<PAGE>
As filed with the Securities and Exchange Commission on May 5, 1999.
Registration No. 333-66901
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RITE AID CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 5912 23-1614034
(State or other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
----------------
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------
Elliot S. Gerson
Executive Vice President, General Counsel and Secretary
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
With a Copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
(212) 309-6000
Attn: Howard A. Kenny
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated May 5, 1999.
Prospectus
RITE AID CORPORATION
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Rite Aid Corporation offers to exchange up to $200,000,000 of its 6% Dealer
Remarketable Securities, "Drs.", due October 1, 2013, the "Exchange Drs.", for
an identical principal amount of its outstanding 6% Drs. due October 1, 2013,
the "Restricted Drs.".
The Exchange Drs. will:
. have the same terms as the Restricted Drs., except the Exchange Drs. will
be registered with the Securities and Exchange Commission and you will be
able to offer and sell them freely to any potential buyer. This is
beneficial to you because the Restricted Drs. are not registered and may
not be offered or sold unless they are registered or exempted from
registration under federal securities laws.
. bear interest at 6% per annum until October 1, 2003 accruing from
September 22, 1998, the issue date of the Restricted Drs., and provide
for payment of interest semi-annually on April 1 and October 1, beginning
April 1, 1999.
. not trade on any securities exchange or through any automated quotation
system. No active public market is anticipated.
The exchange offer:
. expires at 5:00 p.m., New York City time, on , 1999, unless
extended.
. is subject to customary terms and conditions, as specified in this
prospectus and the accompanying letter of transmittal.
The Drs. are subject to mandatory tender, or redemption, on October 1, 2003.
See "Risk Factors" beginning on page 2 for a discussion of factors you should
carefully consider in evaluating an investment in the Drs. offered in this
Prospectus.
We issued the Restricted Drs. in a transaction not requiring registration
under the Securities Act and thus their transfer is restricted. We are making
the exchange offer to satisfy your registration rights, as holders of the
Restricted Drs., requiring us to either provide you with Exchange Drs.
registered under the Securities Act or to register your Restricted Drs. for
resale. In the event we do not fulfill these obligations, we must make certain
penalty interest payments to you, described under "Exchange Offer--Purpose of
the Exchange Offer."
You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. We are not offering to sell or asking you to buy
anything other than the Exchange Drs. We are not offering to sell or asking you
to buy anything in any jurisdiction where doing so would be against the law.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the Exchange Drs. nor determined that this prospectus
is accurate or complete. Any representation to the contrary is a criminal
offence.
, 1999
- -----
"Dealer remarketable securities SM" and "Drs. SM" are service marks of J.P.
Morgan Securities Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY................................................................ 2
RISK FACTORS............................................................... 2
RECENT DEVELOPMENTS........................................................ 3
AVAILABLE INFORMATION...................................................... 4
USE OF PROCEEDS............................................................ 4
RATIO OF EARNINGS TO FIXED CHARGES......................................... 4
EXCHANGE OFFER............................................................. 5
DESCRIPTION OF THE DRS. ................................................... 12
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS............................ 23
PLAN OF DISTRIBUTION....................................................... 26
LEGAL MATTERS.............................................................. 27
EXPERTS.................................................................... 27
</TABLE>
<PAGE>
THE COMPANY
Rite Aid Corporation, incorporated in 1968, is one of the largest retail
drugstore chains in the United States. As of February 27, 1999, we operated
3,821 drugstores, which range in size from approximately 7,200 to 20,000 square
feet, in 30 eastern, southern and western states and the District of Columbia.
We employ over 75,000 associates.
Pharmacy service forms the core of our business, with prescriptions
accounting for 54.2 percent of sales in the fifty-two week period ended
February 27, 1999. Our drugstores offer a full selection of health and personal
care products, seasonal merchandise and a large private label product line in
convenient locations, and a customer-oriented shopping environment. As of
February 27, 1999, we had over 1,000 stores with drive-through pharmacy
windows, over 260 stores that are open 24 hours per day, and over 1,900 stores
with one-hour photo departments. We have added express mail with complementary
services and one-hour photo departments to attract new customers and enhance
customer loyalty.
Through our Eagle Managed Care Corp. subsidiary and our recently purchased
subsidiary, PCS Health Systems, Inc., one of the largest pharmacy benefit
managers, we are engaged in pharmacy benefit management, marketing prescription
plans and selling other managed health care services to employers, health plans
and their members and government-sponsored employee benefit programs. We
purchased PCS, on January 22, 1999.
On January 7, 1999, we announced an alliance with General Nutrition
Companies, Inc., a leader in the fast-growing vitamin and nutritional
supplement category. Under the agreement, we will open and operate 1,500 GNC
stores-within-a-store in Rite Aid stores across the country. In addition, Rite
Aid and GNC will jointly market a new brand of vitamins and mineral
supplements; GNC will manufacture certain of Rite Aid's private label vitamins
and supplements; and Rite Aid and GNC will jointly operate a co-branded web-
site that will feature nutritional information and market their vitamins and
minerals.
On December 12, 1996, we acquired Thrifty PayLess Holdings, Inc., which was
one of the largest drugstore retailers in the western United States with over
1,000 stores in 10 states. We have renamed the Thrifty PayLess stores "Rite
Aid" and are in the process of remodeling those stores. On August 27, 1997, we
completed the purchases of K&B Incorporated and Harco, Inc. K&B operated 186
stores in Louisiana, Alabama, Mississippi, Texas, Tennessee and Florida, and in
1996 was the 13th largest drugstore chain in the U.S. in terms of sales, with
sales of $580,000,000. Harco operated 146 stores in Alabama, Mississippi and
Florida, and in 1996 was the 17th largest drugstore chain in the U.S. in terms
of sales, with sales of $258,000,000. We have renamed all K&B and Harco stores
"Rite Aid" and have completed the conversion of the systems and processes of
those stores into our systems and processes.
We are a Delaware corporation. Our principal executive offices are located
at 30 Hunter Lane, Camp Hill, Pennsylvania 17011 and our telephone number is
(717) 761-2633.
RISK FACTORS
There is a risk associated with our amortization of the goodwill from our
purchase of PCS Health Systems, Inc. over 40 years.
On January 22, 1999, we purchased PCS Health Systems, Inc., one of the
largest pharmacy benefit managers in the country. Immediately following this
purchase, our balance sheet included an amount designated as "goodwill" that
represents 30% of our total assets and 107% of stockholders' equity.
Approximately 52% or $1,600,000,000 of this goodwill resulted from our
acquisition of PCS, and represents the difference between the price we paid for
PCS and the fair value of the tangible and separately measurable intangible net
assets of PCS. U.S. generally accepted accounting principles, or GAAP, require
us to amortize this goodwill and all other intangible assets over the entire
period during which we benefit from these intangible assets. We have determined
that this goodwill will benefit us for no less than 40 years. There is a
2
<PAGE>
risk that this determination will prove to have been incorrect and we will be
amortizing this goodwill over too long a period. If we have done this, our
earnings reports for the periods immediately following the acquisition will be
overstated, and, in later years, we will be burdened with a continuing charge
against earnings without a corresponding benefit to income. If we determine in
a later year that we are no longer receiving the benefit of this goodwill, we
may have to write off the remaining goodwill in that year, resulting in a
reduction in earnings for that fiscal year. We and our independent accountants
have reviewed the anticipated cash flow and all other factors considered when
we determined the cost we were willing to incur to purchase PCS. We concluded
that anticipated future cash flows associated with the intangible assets
acquired when we purchased PCS will continue indefinitely. We have found no
persuasive evidence that we will deplete any material portion of these
intangible assets in less than 40 years. However, we can give no assurance that
this determination will prove to be correct.
RECENT DEVELOPMENTS
On March 12, 1999, we announced that our preliminary estimate for fully
diluted earnings per share for the fourth quarter would be approximately $0.30
to $0.32 as compared to the then existing First Call analysts' consensus
estimates of $0.52 per share. Subsequent to our March 12 announcement, several
purported class action lawsuits were commenced against Rite Aid, Martin Grass,
our Chairman, Chief Executive Officer and a director, Timothy Noonan, our
President, Chief Operating Officer and a director, Franklin Brown, our Vice
Chairman and a director, and Frank Bergonzi, our Senior Executive Vice
President and Chief Financial and Accounting Officer in the United States
District Court for the Eastern District of Pennsylvania. The plaintiffs in
these suits allege that we failed to make prompt public disclosure of matters
mentioned in our March 12 announcement that affected our results for the fourth
quarter and seek to recover damages on behalf of all purchasers of our common
stock between December 14, 1998 and March 11, 1999. On April 18, 1999, the
court approved a stipulation among counsel that, among other things, provided
for consolidation of these suits. We intend to deny the material allegations in
these complaints and to defend these actions vigorously.
On March 29, 1999, we announced our unaudited financial results for the
fourth quarter and year ended February 27, 1999. For the fourth quarter ended
February 27, 1999, sales increased 11.7 percent to $3,565,300,000 from
$3,190,600,000 for the same period in fiscal 1998. Prescription revenue
accounted for 53.8 percent of drugstore sales for the quarter, and third party
prescription revenues represented 86.1 percent of pharmacy sales. Net income
was $73,000,000, a decrease from $119,700,000 for the same period in fiscal
1998. Diluted earnings per shares decreased to $.28 versus $.44 for the
comparable period of fiscal 1998.
Revenues for the fiscal year ended February 27, 1999, rose 11.9 percent to
$12,731,900,000 from $11,375,100,000 in fiscal 1998. Prescription revenue was
54.2 percent of drugstore sales, and third party prescription revenue accounted
for 85.4 percent of pharmacy sales. We recorded a charge for store closings and
other costs of $289,700,000, $176,900,000 after tax. Net income was
$158,000,000 or $.60 per diluted share, a decrease from $316,400,000 or $1.22
per diluted share for fiscal 1998. Excluding the store closing charge, diluted
earnings per share were $1.27.
3
<PAGE>
AVAILABLE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act, relating to the Exchange Drs. As permitted by SEC rules, this prospectus
omits certain information included in the registration statement. For a more
complete understanding of the exchange offer, you should refer to the
registration statement, including its exhibits.
We also file annual, quarterly and special reports, proxy statements and
other information with the SEC. You can read and copy the registration
statement and any other document we file at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. These documents are also
available at the public reference rooms at the SEC's regional offices in New
York, New York and Chicago, Illinois. You may call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov. Documents
filed by us with the SEC are identifiable by our commission file number, 1-
5742.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose information to you by referring you to
those documents. These incorporated documents contain business and financial
information about us that is not included in or delivered with this prospectus.
The information incorporated by reference is part of this prospectus, and later
information filed with the SEC will update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the date the exchange offer expires:
. Annual Report on Form 10-K for the year ended February 28, 1998;
. Quarterly Reports on Form 10-Q for the quarters ended May 30, 1998,
August 29, 1998 and November 28, 1998 and
. Current Reports on Form 8-K dated November 17, 1998, January 19, 1999,
February 9, 1999 and March 17, 1999.
We will provide without charge to each person to whom a copy of this
prospectus has been delivered, on the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated into this prospectus by reference. We will also provide
copies of any exhibits to such documents that are specifically incorporated by
reference in such documents. Requests for such copies should be directed to
Investor Relations, Rite Aid Corporation, 30 Hunter Lane, Camp Hill,
Pennsylvania 17011, telephone number (717) 761-2633, Ext. 5362.
USE OF PROCEEDS
We will receive no proceeds from the exchange of Drs.
RATIO OF EARNINGS TO FIXED CHARGES
We have calculated the ratios of earnings to fixed charges in the following
table by dividing earnings by fixed charges. For this purpose, earnings include
pre-tax income from continuing operations plus fixed charges. Fixed charges
include interest, whether expensed or capitalized, amortization of debt expense
and that portion of rental expense which is representative of the interest
factor in these rentals.
<TABLE>
<CAPTION>
Thirty-nine Fiscal Year
Weeks Ended ------------------------
November 28,
1998 1998 1997 1996 1995 1994
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges....... 1.57 2.91 2.56 3.08 3.78 1.66
</TABLE>
4
<PAGE>
EXCHANGE OFFER
Purpose of the Exchange Offer
We initially sold the Restricted Drs. in a private offering on September 22,
1998 to J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Morgan Stanley &
Co. Incorporated pursuant to a purchase agreement dated September 17, 1998
between us and them. These "initial purchasers" of the Restricted Drs. resold
them to qualified institutional buyers in reliance on, and subject to the
restrictions imposed under, Rule 144A under the Securities Act and outside the
United States in accordance with the provisions of Regulation S under the
Securities Act.
In connection with the private offering of the Restricted Drs., we entered
into an exchange and registration rights agreement dated September 22, 1998,
with the initial purchasers, in which we agreed, among other things:
. to file with the SEC on or before December 21, 1998, a registration
statement relating to an exchange offer for the Restricted Drs.;
. to use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
on or before March 22, 1999;
. upon the effectiveness of the registration statement, to offer the
holders of the Restricted Drs. the opportunity to exchange their
Restricted Drs. for a like principal amount of Exchange Drs.;
. to keep the exchange offer open for not less than 30 days or longer, if
required by applicable law, after notice of the exchange offer is mailed
to holders of Restricted Drs.; and
. to use our reasonable best efforts to complete the exchange offer on or
before April 21, 1999.
We are making the exchange offer to satisfy your registration rights under
the exchange and registration rights agreement. During any periods that we are
not in compliance with our obligations, we must pay you, as a holder of
outstanding Restricted Drs., penalty interest at a rate of .50% per annum,
determined daily.
We strongly encourage you to read the entire text of the exchange and
registration rights agreement, which is included as Exhibit 4.3 to the exchange
offer registration statement. We expressly qualify all discussion of the
exchange and registration rights agreement by the terms of the agreement
itself.
Effect of the Exchange Offer
Based on several no-action letters issued by the staff of the SEC to third
parties in unrelated transactions, we believe that you may offer for resale,
resell or otherwise transfer any Exchange Drs. issued to you in the exchange
offer without registration of your Exchange Drs. or of a prospectus, if
. you are acquiring the Exchange Drs. in the ordinary course of your
business;
. you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate, in a
distribution of the Exchange Drs.;
. you are not an affiliate of Rite Aid as defined in Rule 405 under the
Securities Act; and
. you are not a broker-dealer who acquired Restricted Drs. as a result of
market-making activities or other trading activities.
If you are an affiliate of Rite Aid or an initial purchaser, or if you have
any arrangement or understanding with any person to participate in a
distribution of the Exchange Drs.:
. you will not be able to rely on the interpretations of the staff of the
SEC in connection with any offer for resale, resale or other transfer of
Exchange Drs.; and
5
<PAGE>
. you must comply with the registration and prospectus delivery
requirements of the Securities Act, or have an exemption available to
you, in connection with any offer for resale, resale or other transfer of
the Exchange Drs.
Each broker-dealer that receives Exchange Drs. for its own account in
exchange for Restricted Drs. it acquired as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of its Exchange Drs. See "Plan of
Distribution." This will not be an admission by the broker-dealer that it is an
underwriter within the meaning of the Securities Act. See "Plan of
Distribution."
Terms of the Exchange Offer
. We will accept all Restricted Drs. validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the expiration date of the
exchange offer. You should read "--Expiration Date; Extensions;
Amendments" below for an explanation of how the expiration date may be
amended.
. We will issue and deliver $1,000 principal amount of Exchange Drs. in
exchange for each $1,000 principal amount of outstanding Restricted Drs.
accepted in the exchange offer. Holders may exchange some or all of their
Restricted Drs. in denominations of $1,000 and integral multiples of
$1000.
. By tendering Restricted Drs. in exchange for Exchange Drs. and by signing
the letter of transmittal, you will be representing that, among other
things:
. any Exchange Drs. you receive will be acquired in the ordinary course
of your business;
. you have no arrangement or understanding with any person to
participate in the distribution of the Exchange Drs.; and
. you are not an affiliate, as defined in Rule 405 under the Securities
Act, of Rite Aid, or, if you are an affiliate, you will comply with
the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
. We are sending this prospectus and the letter of transmittal to all
registered holders of Restricted Drs. as of the close of business on
, 1999.
. We are not conditioning the exchange offer upon the tender of any minimum
amount of Restricted Drs.
. We have provided for customary conditions, which we may waive in our
discretion. See "--Conditions to the Exchange Offer."
. We may accept tendered Restricted Drs. by giving oral or written notice
to the exchange agent. The exchange agent will act as your agent for the
purpose of receiving the Exchange Drs. from us and delivering them to
you.
. You will not be required to pay brokerage commissions or fees or, subject
to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of Restricted Drs. We will pay all charges and
expenses in connection with the exchange offer other than taxes specified
under "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless we, in our sole discretion, extend it. We may extend the exchange
offer at any time and from time to time by giving oral or written notice to the
exchange agent and by timely public announcement. We may also accept all
properly tendered Restricted Drs. as of the expiration date and extend the
expiration date in respect of the remaining outstanding Restricted Drs.
6
<PAGE>
We may, in our sole discretion,
. amend the terms of the exchange offer in any manner;
. delay acceptance of, or refuse to accept, any Restricted Drs. not
previously accepted;
. extend the exchange offer; or
. terminate the exchange offer.
We will give prompt notice of any amendment to the registered holders of the
Restricted Drs. If we materially amend the exchange offer, we will promptly
disclose the amendment in a manner reasonably calculated to inform you of the
amendment and we will extend the exchange offer to the extent required by law.
Procedures for Tendering
Only a holder of Restricted Drs. may tender them in the exchange offer. To
tender in the exchange offer, you must:
. complete, sign and date the letter of transmittal or a facsimile of
it,
. have the signatures on the letter of transmittal guaranteed if
required by the letter of transmittal, and
. mail or otherwise deliver an original or facsimile of the letter of
transmittal and other required documents to the exchange agent, prior
to 5:00 p.m., New York City time, on the expiration date.
Prior to the expiration date, the exchange agent must receive a timely
confirmation of a book-entry transfer of tendered Restricted Drs. into its
account at the Depository Trust Company, "DTC", as required by the procedures
for book-entry transfer as provided for in this prospectus and in the letter of
transmittal, or the holder must comply with the guaranteed delivery procedures
described below under "--Guaranteed Delivery Procedures."
Any financial institution that is a participant in DTC's system may make
book-entry delivery of the Restricted Drs. by causing DTC to transfer the
Restricted Drs. into the exchange agent's account in accordance with DTC's
procedures. Although book-entry transfer into the exchange agent's account at
DTC will effect delivery of Restricted Drs., you must deliver an original or
facsimile of the letter of transmittal, with any required signature guarantees
and any other required documents, to the exchange agent at its address set
forth under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date.
Delivery of documents to DTC in accordance with DTC's procedures does NOT
constitute delivery to the exchange agent.
The tender by a holder of Restricted Drs. will constitute an agreement
between the holder, Rite Aid and the exchange agent in accordance with the
terms and subject to the conditions specified in this prospectus and in the
letter of transmittal. If a holder tenders less than all the Restricted Drs.
held, the holder should fill in the amount of Restricted Drs. being tendered in
the appropriate box on the letter of transmittal. The exchange agent will deem
the entire amount of Restricted Drs. delivered to it to have been tendered
unless the holder has indicated otherwise.
The method of delivery of the letter of transmittal and all other required
documents to the exchange agent is at your election and risk. Instead of
delivery by mail, we recommend that you use an overnight or hand delivery
service. In all cases, you should allow sufficient time to ensure delivery to
the exchange agent prior to the expiration date. Do not send your letter of
transmittal or other required documents to us.
7
<PAGE>
Signature Requirements and Signature Guarantee
You must arrange for an "eligible institution" to guarantee the signatures
on a letter of transmittal or a notice of withdrawal. The following are
"eligible institutions":
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,
. a commercial bank or trust company having an office or correspondent in
the United States or
. an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act.
A signature guarantee is not required with respect to Restricted Drs. tendered
for the account of an eligible institution.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, sign or endorse any required documents, they should indicate the
capacity in which they are signing, and unless waived by us, submit evidence
satisfactory to us of their authority to act as fiduciary or representative
together with the letter of transmittal.
Conditions to the Exchange Offer
We will determine all questions as to the validity, form, eligibility,
including time of receipt, acceptance and withdrawal of the tendered Restricted
Drs. in our sole discretion. Our determination will be final and binding. We
may reject any and all Restricted Drs. which are not properly tendered or any
Restricted Drs. of which our acceptance would, in the opinion of our counsel,
be unlawful. We also may waive any irregularities or conditions of tender as to
particular Restricted Drs. Our interpretation of the terms and conditions of
the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, you must cure any
defects or irregularities in connection with tenders of Restricted Drs. within
the time we determine.
Although we intend to notify tendering holders of defects or irregularities
with respect to tenders of Restricted Drs., neither we nor anyone else has any
duty to notify these holders. Neither we nor anyone else shall incur any
liability for failure to give this notification. Your Restricted Drs. will not
be deemed tendered until you have cured or we have waived any irregularities.
As soon as practicable following the expiration date, the exchange agent will
return any Restricted Drs. that we reject due to improper tender or otherwise
unless you cure all defects or irregularities or we waive them.
We reserve the right in our sole discretion:
. to purchase or make offers for any Restricted Drs. that remain
outstanding subsequent to the expiration date;
. to terminate the exchange offer, as set forth in "--Conditions to the
Exchange Offer"; and
. to the extent permitted by applicable law, to purchase Restricted Drs. in
the open market, in privately negotiated transactions or otherwise.
The terms of purchases or offers by us may differ from the terms of the
exchange offer.
We will not be required to accept for exchange, or to issue Exchange Drs.
for, any Restricted Drs., and we may terminate or amend the exchange offer
before the acceptance of Restricted Drs. if, in our judgment, any of the
following conditions has occurred or exists or has not been satisfied:
. the exchange offer, or the making of any exchange by a holder of
Restricted Drs., violates applicable interpretations of the SEC staff;
. any person shall have initiated or threatened an action or proceeding in
any court or by or before any governmental agency or body with respect to
the exchange offer; or
8
<PAGE>
. any legislative or regulatory body shall have adopted or enacted any law,
statute, rule or regulation that can reasonably be expected to impair our
ability to proceed with the exchange offer.
If we determine that we may terminate the exchange offer for any of these
reasons, we may:
. refuse to accept any Restricted Drs. and return any Restricted Drs. that
have been tendered to the tendering holders,
. extend the exchange offer and retain all Restricted Drs. tendered prior
to the expiration date of the exchange offer, subject to the rights of
the holders of the tendered Restricted Drs. to withdraw their Restricted
Drs., or
. waive the termination event with respect to the exchange offer and accept
the properly tendered Restricted Drs. that have not been withdrawn.
If we determine that this waiver constitutes a material change in the exchange
offer, we will promptly disclose the change in a manner reasonably calculated
to inform the holders of the change and we will extend the exchange offer to
the extent required by law.
We may assert or waive any of these conditions in our complete discretion.
Book-Entry Transfer
The exchange agent will make a request promptly after the date of this
prospectus to establish accounts with respect to the Restricted Drs. at DTC.
Subject to the establishment of these accounts, any financial institution that
is a participant in DTC's system may make book-entry delivery of Restricted
Drs. by causing DTC to transfer them into the exchange agent's account with
respect to the Restricted Drs. The institution must do this in accordance with
DTC's Automated Tender Offer Program procedures for book-entry transfer.
However, the exchange agent will only exchange the tendered Restricted Drs.
after a timely confirmation of their book-entry transfer into the exchange
agent's account, and timely receipt of an Agent's Message and any other
documents required by the letter of transmittal.
The term "Agent's Message" means a message, transmitted by DTC and received
by the exchange agent and forming part of the confirmation of a book-entry
transfer, which states that
. DTC has received an express acknowledgment from a participant tendering
Restricted Drs.,
. the participant has received the letter of transmittal and agrees to be
bound by its terms, and
. Rite Aid may enforce the agreement against the participant.
Although you may effect delivery of Restricted Drs. through DTC into the
exchange agent's account at DTC, you must provide the exchange agent with a
completed and executed letter of transmittal with any required signature
guarantee and all other required documents prior to the expiration date. If you
comply with the guaranteed delivery procedures described below, you must
provide the letter of transmittal to the exchange agent within the time period
provided. Delivery of documents to DTC without confirmation or compliance does
not constitute delivery to the exchange agent.
Guaranteed Delivery Procedures
If you wish to tender your Restricted Drs. and (1) cannot deliver the letter
of transmittal or any other required documents to the exchange agent prior to
the expiration date or (2) cannot complete the procedure for book-entry
transfer on a timely basis, you may instead effect a tender if:
. you make the tender through an eligible institution;
. prior to the expiration date, the exchange agent receives from the
eligible institution (1) an original or facsimile of the properly
completed and duly executed letter of transmittal and (2) notice of
guaranteed
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<PAGE>
delivery by facsimile transmittal, mail or hand delivery specifying the
name and address of the holder and the principal amount of the Restricted
Drs. tendered, stating that the tender is being made, and guaranteeing
that, within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, a confirmation of a book-
entry transfer into the exchange agent's account at DTC and any other
documents required by the letter of transmittal, will be deposited by the
eligible institution with the exchange agent; and
. the exchange agent receives confirmation of a book-entry transfer into
its account at DTC and all other documents required by the letter of
transmittal within three New York Stock Exchange trading days after the
date of execution of the notice of guaranteed delivery.
The exchange agent will provide you a form of notice of guaranteed delivery
upon request.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tendered
Restricted Drs. at any time before 5:00 p.m., New York City time, on the
expiration date.
To do so, you must provide the exchange agent with a written or facsimile
transmission notice of withdrawal prior to 5:00 p.m., New York City time, on
the expiration date.
Any notice of withdrawal must
. identify the Restricted Drs. to be withdrawn including the principal
amount of these Restricted Drs. and the name and number of the account at
DTC to be credited; and
. be signed by you in the same manner as the original signature on your
letter of transmittal, including any required signature guarantee, or be
accompanied by documents of transfer sufficient to permit the registrar
to register the transfer of the withdrawn Restricted Drs. into your name.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of withdrawal notices. Our determination shall be
final and binding on all parties. We will not deem any properly withdrawn
Restricted Drs. to be validly tendered for purposes of the exchange offer and
will not issue Exchange Drs. with respect to them unless the holder of the
properly withdrawn Restricted Drs. validly retenders them. You may retender
withdrawn Restricted Drs. by following one of the procedures described above
under "--Procedures for Tendering" at any time before the expiration date.
Exchange Agent
We have appointed Harris Trust and Savings Bank, which also acts as the
trustee under the indenture, as exchange agent for the exchange offer. In this
capacity, the exchange agent has no fiduciary duties and will be acting solely
on the basis of our directions. You should direct all communications with the
exchange agent, including requests for assistance or for additional copies of
this prospectus or of the letter of transmittal as follows:
Facsimile Transmission By Hand/Overnight By Registered or
Number: Delivery: Certified Mail:
Harris Trust and Harris Trust and
Savings Bank Savings Bank
(For Eligible c/o Harris Trust c/o Harris Trust
Institutions Only) Company Company
(212) 701-7636 of New York of New York
88 Pine Street P.O. Box 1010
19th Floor Wall Street Station
New York, NY 10005 New York, NY 10268-1010
For General Information and to Confirm Receipt of Facsimile by Telephone:
(212) 701-7624
Delivery to an address or facsimile number other than those listed above
will not constitute a valid delivery.
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<PAGE>
Fees and Expenses
We will bear all expenses of the exchange offer. We are making the principal
solicitation describing to the exchange offer by mail. Our officers and regular
employees and our affiliates may also make solicitations in person, by
telegraph, telephone or facsimile transmission.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and will
reimburse its reasonable out-of-pocket costs and expenses and will indemnify
the exchange agent for all losses and claims incurred by it as a result of the
exchange offer. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus, letters of transmittal and related
documents to the beneficial owners of the Restricted Drs. and in handling or
forwarding tenders for exchange.
Transfer Taxes
We will pay any transfer taxes applicable to the exchange of Restricted Drs.
in response to the exchange offer. If, however, a transfer tax is imposed for
any reason other than the exchange of Restricted Drs. in response to the
exchange offer, then the amount of these transfer taxes, whether imposed on the
registered holder of the Drs. or any other person, will be payable by the
tendering holder. For example, the tendering holder will pay transfer taxes,
if:
. Exchange Drs. for principal amounts not tendered, or accepted for
exchange are to be registered or issued in the name of any person other
than the registered holder of the Restricted Drs. tendered; or
. tendered Restricted Drs. are registered in the name of any person other
than the person signing the letter of transmittal.
If you do not submit satisfactory evidence of payment of taxes for which you
are liable or exemption from them with your letter of transmittal, we will bill
you for the amount of these transfer taxes directly.
Accounting Treatment
We will record the Exchange Drs. at the same carrying value as the
Restricted Drs., which is the principal amount as reflected in our accounting
records on the date of the exchange. Accordingly, we will not recognize any
gain or loss for accounting purposes. We will capitalize the expenses of the
exchange offer for accounting purposes. We will classify these expenses as
prepaid expenses and include them in other assets on our balance sheet. We will
amortize these expenses over the period until October 1, 2003, the remarketing
date.
Consequences of a Failure to Exchange Restricted Drs.
Holders of Restricted Drs. who do not tender them in the exchange offer will
continue to hold their Restricted Drs. and will be entitled to all the rights,
under the indenture. By making the exchange offer, we will satisfy our
obligation to provide you with Exchange Drs. and register your Restricted Drs.
for resale.
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<PAGE>
All untendered Restricted Drs. will continue to be subject to the
restrictions on transfer set forth in the indenture. Accordingly, after the
completion of the exchange offer, you will only be able to offer for sale, sell
or otherwise transfer untendered Restricted Drs. as follows:
. to us;
. in connection with a registration statement that has been declared
effective under the Securities Act;
. for so long as the Restricted Drs. are eligible for resale under to Rule
144A under the Securities Act, to a person you reasonably believe is a
qualified institutional buyer within the meaning of Rule 144A, that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the transfer is being
made in reliance on the exemption from the registration requirements of
the Securities Act provided by Rule 144A;
. in connection with offers and sales that occur outside the United States
to foreign persons in transactions complying with the provisions of
Regulation S under the Securities Act; or
. under any other available exemption from the registration requirements of
the Securities Act.
The tender and acceptance in the exchange offer of Restricted Drs. could
adversely affect the liquidity of the trading market for any untendered
Restricted Drs.
DESCRIPTION OF THE DRS.
The form and terms of the Exchange Drs. are the same as the form and terms
of the Restricted Drs. except that the Exchange Drs. will have been registered
under the Securities Act and thus will not bear legends restricting their
transfer as required by the Securities Act. The Restricted Drs. have been, and
the Exchange Drs. are to be, issued under an indenture, dated as of September
22, 1998, between Rite Aid and Harris Trust and Savings Bank, as trustee.
<TABLE>
<S> <C>
Title of Securities: 6% Dealer Remarketable Securities
Principal amount being offered: $200,000,000
Maturity Date: October 1, 2013
Remarketing Dealer: J.P. Morgan Securities, Inc.
Remarketing Date: October 1, 2003
Interest Rate to October 1, 2003: 6%
Interest Rate from October 1, 2003 to A fixed rate to be determined by the
October 1, 2013: Remarketing Dealer based on bids
requested from dealers in Rite Aid's
publicly traded debt.
Interest payment dates: April 1 and October 1
</TABLE>
The Drs. are limited to $200,000,000 in aggregate principal amount. The
Restricted Drs. are, and the Exchange Drs. will be, unsecured obligations of
Rite Aid and will rank equally with all our other unsecured and unsubordinated
obligations. We will issue the Exchange Drs. only in fully registered form,
without coupons, in denominations of $1,000 or any integral multiple of $1,000.
The Exchange Drs. will bear interest from the last payment date on which
interest was paid on the Restricted Drs. surrendered in exchange for the
relevant Exchange Drs. If we have paid no interest on the Restricted Drs., the
Exchange Drs. will bear interest from September 22, 1998. We will pay interest
to the persons in whose name the Exchange Drs. are registered on the applicable
record date, which is the fifteenth calendar day immediately preceding the
related Interest Payment Date.
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<PAGE>
The Drs. will mature on October 1, 2013. However, if the Remarketing Dealer
elects to remarket the Drs., then you must tender the Drs. to the Remarketing
Dealer, for purchase at 100% of their principal amount on October 1, 2003 on
the terms and conditions described in this prospectus. See "--Mandatory Tender
of Drs.; Remarketing." If the Remarketing Dealer does not elect to exercise its
right to a mandatory tender of the Drs., or for any reason does not purchase
all of the Drs. on October 1, 2003 then you must tender to us, and we must
repurchase, any Drs. that have not been purchased at 100% of their principal
amount plus accrued interest, if any. See "--Repurchase." In any event, we may
redeem the Drs. on October 1, 2003 on the terms described under "--Redemption."
We will issue the Exchange Drs. in the form of one or more registered global
securities. These will be deposited with, or on behalf of, DTC and registered
in the name of DTC or its nominee. See "--Book-Entry System."
Although the United States federal income tax treatment of the Drs. is not
certain, the terms of the Drs. provide that Rite Aid and all holders of the
Drs. agree to treat the Drs. as fixed rate debt instruments that mature on
October 1, 2003 for United States federal income tax purposes. See "United
States Federal Income Tax Considerations."
Mandatory Tender of Drs.; Remarketing
The following description sets forth the terms and conditions of the
remarketing of the Drs., if the Remarketing Dealer elects to purchase the Drs.
on October 1, 2003 for remarketing.
You will be required to tender the Drs. on October 1, 2003
If the Remarketing Dealer gives notice to us and the trustee on a Business
Day not later than five Business Days before October 1, 2003 of its intention
to purchase all of the Drs. for remarketing, all outstanding Drs. will be
automatically tendered to the Remarketing Dealer for purchase on October 1,
2003, except in the circumstances described under "--Repurchase" or "--
Redemption" below. We refer to the date of this notice as the "notification
date." The purchase price of the Drs. will be 100% of their principal amount.
When the Drs. are tendered for remarketing, the Remarketing Dealer may remarket
the Drs. for its own account at varying prices to be determined by the
Remarketing Dealer at the time of each sale. Alternatively the Remarketing
Dealer may sell the Drs. by soliciting bids from J.P. Morgan Securities Inc.
and four other leading dealers of Rite Aid's publicly-traded debt securities
acceptable to both J.P. Morgan Securities Inc. and Rite Aid. The "Reference
Corporate Dealer" submitting the lowest firm committed bid would then purchase
the Drs.
If the Remarketing Dealer elects to remarket the Drs., then from and
including October 1, 2003 to but excluding October 1, 2013, the Drs. will bear
interest at the interest rate determined as described below. The obligation of
the Remarketing Dealer to purchase the Drs. on October 1, 2003 is subject to
several conditions set forth in the remarketing agreement between Rite Aid and
the Remarketing Dealer. In addition, the Remarketing Dealer may terminate the
remarketing agreement upon the occurrence of certain events set forth in the
remarketing agreement. See "--The Remarketing Dealer." If for any reason the
Remarketing Dealer does not purchase all outstanding Drs. on October 1, 2003,
then we will be required to repurchase on that date any Drs. that have not been
purchased by the Remarketing Dealer at a price equal to their principal amount
plus all accrued interest, if any. See "--Repurchase" below.
The Remarketing Dealer shall determine the interest rate that the Drs. will
bear from October 1, 2003 to October 1, 2013 on the third business day
immediately preceding October 1, 2003 by soliciting by 3:30 p.m., New York City
time, the Reference Corporate Dealers for firm, committed bids to purchase all
outstanding Drs. at the Dollar Price described in the remarketing agreement and
below, and by selecting the lowest such firm, committed bid regardless of
whether each of the Reference Corporate Dealers actually submits a bid. We
refer to the date that the Remarketing Dealer determines the new interest rate
as the "Determination Date." The
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<PAGE>
Reference Corporate Dealer will express each bid in terms of the interest rate
to October 1, 2013 that the Drs. would bear, quoted as a spread over 4.93% per
annum, the "Base Rate", based on the following assumptions:
. the Drs. would be sold to the Reference Corporate Dealer on October 1,
2003 for settlement on the same day;
. the Drs. would mature on October 1, 2013; and
. the Drs. would bear interest from October 1, 2003 to maturity at the
interest rate bid by the Reference Corporate Dealer, payable semiannually
on April 1 and October 1 or, if any such date is not a business day, the
next succeeding business day
The interest rate to maturity announced by the Remarketing Dealer as a
result of such process will be quoted to the nearest one hundred-thousandth
(0.00001) of one percent per annum and, absent manifest error, will be binding
and conclusive upon the holders of the Drs., Rite Aid and the trustee. The
Remarketing Dealer shall have the discretion to select the time at which the
interest rate to maturity is determined on the Determination Date.
The following explains what we mean by the use of certain capitalized terms
in the foregoing explanation of the mechanics of the Drs.:
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York or in the city in which the
trustee is located are authorized or obligated by law, executive order or
governmental decree to be closed. On the date of the indenture, the trustee is
located in Chicago, Illinois.
"Comparable Treasury Issue" means (1) the United States Treasury security
selected in accordance with the remarketing agreement by the Remarketing Dealer
as having an actual maturity on the Determination Date or (2) the United States
Treasury securities selected by the Remarketing Dealer to derive an
interpolated maturity on such Determination Date comparable to the remaining
term of the Drs.
"Comparable Treasury Price" means:
. the offer price for the Comparable Treasury Issue expressed as a
percentage of its principal amount on the Determination Date, as set
forth on Telerate Page 500 and adjusted to reflect settlement on October
1, 2003 if prices quoted on Telerate Page 500 are for settlement on any
date other than October 1, 2003, or
. if Telerate Page 500, or any successor page, is not displayed or does not
contain such offer prices on the relevant business day, then
. the average of Reference Treasury Dealer Quotations listed for
October 1, 2003, after excluding the highest and lowest of these
Reference Treasury Dealer Quotations, unless there is more than one
highest or lowest quotation, in which case only one highest and/or
lowest quotation shall be excluded, or
. if the Remarketing Dealer obtains fewer than four Reference Treasury
Dealer Quotations, the average of all Reference Treasury Dealer
Quotations obtained.
The Remarketing Dealer shall have the discretion to select the time at which
the Comparable Treasury Price is determined on the Determination Date and the
number of Reference Treasury Dealer Quotations, which shall be at least three,
to be obtained.
"Dollar Price" means the discounted present value to October 1, 2003 of the
cash flows on a bond:
. with a principal amount equal to the aggregate principal amount of the
initially issued Drs.,
. maturing on October 1, 2013 and
. bearing interest from October 1, 2003, payable semi-annually, assuming a
360-day year consisting of twelve 30-day months, on April 1, and October
1 at a rate equal to the Base Rate, using a discount rate equal to the
Treasury Rate described below.
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<PAGE>
"Reference Treasury Dealer" means the primary U.S. Government securities
dealer in The City of New York, which may include the Remarketing Dealer,
selected by the Remarketing Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer price for the Comparable Treasury Issue, expressed
as a percentage of its principal amount, for settlement on October 1, 2003,
quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer
by 3:30 p.m., New York City time, on the Determination Date.
"Telerate Page 500" means (1) the display designated as "Telerate Page 500"
on Dow Jones Markets Limited or any other page as may replace Telerate Page 500
on the service or (2) any other service displaying the offer price specified in
the first bullet point of the definition of Comparable Treasury Price as may
replace Dow Jones Markets Limited.
"Treasury Rate" means the annual rate equal to the semi-annual equivalent
yield to maturity or interpolated, on a 30/360 day count basis, yield to
maturity on the Determination Date of the Comparable Treasury Issue for value
on October 1, 2003, assuming a price for the Comparable Treasury Issue,
expressed as a percentage of its principal amount and equal to the Comparable
Treasury Price.
Notification of Results; Settlement
If the Remarketing Dealer has elected to remarket the Drs., then the
Remarketing Dealer will notify us, the trustee and DTC by telephone, confirmed
in writing, by 5:00 p.m., New York City time, on the Determination Date, of the
interest rate the Drs. will bear from October 1, 2003, to October 1, 2013.
All of the Drs. will be automatically delivered to the account of the
trustee by book-entry through DTC, pending payment of their purchase price, on
October 1, 2003.
The Remarketing Dealer will make, or cause the trustee to make, payment to
DTC of the purchase price for all of the Drs. tendered by the close of business
on October 1, 2003 against delivery through DTC of the Drs. The purchase price
of the Drs. will be 100% of their principal amount. If the Remarketing Dealer
does not purchase all of the Drs., then we must make payment for all of the
Drs. not purchased by the Remarketing Dealer, as described below under "--
Repurchase." In any case, we will make, or cause the trustee to make, payment
of interest due on October 1, 2003 to holders of Drs. by book-entry through DTC
by the close of business on October 1, 2003.
The Remarketing Dealer may modify the tender and settlement procedures
described above without the consent of the holders of the Drs. to the extent
required by DTC or, if the book-entry system is no longer available for the
Drs. at the time of the remarketing, to the extent required to facilitate the
tendering and remarketing of Drs. in certificated form. In addition, the
Remarketing Dealer may modify the settlement procedures set forth above in
order to facilitate the settlement process without the consent of the holders
of the Drs.
As long as DTC's nominee holds the certificates representing any Drs. in the
book-entry system of DTC, no selling beneficial owner will deliver certificates
for these Drs. to reflect any transfer of them. effected in the remarketing. In
addition, under the terms of the Drs. and the remarketing agreement, we have
agreed
. to use our best efforts to maintain the Drs. in book-entry form with DTC
or any successor to DTC and to appoint a successor depository to the
extent necessary to maintain the Drs. in book-entry form and
. to waive any discretionary right to cause the Drs. to be issued in
certificated form.
For further information with respect to transfers and settlement through
DTC, see "--Book-Entry System" below.
15
<PAGE>
Our Agreement with the Remarketing Dealer
Rite Aid and the Remarketing Dealer have entered into the remarketing
agreement which provides for the Drs. to be remarketed substantially on the
terms described below and in "--Mandatory Tender of Drs.; Remarketing." The
Remarketing Dealer will not receive any fees or reimbursement of expenses from
us in connection with the remarketing but will be entitled to reimbursement of
out-of-pocket expenses under certain circumstances.
We have agreed to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act, arising out of or
in connection with its duties under the remarketing agreement.
The remarketing agreement provides:
. if the Remarketing Dealer elects to remarket the Drs., its obligation to
purchase them will be subject to several conditions.
. that the Remarketing Dealer may terminate the agreement upon the
occurrence of events that would customarily give underwriters the right
to terminate an underwriting agreement or would give rise to a failure to
satisfy a closing condition to an underwriting agreement in Rite Aid's
public debt offerings.
. the Remarketing Dealer may resign, its resignation to be effective ten
business days after the delivery to us and the Trustee of notice of its
resignation. In which case, we shall have the right, but not the
obligation, to appoint a successor Remarketing Dealer.
As a result, we cannot assure you that the Remarketing Dealer will purchase
your Drs. in connection with a mandatory tender. You do not have any rights
or claims under the remarketing agreement or against us or the Remarketing
Dealer as a result of the Remarketing Dealer not purchasing your Drs.
However, if the Remarketing Dealer does not purchase your Drs. on October 1,
2003, we will be required to do so at 100% of their principal amount plus
accrued interest, if any. See "--Repurchase."
The Remarketing Dealer, in its individual or any other capacity, may:
. buy, sell, hold and deal in any of the Drs.
. exercise any vote or join in any action which any holder of Drs. may be
entitled to exercise or take with like effect as if it did not act in
any capacity under the Remarketing Agreement.
. engage in or have an interest in any financial or other transaction with
us as freely as if it did not act in any capacity under the remarketing
agreement.
Either we or the Remarketing Dealer will purchase your Drs. on October 1, 2003
If the Remarketing Dealer for any reason does not purchase all of the Drs.
on October 1, 2003, you must tender to us, and we shall repurchase on the
Remarketing Date, the Drs. that the Remarketing Dealer has not purchased, at a
price equal to 100% of the principal amount of the Drs. plus all accrued and
unpaid interest, if any, on those Drs. to but excluding October 1, 2003.
We also have the right to redeem the Drs. on or after October 1, 2003
If the Remarketing Dealer has elected to remarket the Drs. on October 1,
2003, we may redeem the Drs., in whole but not in part, from the Remarketing
Dealer on October 1, 2003, at a redemption price equal to the greater of (1)
100% of the aggregate principal amount of the Drs. and (2) the Dollar Price,
by giving notice of redemption to the Remarketing Dealer:
.no later than the business day immediately prior to the Determination
Date, or
. if fewer than three Reference Corporate Dealers timely submit firm,
committed bids for all outstanding Drs. to the Remarketing Dealer on the
Determination Date, immediately after the deadline set by the Remarketing
Dealer for receiving remarketing bids has passed.
16
<PAGE>
In either case, we shall pay the redemption price for the Drs. in same-day
funds by wire transfer on October 1, 2003 to an account designated by the
Remarketing Dealer.
After October 1, 2003, if the Remarketing Dealer has elected to remarket the
Drs., we may redeem the Drs. in whole or in part, at our option at any time at
a redemption price equal to the greater of
. 100% of the principal amount of the Drs. or
. the sum of the present values of the remaining scheduled payments of
principal and interest, not including the portion of the payments of
interest accrued as of the redemption date, discounted to the redemption
date on a semiannual basis, assuming a 360-day year consisting of twelve
30-day months, at the Adjusted Treasury Rate determined on the third
business day preceding the redemption date,
. plus, in each case, accrued and unpaid interest on the Drs. to but
excluding the redemption date.
We will mail notice of any post-remarketing redemption at least 30 days, but
not more than 60 days, before the redemption date to each holder of the Drs. to
be redeemed. Unless we default in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the Drs. or portions of
the Drs. called in connection with such redemption.
"Adjusted Treasury Rate" means:
. the arithmetic mean of the yields under the heading "Week Ending"
published in the Statistical Release most recently published prior to the
date of determination under the caption "Treasury Constant Maturities"
for the maturity, rounded to the nearest month, corresponding to the
remaining life to the maturity, as of the redemption date, of the
principal being redeemed, plus
. 0.20%.
If no maturity set forth under the "Week Ending" heading exactly corresponds to
the maturity of this principal, yields for the two published maturities most
closely corresponding to the maturity of the principal shall be calculated
pursuant to the immediately preceding sentence, and the Adjusted Treasury Rate
shall be interpolated or extrapolated from these yields on a straight-line
basis, rounding in each of the relevant periods to the nearest month.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to constant maturities, or, if the statistical release is
not published at the time of any determination under the terms of the Drs.,
then another reasonably comparable index which shall be designated by Rite Aid.
Covenants Applicable to Drs.
The indenture does not prohibit us from entering into transactions that may
adversely affect you
The indenture does not contain any provisions that permit you to require
prepayment in the event of a change in the management or control of Rite Aid.
It does not afford you protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving Rite Aid that may adversely affect you, except to the limited extent
that the covenants described below might affect our ability to consummate these
transactions.
The various restrictive provisions of the indenture apply to Rite Aid and to
what the indenture defines as our "Restricted Subsidiaries" but do not apply to
what the indenture defines as our "Unrestricted Subsidiaries". In this section,
we use the terms "we" and "us" to mean Rite Aid and our Restricted
Subsidiaries.
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<PAGE>
"Unrestricted Subsidiaries" are those Subsidiaries which are designated as
Unrestricted Subsidiaries by our Board of Directors from time to time pursuant
to the indenture unless and until designated as Restricted Subsidiaries by the
Board of Directors under the indenture).
"Restricted Subsidiaries" are all Subsidiaries other than Unrestricted
Subsidiaries.
A "Wholly-owned Restricted Subsidiary" is a Restricted Subsidiary at least
99% of the outstanding voting stock of which, except directors' qualifying
shares, is owned by us.
A "Subsidiary" is a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by us or an entity other than
a corporation of which we have, directly or indirectly, the majority ownership
and the power to direct the management. (Section 1.01)
We may not designate an Unrestricted Subsidiary a Restricted Subsidiary if
it has any debt that we would not be permitted to incur under the terms of the
indenture, immediately after the Unrestricted Subsidiary becomes a Restricted
Subsidiary. (Section 10.11(a))
The indenture limits our right to incur Secured Debt
We may not incur or guarantee indebtedness secured by any lien, mortgage,
pledge or other encumbrance on our property without equally and ratably
securing the Drs. This restriction does not apply to permitted encumbrances
described in the indenture, including:
. purchase money mortgage encumbrances existing on property at the time we
acquire it,
. conditional sales and similar agreements,
. the extension, renewal or refunding of any of the foregoing, and
. any Secured Debt of a Restricted Subsidiary owing to Rite Aid or a
Wholly-owned Restricted Subsidiary.
. other indebtedness secured by encumbrances not otherwise specifically
permitted which, together with Attributable Debt respecting existing
Sale and Leaseback Transactions, excluding Sale and Leaseback
Transactions entered into in respect of property we acquired not more
than 24 months prior to the date & Sale and Leaseback Transaction is
entered into, and unsecured Funded Debt of Restricted Subsidiaries,
excluding unsecured Funded Debt incurred through extension, refund or
renewal where Consolidated Funded Debt was not thereby increased and
excluding any Funded Debt owed to Rite Aid or a Wholly-owned Restricted
Subsidiary, incurred or entered into, as the case may be, after the date
of the indenture, would not at the time exceed 20% of the Consolidated
Net Tangible Assets of Rite Aid and its Restricted Subsidiaries.
(Section 10.10)
Under the indenture (Section 1.01):
. "Consolidated Net Tangible Assets" means the total amount of assets on
our consolidated balance sheet less applicable reserves and other
properly deductible items and after excluding any investments made in
Unrestricted Subsidiaries or in corporations while they were
Unrestricted Subsidiaries but which are not Subsidiaries at the time of
computation after deducting (a) all liabilities and liability items,
including amounts in respect of obligations under leases, or guarantees
of leases, which under generally accepted accounting principles would be
included on the balance sheet, except Funded Debt, capital stock and
surplus, surplus reserves and provisions for deferred income taxes and
(b) goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles;
. "Funded Debt" means any indebtedness for money borrowed, created,
issued, incurred, assumed or guaranteed, whether secured or unsecured,
maturing more than one year after its date of determination
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and any indebtedness, regardless of its term, renewable according to its
terms or of a revolving credit or similar agreement effective for more
than one year after the date of the creation of the indebtedness, which
would, in accordance with generally accepted accounting practice, be
classified as funded debt, excluding (a) indebtedness for which money in
satisfaction of the indebtedness has been deposited in trust, (b) certain
guarantees arising in the ordinary course of business and (c) liabilities
resulting from capitalization of lease rentals;
. "Secured Debt" means indebtedness for money borrowed which is secured by
a lien or other encumbrance on our property, excluding certain
guarantees arising in the ordinary course of business; and
. "Attributable Debt" means as to any Sale and Leaseback Transaction in
the case of a capital lease, the amount of the capital lease obligation
thereunder and in all other cases, the present value of the minimum
remaining rental obligation discounted at the interest factor included
in the rental payment.
The indenture limits our right to make sales with leases back
We may not sell or transfer, except to Rite Aid or one or more Wholly-owned
Restricted Subsidiaries, any manufacturing plant, warehouse, retail store or
equipment owned and operated by us on or after the date of the indenture with
the intention that we take back a lease on it, except a lease for a period,
including renewals, of not more than 24 months by the end of which period it
is intended that the use of the property by the lessee will be discontinued,
any such transaction, a "Sale and Leaseback Transaction", except:
. where we would be entitled under Section 10.10(d) of the indenture to
incur additional secured indebtedness not otherwise specifically
permitted by the indenture in an amount equal to the Attributable Debt
respecting such Sale and Leaseback Transaction,
. where the Sale and Leaseback Transaction is entered into in respect of
property acquired by us within 24 months of its acquisition or
. where, within 120 days of entering into the Sale and Leaseback
Transaction, we apply to the retirement of its Secured Debt an amount
equal to the greater of:
. the net proceeds of the sale of the property leased in the transaction
or
. the fair market value of the property leased.
The indenture limits the right of Restricted Subsidiaries to incur Funded
Debt
The indenture prohibits our Restricted Subsidiaries from becoming liable
for any unsecured Funded Debt except where we would be entitled under Section
10.10(d) of the indenture to incur additional secured indebtedness not
otherwise specifically permitted by the indenture in an amount equal to such
Funded Debt and except for certain extensions, refundings and renewals of
Funded Debt and Funded Debt owing to Rite Aid or a Wholly-owned Restricted
Subsidiary. (Section 10.08)
The indenture limits our rights to merge or sell our assets
We may not merge with or sell our property substantially as an entirety to
any other corporation if, as a result, our properties or assets would become
subject to a mortgage, lien or other encumbrance which would not be permitted
by the indenture, unless the Drs. are equally and ratably secured with these
obligations. Any successor entity must be a corporation organized in the
United States and assume the payment of the principal and interest on the Drs.
and the performance of every covenant under the indenture. Immediately after
giving effect to a merger or a consolidation, no event of default, and no
event which, after notice or lapse of time or both, would become an event of
default, shall have happened and be continuing. (Section 8.01)
Although the amount of our property that will constitute a sale of the
property "substantially as an entirety" is not readily quantifiable, a
determination as to whether such a sale has occurred will depend on the
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percentage of operating and total assets transferred, among other measurements,
and other facts and circumstances of the transaction. In any particular
transaction, the determination of whether a sale of the property "substantially
as an entirety" has occurred will be made by us, and we will give notice of
this occurrence to the holders of the Drs. Because of the uncertainty regarding
whether a particular sale will constitute a sale of property "substantially as
an entirety," holders will not be able to determine for themselves whether such
a transaction has occurred and will have to rely on our determination. If such
a transaction occurs, the person to whom the "entire" amount of our property is
transferred shall enter into a supplemental indenture satisfactory in form to
the trustee.
Your consent is required for modification of the indenture
We can generally only modify the indenture and the rights of the holders
with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Drs. However, no modification altering the
terms of payment of principal or interest, changing the place or medium of
payment of principal or interest, impairing the rights of holders to institute
suit for payment or reducing the percentage required for modification will be
effective against any holder without his, her or its consent. (Section 9.02)
Events of Default
Each of the following is an event of default under the indenture:
. any default in any payment of principal of or premium, if any, upon any
Drs. when due;
. any default for 30 days in any payment of interest on any Drs. when due;
. any default in the performance of the covenant restricting merger and
sale of assets;
. any default for 60 days after appropriate notice in the performance of
any other covenant in the indenture;
. certain events of default resulting in the acceleration of the maturity
of indebtedness aggregating in excess of $10,000,000 under any mortgages,
indentures or instruments under which we may have issued, or by which
there may have been secured or evidenced, any other of our indebtedness;
or
. certain events in bankruptcy, insolvency or reorganization.
If an event of default shall occur and be continuing, the trustee or the
holders of not less than 25% in aggregate principal amount of the Drs. then
outstanding may declare the principal of the Drs. and any and all accrued
interest, to be due and payable.
The holders of a majority in aggregate principal amount of the Drs. then
outstanding may waive any event of default with respect to the Drs. which has
been cured. (Sections 5.01, 5.02 and 5.13)
We will file annually with the trustee a written statement signed by an
officer as to the absence of certain defaults under the terms of the indenture.
The indenture provides that the trustee may withhold notice to the holders of
any default except in payment of principal or premium, if any, or interest if
it considers it in the interest of the holders to do so. (Sections 6.02 and
10.13)
Subject to the provisions of the indenture relating to the duties of the
trustee, if an event of default shall occur and be continuing, the indenture
provides that the trustee shall be under no obligation to exercise any of its
rights or powers under the indenture at the request, order or direction of
holders unless the holders shall have offered to the trustee reasonable
indemnity. Subject to these provisions for indemnification and other rights of
the trustee, the indenture provides that the holders of a majority in principal
amount of the Drs. then outstanding shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee. (Sections
5.12 and 6.03)
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We may discharge our obligations under the indenture
The indenture provides us with the option to discharge any and all
obligations except for obligations to register the transfer or exchange of
Drs., to replace stolen, lost or mutilated Drs., to maintain paying agencies
and hold moneys for payment in trust by depositing with the trustee, in trust,
money or U.S. government obligations, or both, which through the payment of
interest and principal on the deposits in accordance with their terms will
provide money in an amount sufficient to pay any installment of principal and
premium, if any, and interest on the relevant Drs. in accordance with the terms
of the indenture and the relevant Drs. We may only exercise this option:
. if we have received from, or there has been published by, the United
States IRS a ruling to the effect that such a discharge will not be
deemed, or result in, a taxable event with respect to holders of Drs.,
. there is no event of default or event which may become an event of
default then occurring and
. our action would not cause any outstanding Drs. to become delisted.
(Article 12)
The indenture also provides us with the option to have the occurrence of
events described in the fifth bullet point under the heading "--Events of
Default" above no longer be events of default and to omit to comply with
certain of the covenants described under the heading "--Covenants Applicable to
Drs." above. In order to exercise such option:
. we must deposit with the trustee money or U.S. government obligations, or
both, which through the payment of interest and principal in accordance
with their terms will provide money in an amount sufficient to pay
principal and premium, if any, and interest on the Drs. in accordance
with the terms of the indenture and the Drs.
. no event of default or event which may become an event of default may
have occurred and be continuing on the date of deposit with the trustee,
and
. we must deliver to the trustee an opinion of counsel to the effect that
the deposit and related option not to comply with certain covenants will
not cause the holders of the Drs. to recognize income, gain or loss for
federal income tax purposes. (Article 12)
If we exercise the defeasance option, payment of the Drs. may not be
accelerated
We may exercise the defeasance option notwithstanding our prior exercise of
the covenant defeasance option. If we exercise the defeasance option, payment
of the Drs. may not be accelerated because of an event of default. If we
exercise the covenant defeasance option, payment of the Drs. may not be
accelerated by reference to the provisions described in the preceding
paragraph. In the event we omit to comply with our remaining obligations with
respect to the Drs. under the indenture after exercising the covenant
defeasance option and the Drs. are declared due and payable because of the
occurrence of any event of default, the amount of money and U.S. government
obligations on deposit with the trustee could be insufficient to pay amounts
due on the Drs. at the time of the acceleration resulting from an event of
default. However, we will remain liable in respect of these payments. (Article
12)
Book-Entry System
We will issue the Exchange Drs. in the form of one or more fully registered
global securities that we will deposit with, or on behalf of, DTC and register
in the name of DTC's nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its "participants" deposit with DTC. DTC also facilitates
the settlement among participants of securities
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transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes to participants' accounts, thereby
eliminating the need for physical movement of securities certificates. DTC
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other organizations. A number of these "direct
participants" and the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. own
DTC. Access to the DTC System is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant, either directly or
indirectly, including Euroclear and Cedel Bank. The rules applicable to DTC and
its participants are on file with the SEC.
We will make payments of principal of, premium, if any, and interest on the
Drs. to Cede & Co., as nominee of DTC. DTC's practice is to credit direct
participants' accounts on the related payment date in accordance with their
respective holdings shown on DTC's records. DTC will credit payments of
interest on, premium, if any and principal of the Drs. held through Euroclear
or Cedel Bank to the cash accounts of their respective participants in
accordance with the relevant system's rules and procedures. Standing
instructions and customary practices will govern payments by participants to
beneficial owners of the Drs., as is the case with securities held for the
accounts of customers in bearer form or registered in "street name." These
payments will be the participant's responsibility and not DTC's, the trustee's
or any paying agent's under the indenture, or ours, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to Cede & Co. is our responsibility or the
responsibility of the trustee or any paying agent. Disbursement of payments to
direct participants is DTC's responsibility, and disbursement of payments to
the beneficial owners of the Drs. is the responsibility of direct and indirect
participants.
DTC may decide to discontinue providing its services as securities
depository with respect to the Drs. at any time by giving notice to us or the
trustee. Under these circumstances, in the event that a successor securities
depository is not obtained, Drs. certificates are required to be printed and
delivered.
None of Rite Aid, the trustee, any paying agent or any registrar for the
Drs. will have any responsibility or liability for any aspect of the records
maintained by DTC relating to, or payments made on account of beneficial
ownership interests in, Drs. represented in global form, or for maintaining,
supervising or receiving any records relating to any beneficial ownership
interests maintained by DTC.
Concerning the Trustee
Harris Trust and Savings Bank is the trustee under the indenture and we have
appointed them as the initial registrar and paying agent with respect to the
Drs.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Introduction
The following discussion describes the material U.S. federal income tax
consequences of the purchase, ownership and disposition of the Drs. to initial
holders purchasing Drs. at their "issue price." The "issue price" of the Drs.
is the first price to the public, not including bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers, at which a substantial amount of the Drs. is sold for
money. This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which could be changed. Any changes may be
retroactive.
Moreover, this discussion deals only with purchasers who hold Drs. as
"capital assets" within the meaning of Section 1221 of the Internal Revenue
Code. It does not address persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Drs. as a hedge against currency risk
or as a position in a "straddle," "conversion transaction" or another
integrated transaction for tax purposes, or U.S. holders, as defined below,
whose functional currency is not the U.S. dollar.
In addition, this discussion only addresses the U.S. federal income tax
consequences of the Drs. for the period ending on October 1, 2003. Although the
following discussion does not purport to describe all of the tax considerations
that may be relevant to a prospective purchaser of Drs., in the opinion of
Morgan, Lewis & Bockius LLP, our tax counsel, subject to the qualifications and
limitations set out in this section, the discussion below describes the
material U.S. federal income tax considerations of an investment in the Drs. to
a U.S. holder or, as the case may be, to a non-U.S. holder, as defined below.
Opinions of tax counsel have no binding effect or official status of any kind;
no assurance can be given that the conclusions set out below would be sustained
by a court if challenged by the IRS.
As used in this section, the term "U.S. holder" means a beneficial owner of
Drs. that is, for U.S. federal income tax purposes:
.an individual citizen or resident of the United States,
. a corporation created or organized in or under the laws of the United
States or of any political subdivision of the United States or
.an estate or trust the income of which is subject to U.S. federal income
tax regardless of its source.
As used in this section, the term "non-U.S. holder" means a beneficial owner of
Drs. that is, for U.S. federal income tax purposes:
.a nonresident alien individual,
.a foreign corporation or
.a nonresident alien fiduciary of a foreign estate or trust.
Because the Drs. are subject to mandatory tender to the Remarketing Dealer
or repurchase by Rite Aid on October 1, 2003, we intend to treat the Drs. as
maturing on October 1, 2003 for U.S. federal income tax purposes and as being
reissued on October 1, 2003 should the Remarketing Dealer remarket the Drs. By
purchasing the Drs., you agree to follow this treatment for U.S. federal income
tax purposes. However, because no debt instrument closely comparable to the
Drs. has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the U.S. federal income tax treatment of the Drs. is not
certain, and our tax counsel is unable to opine that the Drs. should be treated
as maturing on October 1, 2003. In addition, we will not seek any ruling on any
of the issues discussed below from the IRS. Accordingly, significant aspects of
the U.S. federal income tax consequences of an investment in the Drs. are
uncertain, and we can give you no assurance that the IRS or the courts will
agree that the Drs. should be treated as maturing on October 1, 2003. We
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strongly urge you to consult your own tax advisors regarding the U.S. federal
income tax consequences of an investment in the Drs. including alternative
characterizations of the Drs. Except where indicated to the contrary, the
following discussion assumes that our treatment of the Drs. will be respected
for U.S. federal income tax purposes. You should also consult your own tax
advisors with respect to any tax consequences arising under the laws of any
state, local or foreign taxing jurisdiction.
Tax Treatment of the Drs.
Assuming the characterization of the Drs. set forth above, it is the opinion
of our tax counsel that the following tax consequences will result to U.S.
Holders.
Summary of Tax Treatment
- --------------------------------------------------------------------------------
Exchange Offer . no gain or loss realized
. tacking of holding periods
. same basis
- --------------------------------------------------------------------------------
Interest . taxable as ordinary income
- --------------------------------------------------------------------------------
Sale/Retirement . excess of amount realized over adjusted basis is
capital gain, or
. excess of adjusted basis over amount realized is
capital loss
- --------------------------------------------------------------------------------
Exchange Offer
A U.S. holder's exchange of Restricted Drs. for Exchange Drs. will not
constitute a taxable event to it. Consequently:
. no gain or loss will be realized by a U.S. holder upon receipt of an
Exchange Drs.;
. the holding period of the Exchange Drs. will include the holding period
of the Restricted Drs. exchanged for them; and
. the adjusted tax basis of the Exchange Drs. will be the same as the
adjusted tax basis of the Restricted Drs. exchanged for them immediately
before the exchange.
Interest Income
Interest on the Drs. will be taxable as ordinary income for U.S. federal
income tax purposes when received or accrued by a U.S. holder in accordance
with its method of accounting for tax purposes.
Gain or Loss on Sale or Retirement
When a U.S. holder sells a Drs., or a Drs. is retired, the U.S. holder will
recognize gain or loss equal to the difference between the amount realized on
the sale or retirement, excluding any amount attributable to accrued interest,
which will be taxable as such, and the adjusted tax basis of the Drs. in the
hands of the U.S. holder. The adjusted tax basis of the Drs. generally will
equal the U.S. holder's cost, reduced by the principal payments previously
received with respect to the Drs. Gain or loss on sale or retirement of a Drs.
will be capital gain or loss.
Alternative U.S. Federal Income Tax Treatment
As discussed above, we can give no assurance that the IRS will agree with,
or that a court will uphold, our treatment of the Drs. as maturing on October
1, 2003 and as thereafter being reissued should the Drs. be remarketed, and it
is possible that the IRS could assert another characterization. In particular,
the IRS could seek to treat the Drs. as maturing on October 1, 2013. Because of
the possible remarketing and reset, if the Drs. were treated as maturing on
October 1, 2013, then Treasury regulations relating to contingent payment debt
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obligations would apply. In which case, the timing and character of income on
the Drs. would be significantly affected. Among other things, U.S. holders,
regardless of their usual method of tax accounting, would be required to accrue
income annually as original issue discount, subject to the adjustments
described below, at a "comparable yield" on the adjusted issue price, which
could be higher than the actual cash payments received on the Drs. in a taxable
year. In addition, the Treasury's contingent payment debt regulations require
that a projected payment schedule be determined, and that adjustments to income
accruals be made to account for differences between actual payments and
projected payments. Furthermore, any gain realized with respect to the Drs.
generally would be treated as ordinary interest income, and any loss realized
generally would be treated as ordinary loss to the extent of the U.S. holder's
ordinary income inclusions with respect to the Drs. Any remaining loss
generally would be treated as capital loss.
In addition, the IRS could, in connection with the treatment of the Drs. as
a contingent payment debt instrument maturing on October 1, 2013, treat the
holder of the Drs. as receiving consideration from the Remarketing Dealer, in
effect, an option premium, in exchange for the Remarketing Dealer's right to
require mandatory tender of the Drs., in which case the issue price of the Drs.
would be increased by an equal amount. Under that characterization, upon the
sale of a Drs. other than through the mandatory tender, the IRS could take the
position that the gain or loss with respect to the mandatory tender right and
the gain or loss with respect to the debt instrument must be separately
determined, in which case any deemed loss with respect to the mandatory tender
right would be treated as capital loss, and a corresponding amount of
additional ordinary income would be recognized by the U.S. holder on the sale
of the debt instrument. The ability to use capital losses to offset ordinary
income in determining taxable income is generally limited.
We strongly urge you to consult your tax advisors regarding the U.S. federal
income tax consequences of an investment in the Drs.
Treatment of Non-U.S. Holders
It is the opinion of our tax counsel that, subject to the discussion of
backup withholding tax below, a non-U.S. holder will not be subject to
withholding of U.S. federal income tax on payments of principal of, premium, if
any, or interest including (i) original issue discount and (ii) accruals, and
gain treated as interest income, under the contingent payment debt regulations,
if any, on a Drs., unless the non-U.S. holder owns actually or constructively
10% or more of the total combined voting power of our stock, is a controlled
foreign corporation related to us through stock ownership or is a bank
receiving interest described in Section 881(c)(3)(A) of the Code. Sections
871(h) and 881(c) of the Code require that, in order to obtain the exemption
from withholding tax described above, either the beneficial owner of the Drs.,
or a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business, a
"Financial Institution", and that is holding the Drs. on behalf of the
beneficial owner, file a statement with the withholding agent to the effect
that the beneficial owner of the Drs. is not a U.S. person. In general, for
payments made on or prior to December 31, 1999, this requirement will be
fulfilled if the beneficial owner of a Drs. certifies on IRS Form W-8, under
penalties of perjury, that it is not a U.S. person and provides its name and
address, and any Financial Institution holding the Drs. on behalf of the
beneficial owner files a statement with the withholding agent to the effect
that it has received this statement from the beneficial owner and furnishes the
withholding agent with a copy of the statement received.
Generally, a non-U.S. holder will not be subject to U.S. federal income tax
on any amount which constitutes gain upon retirement or disposition of a Drs.,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. holder. Certain other exceptions
may be applicable, and a non-U.S. holder should consult its tax advisor in this
regard.
The Drs. will not be includable in the estate of a non-U.S. holder unless
the individual is a direct or indirect 10% or greater shareholder of Rite Aid
or, at the time of the individual's death, payments in respect of the Drs.
would have been effectively connected with the conduct by the individual of a
trade or business in the United States.
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Information Reporting and Backup Withholding
You may be subject to backup withholding tax at the rate of 31% of the
interest and other "reportable payments", including, under certain
circumstances, principal payments and sales proceeds, paid with respect to the
Drs. if, in general, you fail to comply with certain certification procedures
and you are not an exempt recipient under applicable provisions of the Code.
On October 6, 1997, the Treasury Department issued new regulations which
make modifications to the withholding tax, backup withholding tax and
information reporting rules described above. The regulations generally will be
effective for payments made after December 31, 1999, subject to certain
transition rules. We urge you to consult your own tax advisors regarding these
new regulations.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Drs. for its own account by
accepting the exchange offer must acknowledge that it will deliver a prospectus
in connection with any resale of these Exchange Drs. A broker-dealer may use
this prospectus, as it may be amended or supplemented from time to time, in
connection with resales of Exchange Drs. received in exchange for Restricted
Drs. where the Restricted Drs. were acquired as a result of market-making
activities or other trading activities. We have agreed that, for a period of
180 days after the Expiration Date, we will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
resale of its Exchange Drs.
We will not receive any proceeds from any sale of Exchange Drs. by broker-
dealers. Broker-dealers may sell from time to time Exchange Drs. they receive
for their own account pursuant to the exchange offer
. in one or more transactions in the over-the-counter market,
. in negotiated transactions,
. through the writing of options on the Exchange Drs. or
. a combination of these methods of resale.
Broker-dealers may sell at
. market prices prevailing at the time of resale,
. prices related to prevailing market prices or
. negotiated prices.
Any broker-dealer may resell directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from the broker-dealer or the purchasers of the Exchange Drs. Any
broker-dealer that resells Exchange Drs. that were it received for its own
account by accepting the exchange offer and any broker or dealer that
participates in a distribution of the Exchange Drs. may be an "underwriter"
within the meaning of the Securities Act. Any profit on any underwriter's
resale of Exchange Drs. and any commission or concessions received by any
underwriter may be underwriting compensation under the Securities Act. The
letter of transmittal states that, a broker-dealer does not admit that it is an
"underwriter" within the meaning of the Securities Act by acknowledging that it
will deliver and by delivering a prospectus.
For a period of 180 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests them in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the Drs., other than
commissions or concessions of any broker-dealers and will indemnify the holders
of the Drs., including any broker-dealers, against liabilities, including
liabilities under the Securities Act.
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LEGAL MATTERS
Morgan, Lewis & Bockius LLP will pass upon the validity of the Exchange Drs.
for us.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries as
of February 28, 1998 and March 1, 1997 and for each of the years in the three-
year period ended February 28, 1998 and the related financial statement
schedule, have been incorporated by reference into this prospectus and
registration statement in reliance upon the reports of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon
authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information of the Company
and subsidiaries for the periods ended May 30, 1998, August 29, 1998 and
November 28, 1998, incorporated by reference herein, the independent certified
public accountants have reported that they applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports included in the Company's quarterly reports on
Form 10-Q for the quarters ended May 30, 1998, August 29, 1998 and November 28,
1998, and incorporated by reference herein, state that they did not audit and
they do not express an opinion on the interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Act.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of PCS Holding Corporation and Subsidiaries included in
our Form 8-K dated January 19, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in this registration
statement. These financial statements are incorporated by reference in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Rite Aid has not authorized any person to give any information or make any
representations other than those contained in this prospectus, and, if given
or made, you must not rely on any such information or representations as
having been authorized by Rite Aid. This prospectus does not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which it relates or an offer to sell or the solicitation of
an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of Rite Aid since the date hereof or
that the information contained herein is correct as of any time subsequent to
its date.
----------------
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- -------------------------------------------------------------------------------
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Rite Aid Corporation
----------------
PROSPECTUS
----------------
Offer to Exchange 6% Dealer Remarketable SecuritiesSM
("Drs.SM")
Due 2013 for
6% Drs. Due 2013
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. A Delaware
corporation may indemnify any person under such section in connection with a
proceeding by or in the right of the corporation to procure judgment in its
favor, as provided in the preceding sentence, against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action, except that no indemnification
shall be made in respect thereof unless, and then only to the extent that, a
court of competent jurisdiction shall determine upon application that such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper. A Delaware corporation must indemnify any person who
was successful on the merits or otherwise in defense of any action, suit or
proceeding or in defense of any claim, issue or matter in any proceeding, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith. A Delaware corporation may pay for the expenses (including
attorneys' fees) incurred by an officer or director in defending a proceeding
in advance of the final disposition upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation.
Registrant's Restated Certificate of Incorporation and By-Laws provide
Registrant will indemnify and hold harmless 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, by
reason of the fact that such person or a person of whom such person is the
legal representative is or was a director or officer of Registrant or is or was
serving at the request of Registrant 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 Registrant to the fullest extent authorized
by the Delaware General Corporation Law as the same exists or may be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits Registrant to provide broader indemnification rights than said law
permitted Registrant to provide prior to such amendment). The indemnity may
include all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid to be paid in
settlement) reasonably incurred or suffered by such person in connection with
such proceeding and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent of Registrant and shall
inure to the benefit of such person's heirs, executors and administrators.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
Delaware corporation may in its articles of incorporation eliminate or limit
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability: for any breach of the director's duty of loyalty to the corporation
or its stockholders; for acts or omissions not in good faith or
II-1
<PAGE>
which involve intentional misconduct or a knowing violation of law; under
Section 174 (pertaining to certain prohibited acts including unlawful payment
of dividends or unlawful purchase or redemption of the corporation's capital
stock); or for any transaction from which the director derived an improper
personal benefit. Registrant's Restated Certificate of Incorporation eliminates
the liability of directors 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 Registrant 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 Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit, and provide that if the Delaware 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 Registrant shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
The Delaware General Corporation Law permits the purchase of insurance on
behalf of directors and officers against any liability asserted against
directors and officers and incurred by such persons in such capacity, or
arising out of their status as such, whether or not the corporation would have
the power to indemnify offices and directors against such liability.
Registrant's Restated Certificate of Incorporation allows Registrant to
maintain insurance, at its expense, to protect itself and any director,
officer, employee or agent of Registrant or another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or
loss, whether or not Registrant would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law. Registrant has obtained liability coverage, which includes coverage to
reimburse Registrant for amounts required or permitted by law to be paid to
indemnify directors and officers.
The foregoing summary of the Delaware General Corporation Law, Registrant's
Restated Certificate of Incorporation and Registrant's By-Laws is qualified in
its entirety by reference to the relevant provisions of the Delaware General
Corporation Law and by reference to the relevant provisions of Registrant's
Restated Certificate of Incorporation and the relevant provisions of
Registrant's By-Laws.
Item 21. Exhibits and Financial Statement Schedules
(a) The following exhibits, as required by Item 601 of Regulation S-K, are
filed as part of this Registration Statement (previously filed except where
otherwise indicated):
<TABLE>
<C> <S>
4.1 Indenture, dated as of September 22, 1998, by and among Rite Aid
Corporation and Harris Trust and Savings Bank, as Trustee.
4.2 Remarketing Agreement, dated as of September 22, 1998, between Rite
Aid Corporation and J.P. Morgan Securities Inc., as Remarketing
Dealer.
4.3 Exchange and Registration Rights Agreement, dated as of September 22,
1998, by and among Rite Aid Corporation, J.P. Morgan Securities Inc.,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated.
Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
5 securities being registered.
8 Opinion of Morgan, Lewis & Bockius LLP with respect to tax matters.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
15* Letter re Unaudited Interim Financial Information.
23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5).
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8).
23.3* Consent of KPMG LLP.
23.4* Consent of Ernst & Young LLP
24 Powers of Attorney.
Statement of Eligibility of Harris Trust and Savings Bank, as Trustee,
25 on Form T-1.
99.1 Form of Letter of Transmittal respecting the offer to exchange 6%
Dealer remarketable securities due 2013 which have been registered
under the Securities Act for 6% Dealer remarketable securities due
2013.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Filed herewith.
II-2
<PAGE>
(b) Financial Statement Schedules:
Financial Statement Schedules filed herewith:
None applicable.
Item 22. Undertakings.
(a)(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the co-
registrants pursuant to the provisions described under Item 20 or otherwise,
the co-registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by a
co-registrant of expenses incurred or paid by a director, officer or
controlling person of such co-registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, such co-
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Camp
Hill, Commonwealth of Pennsylvania on May 5, 1999.
RITE AID CORPORATION
/s/ Martin L. Grass
By:
----------------------------------
Martin L. Grass
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Martin L. Grass Chairman of the May 5, 1999
Board and Chief
- ----------------------------------- Executive Officer
Martin L. Grass (Principal
Executive Officer)
/s/ Timothy J. Noonan President, Chief May 5, 1999
Operating Officer
- ----------------------------------- and Director
Timothy J. Noonan
/s/ Frank M. Bergonzi Executive Vice May 5, 1999
President
- ----------------------------------- and Chief Financial
Frank M. Bergonzi and Accounting
Officer (Principal
Financial and
Accounting Officer)
/s/ Franklin C. Brown Vice Chairman of the May 5, 1999
Board and Director
- -----------------------------------
Franklin C. Brown
Director
- -----------------------------------
William J. Bratton
* Director May 5, 1999
- -----------------------------------
Alex Grass
* Director May 5, 1999
- -----------------------------------
Leonard I. Green
* Director May 5, 1999
- -----------------------------------
Nancy A. Lieberman
* Director May 5, 1999
- -----------------------------------
Philip Neivert
* Director May 5, 1999
- -----------------------------------
Leonard N. Stern
* Director May 5, 1999
- -----------------------------------
Preston Robert Tisch
* Director May 5, 1999
- -----------------------------------
Gerald Tsai, Jr.
</TABLE>
/s/ Frank M. Bergonzi
- -----------------------------------
Attorney in Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 Indenture, dated as of September 22, 1998, by and among Rite Aid
Corporation and Harris Trust and Savings Bank, as Trustee.
4.2 Remarketing Agreement, dated as of September 22, 1998, between Rite
Aid Corporation and J.P. Morgan Securities Inc., as Remarketing
Dealer.
4.3 Exchange and Registration Rights Agreement, dated as of September 22,
1998, by and among Rite Aid Corporation, J.P. Morgan Securities Inc.,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated.
Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
5 securities being registered.
8 Opinion of Morgan, Lewis & Bockius LLP with respect to tax matters.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
15* Letter re Unaudited Interim Financial Information.
23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5).
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8).
23.3* Consent of KPMG LLP.
23.4* Consent of Ernst & Young LLP.
24 Powers of Attorney.
Statement of Eligibility of Harris Trust and Savings Bank, as Trustee,
25 on Form T-1.
99.1 Form of Letter of Transmittal respecting the offer to exchange 6%
Dealer remarketable securities due 2013 which have been registered
under the Securities Act for 6% Dealer remarketable securities due
2013.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Filed herewith
<PAGE>
EXHIBIT 15
----------
Rite Aid Corporation
Camp Hill, Pennsylvania
Gentlemen:
Re: Registration statement of Rite Aid Corporation on Form S-4
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our reports dated June 30, 1998, October 12, 1998, and
January 12, 1999 related to our reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG LLP
Harrisburg, Pennsylvania
May 3, 1999
<PAGE>
EXHIBIT 23.3
------------
Consent of Independent Certified Public Accountants
The Board of Directors
Rite Aid Corporation
We consent to the use of our audit reports dated April 14, 1998 on the
consolidated financial statements of Rite Aid Corporation and subsidiaries as of
February 28, 1998 and March 1, 1997, and for each of the years in the three-year
period ended February 28, 1998, and the related financial statement schedule,
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG LLP
Harrisburg, Pennsylvania
May 3, 1999
<PAGE>
EXHIBIT 23.4
Consent of Ernst & Young LLP, Independent Auditors
The Board of Directors
Rite Aid Corporation
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 11, 1998 included in Rite Aid Corporation's
Form 8-K of January 19, 1999, with respect to the consolidated financial
statements of PCS Holding Corporation and Subsidiaries incorporated by
reference in Amendment No. 1 to the Registration Statement (Form S-4 No.
333-74751) and related Prospectus of Rite Aid Corporation for the registration
of $700,000,000 of Notes and Debentures.
/s/ Ernst & Young LLP
Phoenix, Arizona
April 28, 1999
