Borrower agree
that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default. If any Event of Default
shall have occurred and be continuing, the Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) apply the cash, if any, then
held by it as Collateral as specified in Section 13 and (ii) if there shall
be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price
or prices as the Agent may deem satisfactory. Any Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection
with any such sale, if it deems it advisable so to do, (A) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a
limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a
view to the distribution or sale of any of such Pledged Stock, (B) to cause
to be placed on certificates for any or all of the Pledged Stock or on any
other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may
not be disposed of in violation of the provision of said Act, and (C) to
impose such other limitations or conditions in connection with any such
sale as the Agent deems necessary or advisable in order to comply with said
Act or any other law. The Borrower will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of
the Borrower which may be waived, and the Borrower, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 9 shall (1)
in the case of a public sale, state the time and place fixed for such sale,
(2) in the case of a sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a
private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Agent may determine. The
Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in the case of the failure of such purchaser to take up
and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction.
SECTION 11. Expenses. The Borrower agrees that it will forthwith upon
demand pay to the Agent:
(a) the amount of any taxes which the Agent may have been required to
pay by reason of the Security Interests or to free any of the Collateral
from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel, which the Agent may incur in connection
with (iii) the administration or enforcement of this Agreement, including
such expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (iv) the
collection, sale or other disposition of any of the Collateral, (v) the
exercise by the Agent of any of the rights conferred upon it hereunder or
(vi) any Default.
Any such amount not paid on demand shall bear interest at a rate per annum
equal to Base Rate plus 4.50% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected
by the Agent in good faith.
SECTION 13. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held
shall be applied by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent is to be reimbursed pursuant to Section
11 hereof;
SECOND, to the ratable payment of unpaid principal of the First
Priority Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest on
the First Priority Secured Obligations in accordance with the terms
thereof;
FOURTH, to the ratable payment of all other First Priority
Secured Obligations, until all First Priority Secured Obligations
shall have been paid in full;
FIFTH, to the ratable payment of unpaid principal of the Second
Priority Secured Obligations,
SIXTH, to the ratable payment of accrued but unpaid interest on
the Second Priority Secured Obligations in accordance with the terms
thereof;
SEVENTH, to the ratable payment of all other Second Priority
Secured Obligations, until all Second Priority Secured Obligations
shall have been paid in full;
EIGHTH, to the ratable payment of unpaid principal of the Third
Priority Secured Obligations;
NINTH, to the ratable payment of accrued but unpaid interest on
Third Priority Secured Obligations in accordance with the terms
thereof;
TENTH, to the ratable payment of all other Third Priority
Secured Obligations, until all Third Priority Secured Obligations
shall have been paid in full;
ELEVENTH, to the ratable payment of all Fourth Priority Secured
Obligations, until all Fourth Priority Secured Obligations have been
paid in full;
FINALLY, to payment to the Borrower or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof. Any amount distributable
pursuant to this Section 13 in respect of any Letter of Credit Exposure
consisting of undrawn letters of credit shall be retained by the Agent for
payment to the Secured Parties that are issuers thereof at such time as
such letters of credit are drawn and then only to the extent of any such
draw. To the extent that any such letter of credit expires undrawn, any
amount then held by the Agent pursuant to the preceding sentence in respect
thereof shall be distributed in accordance with the priorities established
by this Section 13, it being understood that any reimbursement obligations
in respect of such expired letter of credit shall not be included in
Secured Obligations for purposes of such distribution.
SECTION 14. Concerning the Agent. The provisions of Article 7 of each
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the Secured Parties in such respect. In
furtherance and not in derogation of the rights, privileges and immunities
of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including, without limitation, the timing and methods of realization upon
the Collateral) the Agent shall act or refrain from acting in accordance
with written instructions from the Instructing Banks or, in the absence of
such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission
to act on its part hereunder. The Agent shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement by the Borrower.
SECTION 15. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent may
appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination
of the Commitments under the Credit Agreements, the Security Interests
shall terminate and all rights to the Collateral shall revert to the
Borrower. At any time and from time to time prior to such termination of
the Security Interests, the Agent may release any of the Collateral in
accordance with the applicable provisions of the Credit Agreements. Upon
any such termination of the Security Interests or release of Collateral,
the Agent will, at the expense of the Borrower, execute and deliver to the
Borrower such documents as the Borrower shall reasonably request to
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 17. Notices. All notices hereunder shall be given in
accordance with Section 9.01 of the Credit Agreements.
SECTION 18. Waivers, Non-Exclusive Remedies. No failure on the part
of the Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or
any Secured Party of any right under any Loan Document or any other
document relating to the Secured Obligations owing to such Secured Party
preclude any other or further exercise thereof or the exercise of any other
right. The rights under the Loan Documents and such other documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns. This Agreement is for the benefit
of the Secured Parties and their successors and assigns, and in the event
of an assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Borrower and its successors and assigns.
SECTION 20. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Borrower and the Agent with the consent
of the Required Banks under each Credit Agreement. No such amendment shall
by its terms materially adversely affect the rights of holders of any of
the Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure, the Letter
of Credit Exposure or the Fourth Priority Secured Obligations in a manner
different from its effect on the rights of holders of any other Secured
Obligations, except with the written consent of such affected holder (or of
the requisite majority of the affected holders specified in the documents
governing such affected holders' Secured Obligations).
SECTION 21. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except
as otherwise required by mandatory provisions of law and except to the
extent that remedies provided by the laws of any jurisdiction other than
New York are governed by the laws of such jurisdiction.
SECTION 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Agent
and the Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. Acceptance of Appointment. Morgan hereby accepts its
appointment as agent for each of the Secured Parties; provided that neither
such appointment or such acceptance shall impose on Morgan any duties other
than the express duties of the Agent hereunder and subject in any case to
the provisions of Section 7 hereof and Article 7 of the Credit Agreement,
which shall be binding on all Secured Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: ___________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: ___________________________________
Name:
Title:
<TABLE>
<CAPTION>
SCHEDULE A
Letters of Credit
L/C Ref # Beneficiary Amount Date Issued Expiry Date
- --------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
ISSUED BY MELLON
BANK, N.A.:
8571380 National Union Fire Insurance $ 20,861,000.00 20-Feb-98 31-Dec-99
8554730 Insurance Co. of North America 1,186,255.00 03-Nov-97 22-Nov-99
8533170 Commonwealth of PA 75,000.00 11-Jul-97 11-Jul-00
8531390 Joseph Brozek, Jr. 250,000.00 25-Jun-97 25-Jun-00
8159320 Continental Casualty Company 1,027,000.00 19-Feb-92 01-Jan-00
8478300 United States Fidelity and Trust 1,250,000.00 15-May-98 31-Dec-99
8578810 Travelers Indemnity Co. (TPI) 225,000.00 16-Apr-98 31-Dec-99
8578580 LA Dept. of Labor 350,000.00 15-Apr-98 31-Dec-99
8586190 Reliance Insurance Co. 300,000.00 20-May-98 31-Dec-99
8614310 City of Grand Junction, CO 117,680.00 28-Dec-98 21-Apr-00
8642610 Capital Blue Cross 749.458.87 08-Jul-99 31-Dec-99
8464810 Baltimore County, MD 38,973.00 08-May-96 08-Nov-99
--------------
26,430,366.87
ISSUED BY
CITIBANK, N.A.:
13863/30019259 MLTC Funding 5,800,000.00 12-Dec-96 22-Oct-00
ISSUED BY AMSOUTH
BANK OF ALABAMA:
S309510 AmSouth Bank of Alabama 477,320.73 05-Sep-95 01-Jan-00
Total standby
letters of credit
outstanding 32,707,687.60
--------------
</TABLE>
EXHIBIT F
DRUGSTORE.COM PLEDGE AGREEMENT
AGREEMENT dated as of October 25, 1999 between RITE AID CORPORATION
(with its successors, the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("MORGAN"), as agent hereunder (the "AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of July 19, 1996 (as
heretofore amended, the "ORIGINAL 1996 CREDIT AGREEMENT"); and
WHEREAS, the Borrower proposes to enter into an Amended and Restated
Credit Agreement of even date amending and restating the Original 1996
Credit Agreement (as the same may be amended from time to time, the "CREDIT
AGREEMENT"); and
WHEREAS, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (i) on a first priority basis, to secure
certain of its obligations under the Credit Agreement as well as the
Prudential Pro Rata Exposure (as defined below), the Morgan Pro Rata
Exposure (as defined below) and the Letter of Credit Exposure (as defined
below) and (ii) on a second priority basis, to secure the Synthetic Lease
Obligations (as defined below);
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. (a) Terms defined in the heading and recitals
hereto have the respective meanings provided for therein.
(b) The following terms have the meanings provided for in the Credit
Agreement:
Base Rate
Default
Event of Default
Lien
Loan Documents
PCS Pledge Agreement
Morgan Pro Rata Exposure
Prudential Pro Rata Exposure
Tranche A Loans
Tranche B Loans
(c) The following additional terms, as used herein, have the
following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(a).
"FIRST PRIORITY SECURED OBLIGATIONS" means (i) all outstanding
principal amounts of the Partially Secured Obligations, provided that the
principal amount secured pursuant to this clause (i) shall not exceed the
Maximum Principal Amount, (ii) all interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) on the principal amounts secured pursuant to clause (i) of this
definition, (iii) any Yield-Maintenance Amount payable in respect of the
portion of the Prudential Pro Rata Exposure secured pursuant to clauses (i)
and (ii) of this definition, (iv)any renewals or extensions of any of the
foregoing and (v) to the extent the same may be secured hereunder and under
the PCS Pledge Agreement without contravention of the Indentures, any and
all other amounts payable by the Borrower in respect of the Partially
Secured Obligations. The amounts specified in clauses (i) and (iv) shall be
allocated among the Partially Secured Obligations ratably based on the
unpaid principal amount thereof at the time of determination.
"INSTRUCTING BANKS" means the "Required Banks" as defined in the
Credit Agreement.
"ISSUER" means drugstore.com, inc., and its successors.
"LETTER OF CREDIT EXPOSURE" means the reimbursement obligations of
the Borrower in respect of standby letters of credit issued for the account
of the Borrower set forth in Schedule A hereto, and any replacements
thereof; provided that the issuer of such letter of credit shall have
entered into an agreement with the Borrower and the Agent satisfactory to
the Agent pursuant to which such issuer has agreed to accept the benefits
of and be bound by the terms of this Agreement; provided further that the
Letter of Credit Exposure may not for purposes of this Agreement exceed
$32,750,000; and provided further that the outstanding principal amount of
any such letters of credit which are undrawn shall be deemed to be the face
amount thereof for purposes of this Agreement, subject to the last sentence
of Section 13.
"MAXIMUM PRINCIPAL AMOUNT" shall mean that portion of the outstanding
principal amounts of the Partially Secured Obligations secured both
hereunder and under the PCS Pledge Agreement, which principal amount shall
not exceed $399,000,000, it being understood that this Agreement and the
PCS Pledge Agreement each individually, but also collectively, secure the
Partially Secured Obligations to the extent of such Maximum Principal
Amount, and that therefore the Maximum Principal Amount for purposes of
this Agreement shall be reduced by the amount of any proceeds of Collateral
applied to principal of the Partially Secured Obligations pursuant to
Section 13 of the PCS Pledge Agreement.
"PARTIALLY SECURED OBLIGATIONS" means the Tranche B Loans, the
Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure and the Letter
of Credit Exposure.
"PLEDGED STOCK" means (i) the Limited Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section 3(b).
"SECOND PRIORITY SECURED OBLIGATIONS" means (i) the obligations of
the Borrower the Synthetic Lease Obligations and (ii) any renewals or
extensions of the foregoing.
"SECURED OBLIGATIONS" means the First Priority Secured Obligations,
the Second Priority Secured Obligations and any amount payable by the
Borrower under this Agreement.
"SECURED PARTIES" means the Agent and the holders from time to time
of the Secured Obligations.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"LIMITED SHARES" means 9,334,746 shares of Common Stock, par value
$0.001 per share, of the Issuer.
"SYNTHETIC LEASE OBLIGATIONS" means, collectively, (i) the Guaranty
dated as of March 19, 1998 from Rite Aid Corporation to RAC Leasing LLC, as
the same may be amended from time to time, and (ii) the Guaranty dated as
of May 30, 1997 from Rite Aid Corporation to Sumitomo Bank Leasing and
Finance, Inc., as the same may be amended from time to time.
Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial
Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) Title to Pledged Stock. The Borrower owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests. The
Pledged Stock includes 21.5% of the issued and outstanding capital stock of
the Issuer. All of the Pledged Stock has been duly authorized and validly
issued, and is fully paid and non-assessable, and is subject to no options
to purchase or similar rights of any Person. The Borrower is not and will
not become a party to or otherwise bound by any agreement, other than this
Agreement and the Governance Agreement dated June 17, 1999 between the
Issuer and the Borrower, which restricts in any manner the rights of any
present or future holder of any of the Pledged Stock with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. The
Agent has valid and perfected security interests in the Collateral subject
to no prior Lien. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. Neither the Borrower nor any of its Subsidiaries has performed
or will perform any acts which might prevent the Agent from enforcing any
of the terms and conditions of this Agreement or which would limit the
Agent in any such enforcement.
(c) UCC Filing Locations. The chief executive office of the Borrower
is located at its address set forth on the signature pages of the
Credit Agreement.
SECTION 3. The Security Interests. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all the obligations of the
Borrower hereunder:
(a) The Borrower hereby assigns and pledges to and with the Agent for
the benefit of the Secured Parties and grants to the Agent for the benefit
of the Secured Parties security interests in the Pledged Stock, and all of
its rights and privileges with respect to the Pledged Stock, and all income
and profits thereon, and all dividends and other payments and distributions
with respect thereto, and all proceeds of the foregoing (the "COLLATERAL").
Prior to the execution and delivery hereof, the Borrower has delivered the
certificate representing the Limited Shares in pledge hereunder.
(b) In the event that the Issuer at any time issues any additional or
substitute shares of capital stock of any class to the Borrower or any
Subsidiary, the Borrower will immediately pledge and deposit with the Agent
certificates representing all such shares as additional security for the
Secured Obligations. All such shares constitute Pledged Stock and are
subject to all provisions of this Agreement.
(c) The Security Interests are granted as security only and shall not
subject the Agent or any Secured Party to, or transfer or in any way affect
or modify, any obligation or liability of the Borrower with respect to any
of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock. All certificates representing
Pledged Stock delivered to the Agent by the Borrower pursuant hereto shall
be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances. (a) The Borrower agrees that it will,
at its expense and in such manner and form as the Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary
or desirable, or that the Agent may request, in order to create, preserve,
perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, the Borrower hereby
authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement
or of a financing statement relating to this Agreement) which the Agent in
its sole discretion may deem necessary or appropriate to further perfect
the Security Interests.
(b) The Borrower agrees that it will not change (i) its name,
identity or corporate structure in any manner, (ii) the location of its
chief executive office or (iii) its jurisdiction of incorporation unless it
shall have given the Agent not less than 30 days' prior notice thereof.
SECTION 6. Record Ownership of Pledged Stock. The Agent may at any
time or from time to time, in its sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. The Borrower will promptly give to the Agent copies of any notices
or other communications received by it in its capacity as a shareholder of
the Issuer with respect to Pledged Stock registered in the name of the
Borrower and the Agent will promptly give to the Borrower copies of any
notices and communications received by the Agent with respect to Pledged
Stock registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral. During the
continuance of any Default the Agent shall have the right to receive and to
retain as Collateral hereunder all dividends and other payments and
distributions made upon or with respect to the Collateral and the Borrower
shall take all such action as the Agent may deem necessary or appropriate
to give effect to such right. All such dividends and other payments and
distributions which are received by the Borrower shall be received in trust
for the benefit of the Agent and the Secured Parties and, if the Agent so
directs during the continuance of a Default, shall be segregated from other
funds of the Borrower and shall, forthwith upon demand by the Agent during
the continuance of a Default, be paid over to the Agent as Collateral in
the same form as received (with any necessary endorsement). After all
Defaults have been cured, the Agent's right to retain dividends and other
payments and distributions under this Section 7 shall cease and the Agent
shall pay over to the Borrower any such Collateral retained by it during
the continuance of a Default.
SECTION 8. Right to Vote Pledged Stock. Unless a Default shall have
occurred and be continuing, the Borrower shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock, and the Agent shall, upon receiving a written request
from the Borrower accompanied by a certificate signed by its principal
financial officer stating that no Default has occurred and is continuing,
deliver to the Borrower or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
If a Default shall have occurred and be continuing, the Agent shall
have the right to the extent permitted by law, and the Borrower shall take
all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take
any other action with respect to any or all of the Pledged Stock with the
same force and effect as if the Agent were the absolute and sole owner
thereof.
SECTION 9. General Authority. The Borrower hereby irrevocably
appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Secured Parties
or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of the Borrower, to the extent permitted by law
to exercise, at any time and from time to time while an Event of Default
has occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Agent
were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Borrower not less than ten days'
prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Borrower agree
that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default. If any Event of Default
shall have occurred and be continuing, the Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) apply the cash, if any, then
held by it as Collateral as specified in Section 13 and (ii) if there shall
be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price
or prices as the Agent may deem satisfactory. Any Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection
with any such sale, if it deems it advisable so to do, (A) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a
limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a
view to the distribution or sale of any of such Pledged Stock, (B) to cause
to be placed on certificates for any or all of the Pledged Stock or on any
other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may
not be disposed of in violation of the provision of said Act, and (C) to
impose such other limitations or conditions in connection with any such
sale as the Agent deems necessary or advisable in order to comply with said
Act or any other law. The Borrower will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of
the Borrower which may be waived, and the Borrower, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 9 shall (1)
in the case of a public sale, state the time and place fixed for such sale,
(2) in the case of a sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a
private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Agent may determine. The
Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in the case of the failure of such purchaser to take up
and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction.
SECTION 11. Expenses. The Borrower agrees that it will forthwith upon
demand pay to the Agent:
(a) the amount of any taxes which the Agent may have been required to
pay by reason of the Security Interests or to free any of the Collateral
from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel, which the Agent may incur in connection
with (i) the administration or enforcement of this Agreement, including
such expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (ii) the
collection, sale or other disposition of any of the Collateral, (iii) the
exercise by the Agent of any of the rights conferred upon it hereunder or
(iv) any Default.
Any such amount not paid on demand shall bear interest at a rate per annum
equal to Base Rate plus 4.50% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected
by the Agent in good faith.
SECTION 13. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held
shall be applied by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent is to be reimbursed pursuant to Section
11 hereof;
SECOND, to the ratable payment of unpaid principal of the First
Priority Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest on
the First Priority Secured Obligations in accordance with the terms
thereof;
FOURTH, to the ratable payment of all other First Priority
Secured Obligations, until all First Priority Secured Obligations
shall have been paid in full;
FIFTH, to the ratable payment of all Second Priority Secured
Obligations, until all Second Priority Secured Obligations have been
paid in full;
FINALLY, to payment to the Borrower or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof. Any amount distributable
pursuant to this Section 13 in respect of any Letter of Credit Exposure
consisting of undrawn letters of credit shall be retained by the Agent for
payment to the Secured Parties that are issuers thereof at such time as
such letters of credit are drawn and then only to the extent of any such
draw. To the extent that any such letter of credit expires undrawn, any
amount then held by the Agent pursuant to the preceding sentence in respect
thereof shall be distributed in accordance with the priorities established
by this Section 13, it being understood that any reimbursement obligations
in respect of such expired letter of credit shall not be included in
Secured Obligations for purposes of such distribution.
SECTION 14. Concerning the Agent. The provisions of Article 7 of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the Secured Parties in such respect. In
furtherance and not in derogation of the rights, privileges and immunities
of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including, without limitation, the timing and methods of realization upon
the Collateral) the Agent shall act or refrain from acting in accordance
with written instructions from the Instructing Banks or, in the absence of
such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission
to act on its part hereunder. The Agent shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement by the Borrower.
SECTION 15. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent may
appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination
of the Commitments under the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Borrower. At
any time and from time to time prior to such termination of the Security
Interests, the Agent may release any of the Collateral in accordance with
the applicable provisions of the Credit Agreement. Upon any such
termination of the Security Interests or release of Collateral, the Agent
will, at the expense of the Borrower, execute and deliver to the Borrower
such documents as the Borrower shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as
the case may be.
SECTION 17. Notices. All notices hereunder shall be given in
accordance with Section 9.01 of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies. No failure on the part
of the Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or
any Secured Party of any right under any Loan Document or any other
document relating to the Secured Obligations owing to such Secured Party
preclude any other or further exercise thereof or the exercise of any other
right. The rights under the Loan Documents and such other documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns. This Agreement is for the benefit
of the Secured Parties and their successors and assigns, and in the event
of an assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Borrower and its successors and assigns.
SECTION 20. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Borrower and the Agent with the consent
of the Required Banks under the Credit Agreement. No such amendment shall
by its terms materially adversely affect the rights of holders of any of
the Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure, the Letter
of Credit Exposure or the Second Priority Secured Obligations in a manner
different from its effect on the rights of holders of any other Secured
Obligations, except with the written consent of such affected holder (or of
the requisite majority of the affected holders specified in the documents
governing such affected holders' Secured Obligations).
SECTION 21. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except
as otherwise required by mandatory provisions of law and except to the
extent that remedies provided by the laws of any jurisdiction other than
New York are governed by the laws of such jurisdiction.
SECTION 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Agent
and the Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. Acceptance of Appointment. Morgan hereby accepts its
appointment as agent for each of the Secured Parties; provided that neither
such appointment or such acceptance shall impose on Morgan any duties other
than the express duties of the Agent hereunder and subject in any case to
the provisions of Section 7 hereof and Article 7 of the Credit Agreement,
which shall be binding on all Secured Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: ___________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: ___________________________________
Name:
Title:
<TABLE>
<CAPTION>
SCHEDULE A
Letters of Credit
L/C Ref # Beneficiary Amount Date Issued Expiry Date
- --------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
ISSUED BY MELLON
BANK, N.A.:
8571380 National Union Fire Insurance $ 20,861,000.00 20-Feb-98 31-Dec-99
8554730 Insurance Co. of North America 1,186,255.00 03-Nov-97 22-Nov-99
8533170 Commonwealth of PA 75,000.00 11-Jul-97 11-Jul-00
8531390 Joseph Brozek, Jr. 250,000.00 25-Jun-97 25-Jun-00
8159320 Continental Casualty Company 1,027,000.00 19-Feb-92 01-Jan-00
8478300 United States Fidelity and Trust 1,250,000.00 15-May-98 31-Dec-99
8578810 Travelers Indemnity Co. (TPI) 225,000.00 16-Apr-98 31-Dec-99
8578580 LA Dept. of Labor 350,000.00 15-Apr-98 31-Dec-99
8586190 Reliance Insurance Co. 300,000.00 20-May-98 31-Dec-99
8614310 City of Grand Junction, CO 117,680.00 28-Dec-98 21-Apr-00
8642610 Capital Blue Cross 749.458.87 08-Jul-99 31-Dec-99
8464810 Baltimore County, MD 38,973.00 08-May-96 08-Nov-99
--------------
26,430,366.87
ISSUED BY
CITIBANK, N.A.:
13863/30019259 MLTC Funding 5,800,000.00 12-Dec-96 22-Oct-00
ISSUED BY AMSOUTH
BANK OF ALABAMA:
S309510 AmSouth Bank of Alabama 477,320.73 05-Sep-95 01-Jan-00
Total standby
letters of credit
outstanding 32,707,687.60
--------------
</TABLE>
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
TARGET PULL-DOWN LIST.
(This list is for the use of the wordprocessor only, is not a part of this
document and may be discarded.)
ARTICLE/SECTION TARGET NAME
- --------------- -----------
1.01.............................................................definitions
1.03...................................................................types
2.....................................................................assign
2.01.............................................................commitments
2.01(a)............................................................tranche.a
2.01(b)............................................................tranche.b
2.02........................................................notice.committed
2.03............................................................notice.banks
2.03(a).......................................................notice.banks.a
2.04...................................................................notes
2.06...............................................................int.rates
2.06(b)..........................................................int.rates.c
2.06(c)..........................................................int.rates.d
2.07....................................................................fees
2.07(b)...............................................................fees.b
2.08................................................................optional
2.09..............................................................,mandatory
2.10.............................................................redct.evnts
2.10(b)........................................................redct.evnts.b
2.11.........................................................opt.prepayments
2.11(a)....................................................opt.prepayments.a
2.11(b)....................................................opt.prepayments.c
2.12...............................................................gen.provs
2.13..........................................................funding.losses
2.14..........................................................comp.ints.fees
3.................................................................conditions
3.01...........................................................effectiveness
3.01(b)......................................................effectiveness.b
3.01(d)......................................................effectiveness.c
3.01(e)......................................................effectiveness.d
4.................................................................reps.warrs
4.04(c).....................................................financial.info.c
4.06.....................................................................lit
5..................................................................covenants
5.01(a)...........................................................as.soon.as
5.01(b).........................................................as.soon.as.b
5.01(c).........................................................as.soon.as.c
5.01(f).........................................................as.soon.as.f
5.01(g).........................................................as.soon.as.g
5.07...............................................................rest.debt
5.08.......................................................restriction.sales
5.09..............................................................rest.liens
5.10..........................................................restrict.liens
5.10(a).....................................................restrict.liens.a
5.12..............................................................limitation
5.15............................................................use.proceeds
5.20............................................................trnch.A.ltds
6...................................................................defaults
6.01..................................................................events
6.01(c)...........................................................defaults.c
8.....................................................................change
8.01...................................................................basis
8.01(a)..............................................................basis.a
8.02..............................................................illegality
8.03..........................................................increased.cost
8.04...................................................................taxes
8.04(a)..............................................................taxes.a
8.04(d)..............................................................taxes.d
9.01.................................................................notices
9.03...............................................................exp.indem
9.03(b)...........................................................expenses.b
9.05.............................................................amend.waive
9.06(b).........................................................successors.b
9.06(c).........................................................successors.c
Exhibit 10.4
DRUGSTORE.COM PLEDGE AGREEMENT
AGREEMENT dated as of October 25, 1999 between RITE AID CORPORATION
(with its successors, the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("MORGAN"), as agent hereunder (the "AGENT").
W I T N E S S E T H:
WHEREAS, the Borrower, certain banks and Morgan, as agent for such
banks are parties to a Credit Agreement dated as of July 19, 1996 (as
heretofore amended, the "ORIGINAL 1996 CREDIT AGREEMENT"); and
WHEREAS, the Borrower proposes to enter into an Amended and Restated
Credit Agreement of even date amending and restating the Original 1996
Credit Agreement (as the same may be amended from time to time, the "CREDIT
AGREEMENT"); and
WHEREAS, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (i) on a first priority basis, to secure
certain of its obligations under the Credit Agreement as well as the
Prudential Pro Rata Exposure (as defined below), the Morgan Pro Rata
Exposure (as defined below) and the Letter of Credit Exposure (as defined
below) and (ii) on a second priority basis, to secure the Synthetic Lease
Obligations (as defined below);
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. (a) Terms defined in the heading and recitals
hereto have the respective meanings provided for therein.
(b) The following terms have the meanings provided for in the
Credit Agreement:
Base Rate
Default
Event of Default
Lien
Loan Documents
PCS Pledge Agreement
Morgan Pro Rata Exposure
Prudential Pro Rata Exposure
Tranche A Loans
Tranche B Loans
(c) The following additional terms, as used herein, have the
following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(a).
"FIRST PRIORITY SECURED OBLIGATIONS" means (i) all outstanding
principal amounts of the Partially Secured Obligations, provided that the
principal amount secured pursuant to this clause (i) shall not exceed the
Maximum Principal Amount, (ii) all interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) on the principal amounts secured pursuant to clause (i) of this
definition, (iii) any Yield-Maintenance Amount payable in respect of the
portion of the Prudential Pro Rata Exposure secured pursuant to clauses (i)
and (ii) of this definition, (iv) any renewals or extensions of any of the
foregoing and (v) to the extent the same may be secured hereunder and under
the PCS Pledge Agreement without contravention of the Indentures, any and
all other amounts payable by the Borrower in respect of the Partially
Secured Obligations. The amounts specified in clauses (i) and (iv) shall be
allocated among the Partially Secured Obligations ratably based on the
unpaid principal amount thereof at the time of determination.
"INSTRUCTING BANKS" means the "Required Banks" as defined in the
Credit Agreement.
"ISSUER" means drugstore.com, inc., and its successors.
"LETTER OF CREDIT EXPOSURE" means the reimbursement obligations of the
Borrower in respect of standby letters of credit issued for the account of
the Borrower set forth in Schedule A hereto, and any replacements thereof;
provided that the issuer of such letter of credit shall have entered into
an agreement with the Borrower and the Agent satisfactory to the Agent
pursuant to which such issuer has agreed to accept the benefits of and be
bound by the terms of this Agreement; provided further that the Letter of
Credit Exposure may not for purposes of this Agreement exceed $32,750,000;
and provided further that the outstanding principal amount of any such
letters of credit which are undrawn shall be deemed to be the face amount
thereof for purposes of this Agreement, subject to the last sentence of
Section 13.
"LIMITED SHARES" means 9,334,746 shares of Common Stock, par value
$0.001 per share, of the Issuer.
"MAXIMUM PRINCIPAL AMOUNT" shall mean that portion of the outstanding
principal amounts of the Partially Secured Obligations secured both
hereunder and under the PCS Pledge Agreement, which principal amount shall
not exceed $399,000,000, it being understood that this Agreement and the
PCS Pledge Agreement each individually, but also collectively, secure the
Partially Secured Obligations to the extent of such Maximum Principal
Amount, and that therefore the Maximum Principal Amount for purposes of
this Agreement shall be reduced by the amount of any proceeds of Collateral
applied to principal of the Partially Secured Obligations pursuant to
Section 13 of the PCS Pledge Agreement.
"PARTIALLY SECURED OBLIGATIONS" means the Tranche B Loans, the
Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure and the Letter
of Credit Exposure.
"PLEDGED STOCK" means (i) the Limited Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section 3(b).
"SECOND PRIORITY SECURED OBLIGATIONS" means (i) the obligations of the
Borrower the Synthetic Lease Obligations and (ii) any renewals or
extensions of the foregoing.
"SECURED OBLIGATIONS" means the First Priority Secured Obligations,
the Second Priority Secured Obligations and any amount payable by the
Borrower under this Agreement.
"SECURED PARTIES" means the Agent and the holders from time to time of
the Secured Obligations.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"SYNTHETIC LEASE OBLIGATIONS" means, collectively, (i) the Guaranty
dated as of March 19, 1998 from Rite Aid Corporation to RAC Leasing LLC, as
the same may be amended from time to time, and (ii) the Guaranty dated as
of May 30, 1997 from Rite Aid Corporation to Sumitomo Bank Leasing and
Finance, Inc., as the same may be amended from time to time.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings
therein stated.
SECTION 2. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) Title to Pledged Stock. The Borrower owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests.
The Pledged Stock includes 21.5% of the issued and outstanding capital
stock of the Issuer. All of the Pledged Stock has been duly authorized
and validly issued, and is fully paid and non-assessable, and is
subject to no options to purchase or similar rights of any Person. The
Borrower is not and will not become a party to or otherwise bound by
any agreement, other than this Agreement and the Governance Agreement
dated June 17, 1999 between the Issuer and the Borrower, which
restricts in any manner the rights of any present or future holder of
any of the Pledged Stock with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. The
Agent has valid and perfected security interests in the Collateral
subject to no prior Lien. No registration, recordation or filing with
any governmental body, agency or official is required in connection
with the execution or delivery of this Agreement or necessary for the
validity or enforceability hereof or for the perfection or enforcement
of the Security Interests. Neither the Borrower nor any of its
Subsidiaries has performed or will perform any acts which might
prevent the Agent from enforcing any of the terms and conditions of
this Agreement or which would limit the Agent in any such enforcement.
(c) UCC Filing Locations. The chief executive office of the
Borrower is located at its address set forth on the signature pages of
the Credit Agreement.
SECTION 3. The Security Interests. In order to secure the full and
punctual payment of the Secured Obligations in accordance with the terms
thereof, and to secure the performance of all the obligations of the
Borrower hereunder:
(a) The Borrower hereby assigns and pledges to and with the
Agent for the benefit of the Secured Parties and grants to the Agent
for the benefit of the Secured Parties security interests in the
Pledged Stock, and all of its rights and privileges with respect to
the Pledged Stock, and all income and profits thereon, and all
dividends and other payments and distributions with respect thereto,
and all proceeds of the foregoing (the "COLLATERAL"). Prior to the
execution and delivery hereof, the Borrower has delivered the
certificate representing the Limited Shares in pledge hereunder.
(b) In the event that the Issuer at any time issues any
additional or substitute shares of capital stock of any class to the
Borrower or any Subsidiary, the Borrower will immediately pledge and
deposit with the Agent certificates representing all such shares as
additional security for the Secured Obligations. All such shares
constitute Pledged Stock and are subject to all provisions of this
Agreement.
(c) The Security Interests are granted as security only and
shall not subject the Agent or any Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of the Borrower
with respect to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Delivery of Pledged Stock. All certificates representing
Pledged Stock delivered to the Agent by the Borrower pursuant hereto shall
be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances. (a) The Borrower agrees that it will,
at its expense and in such manner and form as the Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary
or desirable, or that the Agent may request, in order to create, preserve,
perfect or validate any Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, the Borrower hereby
authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement
or of a financing statement relating to this Agreement) which the Agent in
its sole discretion may deem necessary or appropriate to further perfect
the Security Interests.
(b) The Borrower agrees that it will not change (i) its name,
identity or corporate structure in any manner, (ii) the location of
its chief executive office or (iii) its jurisdiction of incorporation
unless it shall have given the Agent not less than 30 days' prior
notice thereof.
SECTION 6. Record Ownership of Pledged Stock. The Agent may at any
time or from time to time, in its sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. The Borrower will promptly give to the Agent copies of any notices
or other communications received by it in its capacity as a shareholder of
the Issuer with respect to Pledged Stock registered in the name of the
Borrower and the Agent will promptly give to the Borrower copies of any
notices and communications received by the Agent with respect to Pledged
Stock registered in the name of the Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral. During the
continuance of any Default the Agent shall have the right to receive and to
retain as Collateral hereunder all dividends and other payments and
distributions made upon or with respect to the Collateral and the Borrower
shall take all such action as the Agent may deem necessary or appropriate
to give effect to such right. All such dividends and other payments and
distributions which are received by the Borrower shall be received in trust
for the benefit of the Agent and the Secured Parties and, if the Agent so
directs during the continuance of a Default, shall be segregated from other
funds of the Borrower and shall, forthwith upon demand by the Agent during
the continuance of a Default, be paid over to the Agent as Collateral in
the same form as received (with any necessary endorsement). After all
Defaults have been cured, the Agent's right to retain dividends and other
payments and distributions under this Section 7 shall cease and the Agent
shall pay over to the Borrower any such Collateral retained by it during
the continuance of a Default.
SECTION 8. Right to Vote Pledged Stock. Unless a Default shall have
occurred and be continuing, the Borrower shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock, and the Agent shall, upon receiving a written request
from the Borrower accompanied by a certificate signed by its principal
financial officer stating that no Default has occurred and is continuing,
deliver to the Borrower or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
If a Default shall have occurred and be continuing, the Agent shall
have the right to the extent permitted by law, and the Borrower shall take
all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take
any other action with respect to any or all of the Pledged Stock with the
same force and effect as if the Agent were the absolute and sole owner
thereof.
SECTION 9. General Authority. The Borrower hereby irrevocably
appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Secured Parties
or otherwise, for the sole use and benefit of the Agent and Secured
Parties, but at the expense of the Borrower, to the extent permitted by law
to exercise, at any time and from time to time while an Event of Default
has occurred and is continuing, all or any of the following powers with
respect to all or any of the Collateral:
(a) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Borrower not less than ten days'
prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Borrower agree
that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the Uniforrn Commercial Code.
SECTION 10. Remedies upon Event of Default. If any Event of Default
shall have occurred and be continuing, the Agent may exercise on behalf of
the Secured Parties all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) apply the cash, if any, then
held by it as Collateral as specified in Section 13 and (ii) if there shall
be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price
or prices as the Agent may deem satisfactory. Any Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or
is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Agent is authorized, in connection
with any such sale, if it deems it advisable so to do, (A) to restrict the
prospective bidders on or purchasers of any of the Pledged Stock to a
limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a
view to the distribution or sale of any of such Pledged Stock, (B) to cause
to be placed on certificates for any or all of the Pledged Stock or on any
other securities pledged hereunder a legend to the effect that such
security has not been registered under the Securities Act of 1933 and may
not be disposed of in violation of the provision of said Act, and (C) to
impose such other limitations or conditions in connection with any such
sale as the Agent deems necessary or advisable in order to comply with said
Act or any other law. The Borrower will execute and deliver such documents
and take such other action as the Agent deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of
the Borrower which may be waived, and the Borrower, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 9 shall (1)
in the case of a public sale, state the time and place fixed for such sale,
(2) in the case of a sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a
private sale, state the day after which such sale may be consummated. Any
such public sale shall be hold at such time or times within ordinary
business hours and at such place or places as the Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Agent may determine. The
Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in the case of the failure of such purchaser to take up
and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The Agent, instead of
exercising the power of sale herein conferred upon it, may proceed by a
suit or suits at law or in equity to foreclose the Security Interests and
sell the Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction.
SECTION 11. Expenses. The Borrower agrees that it will forthwith upon
demand pay to the Agent:
(a) the amount of any taxes which the Agent may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including
the fees and disbursements of counsel, which the Agent may incur in
connection with (i) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection, rank and value
of any Security Interest, (ii) the collection, sale or other
disposition of any of the Collateral, (iii) the exercise by the Agent
of any of the rights conferred upon it hereunder or (iv) any Default.
Any such amount not paid on demand shall bear interest at a rate per annum
equal to Base Rate plus 4.50% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty ofAgent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected
by the Agent in good faith.
SECTION 13. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held
shall be applied by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent is to be reimbursed pursuant to Section
11 hereof,
SECOND, to the ratable payment of unpaid principal of the First
Priority Secured Obligations;
THIRD, to the ratable payment of (i) accrued but unpaid interest
on the First Priority Secured Obligations in accordance with the terms
thereof and (ii) any Yield-Maintenance Amount payable in respect of
the portion of the Prudential Pro Rata Exposure secured pursuant to
clauses (i) and (ii) of the definition of First Priority Secured
Obligations;
FOURTH, to the ratable payment of all other First Priority
Secured Obligations, until all First Priority Secured Obligations
shall have been paid in full;
FIFTH, to the ratable payment of all Second Priority Secured
Obligations, until all Second Priority Secured Obligations have been
paid in full;
FINALLY, to payment to the Borrower or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof. Any amount distributable
pursuant to this Section 13 in respect of any Letter of Credit Exposure
consisting of undrawn letters of credit shall be retained by the Agent for
payment to the Secured Parties that are issuers thereof at such time as
such letters of credit are drawn and then only to the extent of any such
draw. To the extent that any such letter of credit expires undrawn, any
amount then held by the Agent pursuant to the preceding sentence in respect
thereof shall be distributed in accordance with the priorities established
by this Section 13, it being understood that any reimbursement obligations
in respect of such expired letter of credit shall not be included in
Secured Obligations for purposes of such distribution.
SECTION 14. Concerning the Agent. The provisions of Article 7 of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the Secured Parties in such respect. In
furtherance and not in derogation of the rights, privileges and immunities
of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is
provided to be taken by it as Agent hereunder and all other action
reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and
methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the
Instructing Banks or, in the absence of such instructions, in
accordance with its discretion.
(b) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in
any of the Collateral, whether impaired by operation of law or by
reason of any action or omission to act on its part hereunder. The
Agent shall have no duty to ascertain or inquire as to the performance
or observance of any of the terms of this Agreement by the Borrower.
SECTION 15. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent may
appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions for the
protection of such co-agent or separate agent similar to the provisions of
Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination
of the Commitments under the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Borrower. At
any time and from time to time prior to such termination of the Security
Interests, the Agent may release any of the Collateral in accordance with
the applicable provisions of the Credit Agreement. Upon any such
termination of the Security Interests or release of Collateral, the Agent
will, at the expense of the Borrower, execute and deliver to the Borrower
such documents as the Borrower shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as
the case may be.
SECTION 17. Notices. All notices hereunder shall be given in
accordance with Section 9.01 of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies. No failure on the part
of the Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or
any Secured Party of any right under any Loan Document or any other
document relating to the Secured Obligations owing to such Secured Party
preclude any other or further exercise thereof or the exercise of any other
right. The rights under the Loan Documents and such other documents are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns. This Agreement is for the
benefit of the Secured Parties and their successors and assigns, and in the
event of an assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Borrower and its successors and assigns.
SECTION 20. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Borrower and the Agent with the consent
of the Required Banks under the Credit Agreement. No such amendment shall
by its terms materially adversely affect the rights of holders of any of
the Prudential Pro Rata Exposure, the Morgan Pro Rata Exposure, the Letter
of Credit Exposure or the Second Priority Secured Obligations in a manner
different from its effect on the rights of holders of any other Secured
Obligations, except with the written consent of such affected holder (or of
the requisite majority of the affected holders specified in the documents
governing such affected holders' Secured Obligations).
SECTION 21. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except
as otherwise required by mandatory provisions of law and except to the
extent that remedies provided by the laws of any jurisdiction other than
New York are governed by the laws of such jurisdiction.
SECTION 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Agent
and the Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. Acceptance of Appointment. Morgan hereby accepts its
appointment as agent for each of the Secured Parties; provided that neither
such appointment or such acceptance shall impose on Morgan any duties other
than the express duties of the Agent hereunder and subject in any case to
the provisions of Section 7 hereof and Article 7 of the Credit Agreement,
which shall be binding on all Secured Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: __________________________________
Name:
Title:
<TABLE>
<CAPTION>
SCHEDULE A
Letters of Credit
L/C Ref # Beneficiary Amount Date Issued Expiry Date
---------------- ------------------------ ------------------ ----------- -----------
ISSUED BY MELLON
BANK, N.A.:
<S> <C> <C> <C> <C>
8571380 National Union Fire Insurance $ 20,861,000.00 20-Feb-98 31-Dec-99
8554730 Insurance Co. of North America 1,186,255.00 03-Nov-97 22-Nov-99
8553170 Commonwealth of PA 75,000.00 11-Jul-97 11-Jul-00
8531390 Joseph Brozek, Jr. 250,000.00 25-Jun-97 25-Jun-00
8159320 Continental Casualty Company 1,027,000.00 19-Feb-92 01-Jan-00
8478300 United State Fidelity and Trust 1,250,000.00 15-May-98 31-Dec-99
8578810 Travelers Indemnity Co. (TPI) 225,000.00 16-Apr-98 31-Dec-99
8578580 LA Dept. of Labor 350,000.00 15-Apr-98 31-Dec-99
8586190 Reliance Insurance Co. 300,000.00 20-May-98 31-Dec-99
8614310 City of Grand Junction, CO 117,680.00 28-Dec-98 21-Apr-00
8642610 Capital Blue Cross 749,458.37 08-Jul-99 31-Dec-99
8464810 Baltimore County, MD 38,973.00 08-May-96 08-Nov-99
-----------------
26,430,366.87
Issued by
Citibank, N.A.:
13863/30019259 MLTC Funding 5,800,000.00 12-Dec-96 22-Oct-00
Issued by
AmSouth Bank of
Alabama:
S309510 AmSouth Bank of Alabama 477,320.73 05-Sep-95 01-Jan-00
Total standby letters
of credit outstanding 32,707,687.60
</TABLE>
Exhibit 10.5
PCS JUNIOR PLEDGE AGREEMENT
AGREEMENT dated as of October 19,1999 between RITE AID CORPORATION
(with its successors, the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, certain banks and Morgan Guaranty Trust Company
of New York ("MORGAN"), as agent for such banks are parties to a Credit
Agreement dated as of July 19, 1996 (as the same may be amended from time
to time, the "CREDIT AGREEMENT"); and
WHEREAS, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined) to secure its
obligations under the Credit Agreement and the Notes issued pursuant
thereto;
WHEREAS, the Borrower has heretofore granted a continuing security
interest in and to the Collateral to secure its obligations under the
Credit Agreement dated as of January 21, 1999 (the "PCS Credit Agreement")
among the Borrower, the banks listed therein and Morgan, as agent and the
notes issued pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have
the following respective meanings:
"COLLATERAL" has the meaning assigned to such term in Section 3(a).
"ISSUER" means PCS Holdings Corporation, and its successors.
"JUNIOR SECURED OBLIGATIONS" means the obligations secured under this
Agreement including (i) up to $200,000,000 principal amount of loans made
to the Borrower under the Credit Agreement on or after the date hereof for
the purpose of repaying maturing commercial paper (together with interest
on such loans and facility fees allocable to such loans (including, without
limitation, any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Borrower, whether or not allowed or allowable as a
claim in any such proceeding)), (ii) all other amounts payable by the
Borrower hereunder and (iii) any renewals or extensions of any of the
foregoing.
"JUNIOR SECURITY INTERESTS" means the security interests in the
Collateral granted hereunder securing the Junior Secured Obligations.
"PLEDGED STOCK" means (i) the Subsidiary Shares and (ii) any other
capital stock required to be pledged to the Agent pursuant to Section 3(b).
"SENIOR PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as of
September 29, 1999 between the Borrower and Morgan Guaranty Trust Company,
as agent.
"SENIOR SECURED OBLIGATIONS" means the obligations secured under the
PCS Credit Agreement including (i) all principal of and interest
(including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any loan under,
or any note issued pursuant to, the PCS Credit Agreement, (ii) all other
amounts payable by the Borrower under the Senior Pledge Agreement or under
the PCS Credit Agreement and (iii) any renewals or extensions of any of the
foregoing.
"SENIOR SECURITY INTERESTS" means the security interests in the
Collateral granted under the Senior Pledge Agreement securing the Senior
Secured Obligations.
"SUBSIDIARY SHARES" means 565 shares of Class A Stock, par value $1.00
per share, of the Issuer.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings
therein stated.
SECTION 2. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) Title to Pledged Stock. The Borrower owns all of the Pledged
Stock, free and clear of any Liens other than the Junior Security
Interests and the Senior Security Interests. The Pledged Stock
includes all of the issued and outstanding capital stock of the
Issuer. All of the Pledged Stock has been duly authorized and validly
issued, and is fully paid and non-assessable, and is subject to no
options to purchase or similar rights of any Person. The Borrower is
not and will not become a party to or otherwise bound by any
agreement, other than this Agreement, which restricts in any manner
the rights of any present or future holder of any of the Pledged Stock
with respect thereto.
(b) Validity, Perfection and Priority of Junior Security
Interests. The Agent has valid and perfected security interests in the
Collateral subject to no prior Lien other than the Lien created
pursuant to the Senior Pledge Agreement. No registration, recordation
or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or
necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Junior Security Interests. Neither
the Borrower nor any of its Subsidiaries has performed or will perform
any acts which might prevent the Agent from enforcing any of the terms
and conditions of this Agreement or which would limit the Agent in any
such enforcement.
(c) UCC Filing Locations. The chief executive office of the
Borrower is located at its address set forth on the signature pages of
the Credit Agreement.
SECTION 3. The Junior Security Interests. In order to secure the
full and punctual payment of the Junior Secured Obligations in accordance
with the terms thereof, and to secure the performance of all the
obligations of the Borrower hereunder:
(a) The Borrower hereby assigns and pledges to and with the
Agent for the benefit of the Banks and grants to the Agent for the
benefit of the Banks security interests in the Pledged Stock, and all
of its rights and privileges with respect to the Pledged Stock, and
all income and profits thereon, and all dividends and other payments
and distributions with respect thereto, and all proceeds of the
foregoing (the "COLLATERAL"), such security interest to be subordinate
and junior to the security interest created under the Senior Pledge
Agreement. Delivery of the certificate representing the Subsidiary
Shares to Morgan as agent under the Senior Pledge Agreement shall
constitute delivery of the Subsidiary Shares to Morgan as agent
hereunder. Upon termination of the commitments and repayment of all
loans and other amounts outstanding under the PCS Credit Agreement and
the Senior Pledge Agreement, such Subsidiary Shares shall be held by
Morgan exclusively as agent hereunder.
(b) In the event that the Issuer at any time issues any
additional or substitute shares of capital stock of any class, the
Borrower will immediately pledge and deposit with the Agent
certificates representing all such shares as additional security for
the Junior Secured Obligations. All such shares constitute Pledged
Stock and are subject to all provisions of this Agreement.
(c) The Junior Security Interests are granted as security only
and shall not subject the Agent or any Bank to, or transfer or in any
way affect or modify, any obligation or liability of the Borrower with
respect to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Delivery of Pledged Stock. All certificates representing
Pledged Stock delivered to the Agent by the Borrower pursuant hereto shall
be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Agent.
SECTION 5. Further Assurances. (a) The Borrower agrees that it will,
at its expense and in such manner and form as the Agent may require,
execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary
or desirable, or that the Agent may request, in order to create, preserve,
perfect or validate any Junior Security Interest or to enable the Agent to
exercise and enforce its rights hereunder with respect to any of the
Collateral. To the extent permitted by applicable law, the Borrower hereby
authorizes the Agent to execute and file, in the name of the Borrower or
otherwise, Uniform Commercial Code financing statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement
or of a financing statement relating to this Agreement) which the Agent in
its sole discretion may deem necessary or appropriate to further perfect
the Junior Security Interests.
(b) The Borrower agrees that it will not change (i) its name,
identity or corporate structure in any manner or (ii) the location of
its chief executive office unless it shall have given the Agent not
less than 30 days' prior notice thereof.
SECTION 6. Record Ownership of Pledged Stock. Subject to the rights
of the holders of the Senior Secured Obligations, the Agent may at any time
or from time to time, in its sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Agent or its
nominee. The Borrower will promptly give to the Agent copies of any notices
or other communications received by it with respect to Pledged Stock
registered in the name of the Borrower and the Agent will promptly give to
the Borrower copies of any notices and communications received by the Agent
with respect to Pledged Stock registered in the name of the Agent or its
nominee.
SECTION 7. Right to Receive Distributions on Collateral. Subject to
the rights of the holders of the Senior Secured Obligations, during the
continuance of any Default the Agent shall have the right to receive and to
retain as Collateral hereunder all dividends and other payments and
distributions made upon or with respect to the Collateral and the Borrower
shall take all such action as the Agent may deem necessary or appropriate
to give effect to such right. All such dividends and other payments and
distributions which are received by the Borrower shall be received in trust
for the benefit of the Agent and the Banks and, if the Agent so directs
during the continuance of a Default, shall be segregated from other funds
of the Borrower and shall, forthwith upon demand by the Agent during the
continuance of a Default, be paid over to the Agent as Collateral in the
same form as received (with any necessary endorsement). After all Defaults
have been cured, the Agent's right to retain dividends and other payments
and distributions under this Section 7 shall cease and the Agent shall pay
over to the Borrower any such Collateral retained by it during the
continuance of a Default.
SECTION 8. Right to Vote Pledged Stock. Subject to the rights of the
holders of the Senior Secured Obligations, unless a Default shall have
occurred and be continuing, the Borrower shall have the right, from time to
time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock, and the Agent shall, upon receiving a written request
from the Borrower accompanied by a certificate signed by its principal
financial officer stating that no Default has occurred and is continuing,
deliver to the Borrower or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any
of the Pledged Stock which is registered in the name of the Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Agent.
Subject to the rights of the holders of the Senior Secured
Obligations, if a Default shall have occurred and be continuing, the Agent
shall have the right to the extent permitted by law and the Borrower shall
take all such action as may be necessary or appropriate to give effect to
such right, to vote and to give consents, ratifications and waivers, and
take any other action with respect to any or all of the Pledged Stock with
the same force and effect as if the Agent were the absolute and sole owner
thereof.
SECTION 9. General Authority. The Borrower hereby irrevocably
appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of the Borrower, the Agent, the Banks or
otherwise, for the sole use and benefit of the Agent and Banks, but at the
expense of the Borrower, to the extent permitted by law to exercise, at
anytime and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any
of the Collateral:
(a) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Agent shall give the Borrower not less than ten days'
prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent and the Borrower agree
that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default. Subject to the rights of
the holders of the Senior Secured Obligations, if any Event of Default
shall have occurred and be continuing, the Agent may exercise on behalf of
the Banks all the rights of a secured party under the Uniform Commercial
Code (whether or not in effect in the jurisdiction where such rights are
exercised) and, in addition, the Agent may, without being required to give
any notice, except as herein provided or as may be required by mandatory
provisions of law, (i) apply the cash, if any, then held by it as
Collateral as specified in Section 13 and (ii) if there shall be no such
cash or if such cash shall be insufficient to pay all the Junior Secured
Obligations in full, sell the Collateral or any part thereof at public or
private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery, and at such price or prices as
the Agent may deem satisfactory. Any Bank may be the purchaser of any or
all of the Collateral so sold at any public sale (or, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is
the subject of widely distributed standard price quotations, at any private
sale). The Agent is authorized, in connection with any such sale, if it
deems it advisable so to do, (A) to restrict the prospective bidders on or
purchasers of any of the Pledged Stock to a limited number of sophisticated
investors who will represent and agree that they are purchasing for their
own account for investment and not with a view to the distribution or sale
of any of such Pledged Stock, (B) to cause to be placed on certificates for
any or all of the Pledged Stock or on any other securities pledged
hereunder a legend to the effect that such security has not been registered
under the Securities Act of 1933 and may not be disposed of in violation of
the provision of said Act, and (C) to impose such other limitations or
conditions in connection with any such sale as the Agent deems necessary or
advisable in order to comply with said Act or any other law. The Borrower
will execute and deliver such documents and take such other action as the
Agent deems necessary or advisable in order that any such sale may be made
in compliance with law. Upon any such sale the Agent shall have the right
to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including
any equity or right of redemption of the Borrower which may be waived, and
the Borrower, to the extent permitted by law, hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under
any law now existing or hereafter adopted. The notice (if any) of such sale
required by Section 9 shall (1) in the case of a public sale, state the
time and place fixed for such sale, (2) in the case of a sale at a broker's
board or on a securities exchange, state the board or exchange at which
such sale is to be made and the day on which the Collateral, or the portion
thereof so being sold, will first be offered for sale at such board or
exchange, and (3) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as
the Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as
the Agent may determine. The Agent shall not be obligated to make any such
sale pursuant to any such notice. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same
may be so adjourned. In the case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Agent until the selling price is paid by the purchaser
thereof, but the Agent shall not incur any liability in the case of the
failure of such purchaser to take up and pay for the Collateral so sold
and, in the case of any such failure, such Collateral may again be sold
upon like notice. The Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Junior Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction.
SECTION 11. Expenses. The Borrower agrees that it will forthwith
upon demand pay to the Agent:
(a) the amount of any taxes which the Agent may have been
required to pay by reason of the Junior Security Interests or to free
any of the Collateral from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including
the fees and disbursements of counsel, which the Agent may incur in
connection with (i) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection, rank and value
of any Junior Security Interest, (ii) the collection, sale or other
disposition of any of the Collateral, (iii) the exercise by the Agent
of any of the rights conferred upon it hereunder or (iv) any Default.
Any such amount not paid on demand shall bear interest at the rate
applicable to Base Rate Borrowings plus 2% and shall be an additional
Junior Secured Obligation hereunder.
SECTION 12. Limitation on Duty of Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected
by the Agent in good faith.
SECTION 13. Application of Proceeds. Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held
shall, after application of such proceeds in accordance with Section 13 of
the Senior Pledge Agreement, be applied by the Agent in the following order
of priorities:
FIRST, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Agent, and all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, and any other unreimbursed
expenses for which the Agent or any Bank is to be reimbursed pursuant
to Section 9.03 of the Credit Agreement or Section 11 hereof and
unpaid fees owing to the Agent under the Credit Agreement;
SECOND, to the ratable payment of unpaid principal of the Junior
Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest on
the Junior Secured Obligations in accordance with the provisions of
the Credit Agreement;
FOURTH, to the ratable payment of all other Junior Secured
Obligations, until all Junior Secured Obligations shall have been paid
in full; and
FINALLY, to payment to the Borrower or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a
ratable basis, in any combination thereof
SECTION 14. Concerning the Agent. The provisions of Article 7 of the
Credit Agreement shall inure to the benefit of the Agent in respect of this
Agreement and shall be binding upon the parties to the Credit Agreement in
such respect, In furtherance and not in derogation of the rights,
privileges and immunities of the Agent therein set forth:
(a) The Agent is authorized to take all such action as is
provided to be taken by it as Agent hereunder and all other action
reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and
methods of realization upon the Collateral) the Agent shall act or
refrain from acting in accordance with written instructions from the
Required Banks or, in the absence of such instructions, in accordance
with its discretion.
(b) The Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Junior Security
Interests in any of the Collateral, whether impaired by operation of
law or by reason of any action or omission to act on its part
hereunder. The Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
the Borrower.
SECTION 15. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent may
appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Agent, or to act as
separate agent or agents on behalf of the Banks with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in
the discretion of the Agent, include provisions for the protection of such
co-agent or separate agent similar to the provisions of Section 14).
SECTION 16. Termination of Junior Security Interests; Release of
Collateral. Upon the repayment in full of all Junior Secured Obligations
and the termination of the Commitments under the Credit Agreement, the
Junior Security Interests shall terminate and all rights to the Collateral
shall revert to the Borrower. At any time and from time to time prior to
such termination of the Junior Security Interests, the Agent may release
any of the Collateral with the prior written consent of the Required Banks.
Upon any such termination of the Junior Security Interests or release of
Collateral, the Agent will, at the expense of the Borrower, execute and
deliver to the Borrower such documents as the Borrower shall reasonably
request to evidence the termination of the Junior Security Interests or the
release of such Collateral, as the case may be.
SECTION 17. Notices. All notices hereunder shall be given in
accordance with Section 9.01 of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies. No failure on the part
of the Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent of
any right under the Credit Agreement or this Agreement preclude any other
or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the Credit Agreement are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns. This Agreement is for the
benefit of the Agent and the Banks and their successors and assigns, and in
the event of an assignment of all or any of the Junior Secured Obligations,
the rights hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This Agreement shall
be binding on the Borrower and its successors and assigns.
SECTION 20. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally,
but only in writing signed by the Borrower and the Agent with the consent
of the Required Banks.
SECTION 21. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except
as otherwise required by mandatory provisions of law and except to the
extent that remedies provided by the laws of any jurisdiction other than
New York are governed by the laws of such jurisdiction.
SECTION 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and shall be liberally construed in favor of the Agent
and the Banks in order to carry out the intentions of the parties hereto as
nearly as may be possible; and (ii) the invalidity or unenforceability of
any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By: /s/ Elliot S. Gerson
--------------------------------------
Name: Elliot S. Gerson
Title: Senior Executive Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: /s/ Glenda Winter-Irving
-------------------------------------
Name: Glenda Winter-Irving
Title: Vice President
Exhibit 99
CAMP HILL, Pa. (BUSINESS WIRE) Oct. 27, 1999 Rite Aid Corporation
(RAD-NYSE, PSE), today announced that it has concluded the extension and
restructuring of all $2.7 billion of its outstanding banking facilities and
concurrently consummated the sale of $300 million of its 8% convertible
pay-in-kind preferred stock to an affiliate of Leonard Green & Partners.
As a result, the due dates of $1.3 billion of its bank debt scheduled to
mature on October 29, 1999 and $300 million of its bank debt which was due
on demand have been extended to Nov. 1, 2000.
In addition, the financial covenants in all $2.7 billion of its banking
facilities have been amended to be consistent with the Company's current
business plan. The facilities prohibit the Company from paying cash
dividends or from redeeming or otherwise purchasing its capital stock and
are secured by the Company's ownership interests in PCS Health Systems,
Inc. and drugstore.com, inc.
The preferred stock issued to the Leonard Green & Partners' affiliate has
an 8% dividend payable in cash or in additional shares, at the option of
the Company, subject to the restriction in the banking facilities on the
payment of cash dividend, and is convertible into common stock at $11 per
share. The conversion price is subject to certain antidilution
adjustments. In addition, the conversion price will be reset (1) in the
event that prior to October 27, 2000, the Company issues shares of common
stock at a price lower than the then current conversion price and (2) on
March 1, 2001, to the lowest average price (but not less than $7.50) of the
Company's common stock during any consecutive three-month period from
October 27, 1999, through February 28, 2001, if such average price is lower
than the then current conversion price; however, if the conversion price
has not been so reset to a lower price by February 28, 2001, it will be
reset to $11.50 (assuming no other adjustment). The preferred stock is
redeemable by the Company after October 24, 2004.
Leonard Green and Jonathan Sokoloff, partners in Leonard Green & Partners,
will join Rite Aid's Board of Directors; Green will also become a member of
the executive committee of the board.
Rite Aid is one of the nation's leading drugstore chains with annual
revenues of nearly $13 billion and approximately 3,800 stores in 30 states
and the District of Columbia. Rite Aid owns PCS Health Systems, Inc.,
which provides pharmacy benefit management programs and services that can
help improve patient health and reduce health care costs. Rite Aid also
owns approximately 22% of drugstore.com a leading online source for health,
beauty and pharmacy products. General information about Rite Aid,
including corporate background and press releases is available through the
company's web site at http://www.RITEAID.com
Contact: CONTACT: Media: Karen Rugen (717) 730-7766
Sarah Datz (717) 975-5718 or Investors: Doug Wilburne (717) 214-8835
07:30 EDT OCTOBER 27, 1999
