SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 11, 2000
(Date of earliest event reported)
RITE AID CORPORATION.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-5742 23-1614034
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
30 Hunter Lane, Camp Hill, Pennsylvania 17011
(Address of Principal Offices, including zip code)
(717) 761-2633
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
On April 11, 2000, Rite Aid Corporation issued a press release
announcing its receipt of a commitment letter, both of which are attached
hereto as exhibits and incorporated herein by reference.
ITEM 7. EXHIBITS
4.1 Commitment Letter dated April 10, 2000.
99.1 Press Release dated April 11, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
RITE AID CORPORATION
Dated: April 11, 2000 By: /s/ Elliot S. Gerson
___________________________________
Name: Elliot S. Gerson
Title: Senior Executive Vice
President and General
Counsel
EXHIBIT INDEX
Exhibit
Number Description
4.1 Commitment Letter dated April 10, 2000.
99.1 Press Release dated April 11, 2000.
SALOMON SMITH BARNEY INC.
390 GREENWICH STREET
NEW YORK, NEW YORK 10013
HELLER FINANCIAL, INC. FLEET RETAIL FINANCE INC.
500 WEST MONROE STREET 40 BROAD STREET, 10TH FLOOR
CHICAGO, ILLINOIS 60661 BOSTON, MASSACHUSETTS 02109
April 10, 2000
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: Mr. Robert G. Miller
Chairman of the Board of Directors
and Chief Executive Officer
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
COMMITMENT LETTER
Ladies and Gentlemen:
Rite Aid Corporation ("Rite Aid") has advised Citi/SSB, Heller and Fleet
(as defined below) that Rite Aid desires to establish the Senior Facility
(as defined in Exhibit A) in connection with the transactions described in
Exhibit A hereto (the "Transaction Description"). Capitalized terms used in
this Commitment Letter but not defined herein shall have the meanings given
to them in the Transaction Description.
Subject to the terms and conditions described in this Commitment Letter
(including Exhibits A, B and C hereto), and in the Fee Letters referred to
below, Citi/SSB, Heller and Fleet are pleased to inform Rite Aid of their
several commitments to provide the following principal amounts of the
Senior Facility:
Citi/SSB $500,000,000
Heller $250,000,000
Fleet $250,000,000
------------------
TOTAL $1,000,000,000
Each of Citi/SSB, Heller and Fleet shall be liable only for its own
commitment hereunder, and shall not have any liability with respect to the
commitment of any other party.
The commitments of Citi/SSB, Heller and Fleet hereunder will be irrevocably
reduced by the amount of the commitments of any other prospective Senior
Lenders (as defined below) which execute commitments relating to the Senior
Facility to the extent expressly stated in such commitment of such other
prospective Senior Lenders. Such reductions will be allocated among the
commitments of Citi/SSB, Heller and Fleet as agreed by them.
For purposes of this Commitment Letter, "Citi/SSB" shall mean Citicorp
North America, Inc. and/or any affiliate thereof, including Salomon Smith
Barney Inc. ("SSBI"), as Citi/SSB shall determine to be appropriate to
provide the services contemplated herein. "Heller" means Heller Financial,
Inc. or any affiliate thereof that it so designates. "Fleet" means Fleet
Retail Finance Inc. or any affiliate thereof. Citi/SSB, Heller and Fleet
are referred to collectively as the "Agents".
1. CONDITIONS PRECEDENT. The commitments of Citi/SSB, Heller and Fleet
hereunder are subject to:
(a) The Agents' completion of, and satisfaction in all respects with,
the results of its ongoing due diligence investigation of the business,
assets, operations, properties, condition (financial or otherwise),
contingent liabilities, prospects and material agreements of Rite Aid. The
Agents expect that the due diligence investigation, which is underway, will
be completed by April 30, 2000.
(b) The preparation, execution and delivery of definitive
documentation with respect to the Senior Facility, including a credit
agreement, security agreements and guarantees incorporating substantially
the terms and conditions outlined in this Commitment Letter and otherwise
reasonably satisfactory to the Agents and Citi/SSB's counsel (the
"Operative Documents"), on or before May 31, 2000.
(c) There not having occurred any material adverse change in the
revenues, store operations, inventory, accounts receivable, business or
prospects of Rite Aid and its subsidiaries taken as a whole, or to Rite
Aid's knowledge, in any relationship with any vendor or third party
insurance payor of Rite Aid or any of its subsidiaries, taken as a whole,
since November 2, 1999, other than, in each case, as publicly disclosed
before the date of this Commitment Letter.
(d) There not having occurred any disruption of or change in loan
syndication, financial, banking or capital market conditions that, in the
judgment of the Agents, could materially impair the syndication of the
Senior Facility or the completion of the Exchange Offer.
(e) The accuracy and completeness of all representations that Rite
Aid and its affiliates make to the Agents and all information that Rite Aid
and its affiliates furnish to the Agents.
(f) The payment in full of all fees, expenses and other amounts
payable under this Commitment Letter and the Engagement Letter.
(g) The Agents' satisfaction in all respects with (i) the structure
of the Transactions and all related tax, legal and accounting matters, (ii)
the material terms of the Transactions and of all agreements and
instruments to be entered into in connection with the Transactions and
(iii) the capitalization, structure and equity ownership of Rite Aid and
its subsidiaries after giving effect to the Transactions.
(h) The Agents' satisfaction that Rite Aid is not subject to material
contractual or other material restrictions that would be violated by the
Transactions, including the granting of security interests and guarantees
and the payment of dividends by subsidiaries.
(i) The Agents' reasonable satisfaction with the timing and schedule
for the Transactions.
(j) The execution, delivery and compliance with the terms of (i) this
Commitment Letter, and (ii) the Senior Facility Fee Letter, each in form
and substance satisfactory to the Agents.
(k) The execution, delivery and compliance with the terms of (i) the
Engagement Letter, and (ii) the Engagement Fee Letter, each of which will
be in form and substance satisfactory to Citi/SSB.
(l) The completion of the Debt Modification on substantially similar
terms and conditions as those described in this Commitment Letter
(including Exhibits A, B and C hereto).
(m) The prompt delivery to the Agents of a three year business plan
of Rite Aid which shall be satisfactory in all material respects to the
Agents.
(n) The Agents' receipt of valuations and appraisals of the
Collateral by an independent appraisal firm satisfactory to the Agents
which valuations and appraisals shall be satisfactory to Agents.
(o) Citi/SSB's completion of a field examination of the Collateral,
the results of which shall be satisfactory to the Agents.
(p) The absence of (i) any development in any Current Litigation (as
defined in Exhibit A) after the date hereof, and (ii) any other actual or
threatened litigation that, in case of either clause (i) or (ii) in the
Agents' sole judgment, could impair the validity, enforceability or
priority of the security interests to be granted in favor of the Senior
Lenders under the Operative Documents.
(q) The absence of (i) any development in any Current Litigation
after the date hereof, and (ii) any other actual or threatened litigation
that, in case of either clause (i) or (ii) in the Agents' sole judgment,
could impair the syndication of the Senior Facility or the completion of
the Exchange Offer.
Please note that the terms and conditions of Citi/SSB's, Heller's and
Fleet's commitments hereunder are not limited to those set forth in this
Commitment Letter and that those matters that are not covered or made clear
in this Commitment Letter are subject to mutual agreement of the parties.
2. COMMITMENT TERMINATION. The commitments set forth in this Commitment
Letter will terminate on the earlier of May 31, 2000 and the date of
execution and delivery of the Operative Documents. Before such date, the
Agents may terminate this Commitment Letter if any event occurs or
information becomes available that, in their reasonable judgment, results
or is likely to result in the failure to satisfy any condition set forth in
Section 1.
3. SYNDICATION. Each of the Agents reserves the right, before or after the
execution of the Operative Documents, to syndicate all or a portion of its
commitment to one or more other financial institutions, in consultation
with Rite Aid, that will become parties to the Operative Documents pursuant
to syndications to be managed by SSBI (the financial institutions becoming
parties to the Operative Documents being collectively referred to herein as
the "Senior Lenders"). Rite Aid understands that SSBI intends to commence
such syndication of the Senior Facility promptly and that SSBI may elect to
appoint one or more syndication agents to direct such syndication efforts
on its behalf.
SSBI will act as the lead syndication agent with respect to the Senior
Facility and will manage all aspects of the syndications in consultation
with Rite Aid, including the timing of all offers to potential Senior
Lenders, the determination of all amounts offered to potential Senior
Lenders, the selection of Senior Lenders, the allocation of commitments
among the Senior Lenders, the assignment of any titles and the compensation
to be provided to the Senior Lenders.
Rite Aid shall take all action that SSBI may reasonably request to assist
it in forming syndicates acceptable to SSBI and Rite Aid. Rite Aid's
assistance in forming such syndicates shall include but not be limited to:
(i) making senior management, representatives and advisors of Rite Aid
available to participate in informational meetings with potential Senior
Lenders at such times and places as SSBI may reasonably request; (ii) using
its reasonable best efforts to ensure that the syndication efforts benefit
from Rite Aid's existing lending relationships; (iii) assisting (including
using its best efforts to cause its affiliates and advisors to assist) in
the preparation of a confidential information memorandum for the Senior
Facility and other marketing materials to be used in connection with the
syndications; and (iv) promptly providing SSBI with all information
reasonably deemed necessary by it to successfully complete the
syndications, and which in the case of financial information, is reasonably
available to Rite Aid.
To ensure an orderly and effective syndication of the Senior Facility, Rite
Aid agrees that, from the date hereof until the termination of the
syndications (as determined by SSBI), it will not and will not permit any
of its affiliates to, syndicate or issue, attempt to syndicate or issue,
announce or authorize the announcement of the syndication or issuance of,
or engage in discussions concerning the syndication or issuance of, any
debt security or commercial bank or other debt facility (including any
renewals thereof), without the prior written consent of SSBI other than as
contemplated by the Transactions; provided, that the foregoing shall not
limit Rite Aid's ability to issue privately placed equity.
Rite Aid agrees that (a) Citicorp USA, Inc. will act as the sole
administrative agent for the Senior Facility, (b) SSBI will act as sole
arranger and book manager for the Senior Facility, and (c) Heller and Fleet
will act as co-syndication agents for the Senior Facility. No additional
agents, co-agents, arrangers or co-arrangers, will be appointed, or other
titles conferred, without the consent of SSBI. Rite Aid agrees that no
Senior Lender will receive any compensation of any kind for its
participation in the Senior Facility, except as expressly provided in the
Fee Letters or in Exhibit A, B or C.
4. FEES. In addition to the fees described in Exhibits B and C, Rite Aid
will pay the fees set forth in the fee letter relating to the Senior
Facility dated the date hereof between Rite Aid and the Agents (the "Senior
Facility Fee Letter"), and the fee letter dated the date hereof between
Rite Aid and Citi/SSB (the "Engagement Fee Letter", and together with the
Senior Facility Fee Letter, the "Fee Letters"). The terms of the Senior
Facility Fee Letter are an integral part of the Agents' commitments
hereunder and constitute part of this Commitment Letter for all purposes
hereof. Each of the fees described in the Fee Letters and Exhibits B and C
shall be nonrefundable when paid.
5. INDEMNIFICATION. Rite Aid agrees to indemnify and hold harmless the
Agents, each Senior Lender and each of their respective affiliates and each
of their respective officers, directors, employees, agents, advisors and
representatives (each, an "Indemnified Person") from and against any and
all claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and disbursements of counsel), joint or
several, that may be incurred by or asserted or awarded against any
Indemnified Person, (including, without limitation, in connection with any
investigation, litigation or proceeding or the preparation of a defense in
connection therewith), in each case arising out of or in connection with or
by reason of this Commitment Letter or the Operative Documents or the
Transactions contemplated hereby or thereby, or any use made or proposed to
be made with the proceeds of the Senior Facility, except to the extent such
claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Person's gross negligence or willful
misconduct. In the case of an investigation, litigation or other proceeding
to which the indemnity in this paragraph applies, such indemnity shall be
effective, whether or not such investigation, litigation or proceeding is
brought by Rite Aid, any of its directors, securityholders or creditors, an
Indemnified Person or any other person, or an Indemnified Person is
otherwise a party thereto and whether or not the Transactions contemplated
hereby are consummated.
No Indemnified Person shall have any liability (whether in contract, tort
or otherwise) to Rite Aid or any of its directors, securityholders or
creditors for or in connection with the Transactions contemplated hereby,
except for direct damages (as opposed to special, indirect, consequential
or punitive damages including, without limitation, any loss of profits,
business or anticipated savings) determined in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Person's gross negligence or willful misconduct.
If any litigation or proceeding is brought against any Indemnified Person
in respect of which indemnification may be sought against Rite Aid pursuant
to this Section 5, such Indemnified Person shall promptly notify Rite Aid
in writing of the commencement of such litigation or proceeding, but the
failure so to notify Rite Aid shall relieve Rite Aid from any liability
which it may have hereunder only if, and to the extent that, it has been
materially prejudiced by such failure and will not in any event relieve
Rite Aid from any other obligation or liability that it may have to any
Indemnified Person other than under this Commitment Letter. In case any
such litigation or proceeding shall be brought against any Indemnified
Person and such Indemnified Person shall notify Rite Aid in writing of the
commencement of such litigation or proceeding, Rite Aid shall be entitled
to participate in such litigation or proceeding, and, after written notice
from Rite Aid to such Indemnified Person, to assume the defense of such
litigation or proceeding with counsel of its choice at its expense;
provided, however, that such counsel shall be satisfactory to the
Indemnified Person in the exercise of its reasonable judgment; and provided
further, however, that Rite Aid shall not have the right to assume the
defense of any litigation or proceeding related to the security interests
granted in favor of the Senior Lenders or the validity or enforceability of
the documentation for the Senior Facility. Notwithstanding the election of
Rite Aid to assume the defense of such litigation or proceeding, such
Indemnified Person shall have the right to employ separate counsel and to
participate in the defense of such litigation or proceeding, and Rite Aid
shall bear the reasonable fees, costs and expenses of such separate counsel
and shall pay such fees, costs and expenses at least quarterly (provided
that with respect to any single litigation or proceeding or with respect to
several litigations or proceedings involving substantially similar legal
claims, Rite Aid shall not be required to bear the fees, costs and expenses
of more than one such counsel except where such Indemnified Person requires
local counsel, in which case Rite Aid shall also be required to bear the
fees, costs and expenses of such local counsel) if (i) the use of counsel
chosen by Rite Aid to represent such Indemnified Person would present such
counsel with a conflict of interest (based upon written advice of counsel
to the Indemnified Person), (ii) the defendants in, or targets of, any such
litigation or proceeding include both an Indemnified Person and Rite Aid,
and such Indemnified Person shall have reasonably concluded that there may
be legal defenses available to it or to other Indemnified Persons which are
different from or additional to those available to Rite Aid (in which case
Rite Aid shall not have the right to direct the defense of such action on
behalf of the Indemnified Person), (iii) Rite Aid shall not have employed
counsel satisfactory to such Indemnified Person, in the exercise of the
Indemnified Person's reasonable judgment, to represent such Indemnified
Person within a reasonable time after notice of the institution of such
litigation or proceeding or (iv) Rite Aid shall authorize in writing such
Indemnified Person to employ separate counsel at the expense of Rite Aid.
In any action or proceeding the defense of which Rite Aid assumes, the
Indemnified Person shall have the right to participate in such litigation
and retain its own counsel at such Indemnified Person's own expense. Each
Indemnified Person agrees to use all reasonable efforts to cooperate in the
defense of any action or proceeding pursuant to which a claim for
indemnification is made under this Section 5.
No Indemnified Person seeking indemnification under this Commitment Letter
shall, without Rite Aid's prior written consent (which consent shall not be
unreasonably withheld), settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding in
respect of which indemnification may be sought hereunder.
6. COSTS AND EXPENSES. Rite Aid shall pay or reimburse (a) each of Heller
and Fleet on demand for all reasonable out-of-pocket costs and expenses
incurred by each of them (whether incurred before or after the date hereof)
in an aggregate amount not to exceed $50,000 each, and (b) Citi/SSB on
demand for all reasonable out-of-pocket costs and expenses incurred by
Citi/SSB (whether incurred before or after the date hereof), in each case
in connection with the Senior Facility and the preparation, negotiation,
execution and delivery of this Commitment Letter, the Operative Documents
and any security arrangements in connection (which costs and expenses will
be documented in reasonable detail), including the reasonable fees and
disbursements of counsel (whether incurred before or after the date
hereof), whether or not any of the Transactions contemplated hereby are
consummated. Rite Aid further agrees to pay all costs and expenses of
Citi/SSB (including, without limitation, reasonable fees and disbursements
of counsel) incurred in connection with the enforcement of any of its
rights and remedies hereunder.
7. CONFIDENTIALITY. By accepting delivery of this Commitment Letter, Rite
Aid agrees that this Commitment Letter is for its confidential use only and
that neither its existence nor the terms hereof will be disclosed by it to
any person other than its officers, directors, employees, accountants,
attorneys and other advisors, and then only on a confidential and "need to
know" basis in connection with the Transactions contemplated hereby.
Notwithstanding the foregoing, following Rite Aid's acceptance of the
provisions hereof and its return of an executed counterpart of this
Commitment Letter to Citi/SSB as provided below, (i) Rite Aid may file a
copy of this Commitment Letter (other than the Fee Letters) in any public
record in which it is required by law to be filed and (ii) Rite Aid may
make such other public disclosures of the terms and conditions hereof as
(a) Rite Aid is required by law, in the opinion of its counsel, to make and
(b) may be necessary or advisable in connection with the Transactions.
8. REPRESENTATIONS AND WARRANTIES. Rite Aid represents and warrants that
(i) all information (other than financial projections) that has been or
will hereafter be made available to the Agents, any Senior Lender or any
potential Senior Lender by or on behalf of Rite Aid or any of its
representatives in connection with the Transactions contemplated hereby is
and will be complete and correct in all material respects and does not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein
not misleading in light of the circumstances under which such statements
were or are made and (ii) all financial projections, if any, that have been
or will be prepared by or on behalf of Rite Aid or any of its
representatives and made available to the Agents, any Senior Lender or any
potential Senior Lender have been or will be prepared in good faith based
upon assumptions that are reasonable at the time made and at the time the
related financial projections are made available to the Agents. If, at any
time from the date hereof until the execution and delivery of the Operative
Documents, any of the representations and warranties in the preceding
sentence would be incorrect if the information or financial projections
were being furnished, and such representations and warranties were being
made, at such time, then Rite Aid will promptly supplement the information
and the financial projections so that such representations and warranties
will be correct under those circumstances.
In issuing this Commitment Letter and in arranging the Senior Facility
including the syndication of the Senior Facility, the Agents will be
entitled to use, and to rely on the accuracy of, the information furnished
to it by or on behalf of Rite Aid or any of its representatives without
responsibility for independent verification thereof.
9. NO THIRD PARTY RELIANCE, ETC. The agreements of the Agents hereunder and
of any Senior Lender that issues a commitment to provide financing under
the Senior Facility are made solely for the benefit of Rite Aid and may not
be relied upon or enforced by any other person (other than Indemnified
Persons pursuant to Section 5). This Commitment Letter is not intended to
create a fiduciary relationship among the parties hereto.
10. SHARING INFORMATION. Rite Aid acknowledges that the Agents may provide
debt financing, equity capital or other services (including financial
advisory services) to parties whose interests regarding the Transactions
described herein and otherwise may conflict with Rite Aid's interests.
Consistent with the Agents' policy to hold in confidence the affairs of its
customers, the Agents will not furnish confidential information obtained
from Rite Aid or its affiliates to any of its other customers. Furthermore,
the Agents will not use in connection with the Transactions contemplated
hereby, or furnish to Rite Aid, confidential information obtained by the
Agents from any other person.
11. ASSIGNMENTS. Rite Aid may not assign this Commitment Letter or the
Agents' commitments hereunder without the Agents' prior written consent,
and any attempted assignment without such consent shall be void.
12. AMENDMENTS. This Commitment Letter may not be amended or any provision
hereof waived or modified except by an instrument in writing signed by each
party hereto.
13. GOVERNING LAW, ETC. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of New York. This
Commitment Letter sets forth the entire agreement among the parties with
respect to the matters addressed herein and supersedes all prior
communications, written or oral, with respect hereto. This Commitment
Letter may be executed in any number of counterparts, each of which, when
so executed, shall be deemed to be an original and all of which, taken
together, shall constitute one and the same Commitment Letter. Delivery of
an executed counterpart of a signature page to this Commitment Letter by
telecopier shall be as effective as delivery of a manually executed
counterpart of this Commitment Letter. Sections 3 through 8, 10, 13 and 14
shall survive the expiration or termination of this Commitment Letter
whether or not the Operative Documents shall be executed and delivered,
but, after the effectiveness of the Operative Documents, only to the extent
not inconsistent with the Operative Documents.
14. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Commitment
Letter or the Transactions contemplated hereby or the actions of the
parties hereto in the negotiation, performance or enforcement hereof.
Please indicate your acceptance of the provisions hereof by (i) signing the
enclosed copy of this Commitment Letter and the Fee Letters and returning
them to Jeffrey A. McDermott, Managing Director, Salomon Smith Barney Inc.,
390 Greenwich Street, New York, New York 10013 (telecopier: (212)
816-6591), with a copy to Richard D. Banziger, Director (telecopier: (212)
723-8544) and (ii) making the deposits and advance payments contemplated by
the Engagement Fee Letter in respect of costs and expenses to be paid or
reimbursed pursuant to Section 6 hereof, in each case at or before 5:00
p.m. (New York City time) on April 11, 2000, at which time the commitment
of the Agents set forth above (if such acceptance, deposits and payments
have not occurred prior thereto) will expire.
If you elect to deliver this Commitment Letter by telecopier, please
arrange for the executed original to follow by next-day courier.
Very truly yours,
CITICORP NORTH AMERICA, INC.,
By__________________________
Name:
Title: Vice President
SALOMON SMITH BARNEY INC.,
By__________________________
Name:
Title: Managing Director
HELLER FINANCIAL, INC.,
By__________________________
Name:
Title:
FLEET RETAIL FINANCE INC.,
By__________________________
Name:
Title:
ACCEPTED AND AGREED on April 11, 2000:
RITE AID CORPORATION,
By_______________________
Name:
Title:
CONFIDENTIAL EXHIBIT A
April 10, 2000
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
TRANSACTION DESCRIPTION
All capitalized terms used herein but not defined herein shall have the
meanings provided in the Commitment Letter relating to this Transaction
Description. The following transactions are referred to herein as the
"Transactions".
1. Rite Aid will obtain a new senior secured credit facility in an
aggregate principal amount of $1,000,000,000 (the "Senior Facility"), which
shall be unconditionally guaranteed by its subsidiaries and secured by a
first priority security interest in the Collateral (as described in Exhibit
B to the Commitment Letter).
2. Rite Aid will provide its lenders with respect to each of:
(a) the indebtedness under Rite Aid's $1,300,000,000 Term
Loan Agreement dated as of October 25, 1999 (the "PCS Facility");
(b) the indebtedness under Rite Aid's $1,000,000,000
Amended and Restated Credit Agreement dated as of October 25, 1999
(the "RCF Facility");
(c) the indebtedness in the amount of approximately
$35,000,000 represented by the 7.30% Senior Secured Notes due
February 28, 2002 (the "Prudential Note") issued by Finco, Inc. and
guaranteed by Rite Aid; and
(d) the indebtedness in the amount of approximately
$270,000,000 under the Term Loan Agreement dated as of October 27,
1999 (the "MGT Term Note", and together with the indebtedness
described under clauses (a) through (c) above, the "Agreement
Debt"),
the option (the "Debt Exchange Option") to exchange (the "Debt Exchange") a
portion of such Agreement Debt (the "Exchangeable Debt") for a combination
of (x) shares of common stock, par value $.01 per share (the "Common
Stock"), of Rite Aid with an aggregate value equal to 50% of the aggregate
principal amount of the Exchangeable Debt (based on a price per share of
Common Stock of $5.50), together with registration rights to be agreed
upon, and (y) indebtedness in an aggregate principal amount equal to 50% of
the principal amount of the Exchangeable Debt (the "Exchange Debt"). The
maximum aggregate amount of Exchangeable Debt that will be eligible for the
Debt Exchange shall be equal to the product of two multiplied by the value
of 20% of the outstanding Common Stock of Rite Aid prior to the Debt
Exchange. J.P. Morgan shall have the first right to participate in the Debt
Exchange with respect to up to 100% of its outstanding loans to Rite Aid,
and the remaining lenders with respect to the Agreement Debt shall be
permitted to participate in the Debt Exchange on a pro rata basis.
The terms of the Exchange Debt will include (i) a first priority
security interest in certain specified collateral, including a portion of
Rite Aid's prescription files to be agreed before the initial funding date
under the Senior Facility, with a value equal to the aggregate principal
amount of such Exchange Debt, (ii) a silent second priority lien on the
Collateral that will be shared with the Agreement Debt, the Synthetic
Leases (as described below) and the Exchange Notes (as described below) on
a pari passu basis, (iii) with respect to any Agreement Debt that
constitutes Exchangeable Debt, the right to any liens on pledged stock
(i.e., the PCS stock and drugstore.com stock) such lenders were entitled to
under the Agreement Debt and (iv) a maturity date of August 15, 2002.
3. To the extent the Agreement Debt has not been exchanged for
Exchange Debt and shares of Common Stock in connection with the Debt
Exchange, Rite Aid will modify the terms of, and obtain the appropriate
amendments to, the Agreement Debt, in order to, among other things, provide
for the extension of the maturity date of the Agreement Debt to August 15,
2002, modify certain existing covenants and provide that the Agreement Debt
shall be secured by a silent second priority lien on the Collateral that
will be shared with the Exchange Debt, the Exchange Notes and the Synthetic
Leases on a pari passu basis (the "Agreement Debt Modification").
4. Rite Aid will modify the terms of, and obtain the appropriate
amendments to, certain synthetic leases in an aggregate amount of
approximately $214,000,000 (the "Synthetic Leases") in order to, among
other things, provide for the modification of certain covenants and provide
that the Synthetic Leases shall be secured by a silent second priority lien
on the Collateral that will be shared with the Exchange Debt, the Exchange
Notes and the Agreement Debt on a pari passu basis (the "Synthetic Lease
Modification").
5. Rite Aid will seek to exchange not less than 85% of its senior
indenture debt (the "Senior Notes") consisting of $200,000,000 of unsecured
5.50% fixed rate senior notes due 2000 (the "5.50% Notes") and $350,000,000
of unsecured 6.70% notes due 2001 (the "6.70% Notes", and together with the
5.50% Notes, the "Existing Notes") in an exchange offer in accordance with
Section 4(2) of the Securities Act of 1933 (the "Securities Act"), made
only to Qualified Institutional Buyers or institutional Accredited
Investors (as such terms are defined in the rules and regulations under the
Securities Act), at par, for new senior notes (the "Exchange Notes")
maturing on September 15, 2002 and having, among other things, the same
silent second priority lien on the Collateral that will be shared with the
Agreement Debt, the Exchange Debt and the Synthetic Leases on a pari passu
basis (the " Exchange Offer", and together with the Debt Exchange, the
Synthetic Lease Modification and the Agreement Debt Modification, the "Debt
Modification").
6. All outstanding uncollected receivables to be collected by Rite
Aid as collection agent (the "Obligations to be Repurchased") under its
accounts receivable securitization facility (the "Securitization Facility")
will be repurchased by the seller thereof from the purchaser thereof and
the Securitization Facility terminated.
7. Costs and expenses (including, without limitation, all fees and
amounts payable under the Fee Letters) incurred in connection with the
foregoing transactions will be paid in an amount approximately equal to
$60,000,000 (the "Transaction Costs").
8. The estimated sources and uses of the funds necessary to
consummate the Transactions are set forth in Annex I hereto (the "Sources
and Uses of Funds").
ANNEX I
to Transaction Description
<TABLE>
<CAPTION>
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
SOURCES AND USES OF FUNDS
SOURCES USES
- --------------------------------------------- -------------------------------------------------
<S> <C> <C> <C>
Senior Facility $1,000,000,000 Obligations to be $ 300,000,000
Repurchased
Exchange Notes $ 550,000,000 Existing Notes $ 550,000,000
Transaction Costs $ 60,000,000
Availability for Working
Capital, Capital
Expenditures and
other permitted
General Corporate
Purposes $ 640,000,000
------------------------ ---------------
TOTAL SOURCES $1,550,000,000 TOTAL USES $ 1,550,000,000
======================== ===============
</TABLE>
CONFIDENTIAL EXHIBIT B
April 10, 2000
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
All capitalized terms used herein but not defined herein shall have the
meanings provided in the Commitment Letter and the Transaction Description
relating to this Summary of Principal Terms and Conditions.
BORROWER: Rite Aid Corporation, a Delaware
corporation.
TRANSACTIONS: As described in the Transaction
Description.
ADMINISTRATIVE AGENT: Citicorp USA, Inc., or an affiliate
thereof designated by SSBI (in its
individual capacity "CUSA" and in
its capacity as Administrative
Agent, the "Administrative Agent").
COLLATERAL AGENT: CUSA (in its capacity as Collateral
Agent, the "Collateral Agent").
SYNDICATION AGENTS: SSBI, Heller Financial, Inc. and
Fleet Retail Finance Inc. (together
with the Administrative Agent and
Collateral Agent, the "Agents").
LEAD ARRANGER AND
SOLE BOOK MANAGER: Salomon Smith Barney Inc. ("SSBI" or
the "Arranger").
SENIOR LENDERS: A syndicate of financial
institutions arranged by SSBI (the
"Senior Lenders").
SENIOR FACILITY: (A) Senior Secured Term Loan
Facilities in an aggregate principal
amount of $500,000,000 (the "Term
Facilities"), such aggregate
principal amount to be allocated, as
determined by the Arranger in its
discretion, entirely to or between
one or more term loan facilities.
(B) A Senior Secured Revolving
Credit Facility in an aggregate
principal amount of $500,000,000
(the "Revolving Facility").
(C) Up to $100,000,000 of the
Revolving Facility will be available
as a letter of credit subfacility.
(D) An amount to be agreed, but no
less than $50,000,000, of the
Revolving Facility will be available
as an uncommitted swing line
facility. Swing line loans must be
repaid not later than seven days
after being drawn and may not be
refinanced with swing line loans.
PURPOSE AND AVAILABILITY: The Term Facilities will be fully
drawn on the date on which the
conditions to the initial borrowing
specified below are satisfied (the
"Initial Funding Date"). The
Revolving Facility will be available
on and after the Initial Funding
Date and at any time before the
final maturity of the Revolving
Facility, in minimum principal
amounts to be agreed. Amounts
borrowed under the Term Facilities
that are repaid or prepaid may not
be reborrowed. Amounts repaid under
the Revolving Facility may be
reborrowed.
Amounts borrowed under the Term
Facilities will be utilized by the
Borrower solely (1) to finance the
repurchase by the sellers thereof
from the purchasers thereof of all
outstanding uncollected receivables
to be collected by the Borrower as
collection agent under the
Borrower's accounts receivable
securitization facility (the
"Securitization Facility"), (2) to
pay approximately $60,000,000 of
transaction costs for the
Transactions, and (3) for liquidity
and other permitted general
corporate purposes. Amounts borrowed
under the Revolving Facility will be
utilized by the Borrower solely to
finance working capital requirements
and capital expenditures and for
other permitted general corporate
purposes. Letters of credit may be
issued in the ordinary course of the
Borrower's business for permitted
general corporate purposes. Existing
standby letters of credit issued by
Mellon Bank for the benefit of the
Borrower and its subsidiaries will
remain outstanding up to a limit of
$35,000,000, and will be secured by
a shared first-priority lien on the
Collateral. Treatment of existing
trade letters of credit issued for
the benefit of the Borrower and its
subsidiaries will be as agreed in
the Operative Documents.
FINAL MATURITY: The Term Facilities and the
Revolving Facility will mature (and
all lending commitments under the
Revolving Facility will terminate)
on August 1, 2002.
BORROWING BASE: All loans and other extensions of
credit under the Senior Facility
will be subject to a borrowing base
(the "Borrowing Base") calculated as
percentages to be agreed of Eligible
Receivables and Eligible Inventory
pledged as Collateral. The
components, standards of calculation
and initial advance rates of the
Borrowing Base will be determined at
the reasonable judgment and
customary practices of the Agents.
The Collateral Agent may use its
reasonable judgment to increase the
initial advance rates by 5%. Any
increase greater than that amount
will be subject to a 662/3% vote of
the Senior Lenders and any increase
in advance rates above 80% of the
orderly liquidation value of the
Eligible Inventory or 85% of orderly
liquidation value of the Eligible
Receivables will be subject to a
100% vote of the Senior Lenders. The
Borrowing Base will be computed
weekly and at other times requested
by the Collateral Agent. A Borrowing
Base Certificate presenting the
Borrower's computation will be
delivered to the Collateral Agent,
with respect to accounts receivable,
not later than two business days
after the end of each week or the
date of any such request, and with
respect to inventory, as agreed in
the Operative Documents.
GUARANTEE: All obligations of the Borrower
under the Senior Facility and under
any interest protection or other
hedging arrangements entered into
with a Senior Lender (or any
affiliate thereof) will be
unconditionally guaranteed (the
"Guarantees") by each existing and
subsequently acquired or organized
domestic and, to the extent no
adverse tax consequences would
result, foreign direct or indirect
subsidiary of the Borrower owning
any assets consisting of inventory,
accounts receivable, certain owned
real estate (including owned
fixtures) and intellectual property
("Specified Assets"). Each such
subsidiary (collectively, the
"Subsidiary Guarantors") shall be
designated as an "Unrestricted
Subsidiary" under each of the
indentures governing the Borrower's
outstanding senior debt securities.
Guarantees given by PCS Holding
Corporation, PCS Health Systems and
any other PCS companies
(collectively, the "PCS Companies")
will be limited in recourse to the
assets of such companies which
constitutes collateral, and the
guarantees of each PCS Company and
will automatically be terminated
upon sale of such PCS Company by
Rite Aid.
COLLATERAL: The Senior Facility, the Guarantees,
any interest protection and other
hedging arrangements entered into
with a Senior Lender (or any
affiliate thereof) and the
Borrower's obligations in respect of
not more than $35,000,000 at any
time outstanding of standby letters
of credit issued by Mellon Bank will
be secured by a first priority
pledge of, or mortgages on, all
Specified Assets of each Subsidiary
Guarantor (whether existing or
subsequently acquired or organized)
and all proceeds of the foregoing
(collectively, the "Collateral").
The indebtedness under the Agreement
Debt, the Exchange Debt, the
Synthetic Leases and the Exchange
Notes (collectively, the "Second
Priority Indebtedness") will be
secured, on a pari passu basis, by a
silent second priority lien on the
Collateral. Such lien will not
entitle the Second Priority
Indebtedness to take any action
whatsoever with respect to the
Collateral, and the Senior Lenders
will at all times control all
remedies or other actions relating
to the Collateral. The holders of
the obligations under the Senior
Facility will have the right to
receive all proceeds of any
realization on the Collateral until
all obligations under the Senior
Facility have been paid in full. The
Second Priority Indebtedness will
have secured claims in bankruptcy
proceedings, but the intercreditor
provisions will provide that the
holders of Second Priority
Indebtedness may not vote such
claims in a manner adverse to the
Senior Facility.
CASH DOMINION: The Borrower will establish a cash
management system reasonably
satisfactory to the Administrative
Agent. As part of that system, the
Administrative Agent will act as the
concentration bank for all of the
Borrower's and the Subsidiary
Guarantors' cash collections and
proceeds. Collections and proceeds
from assets sales, including credit
card collections, will be deposited
into an account with the
Administrative Agent, or into an
account at another institution that
is subject to a blocked account or
agency agreement reasonably
satisfactory to the Administrative
Agent. The Borrower will have free
access to the funds in such accounts
during such periods of time when (i)
no default exists and (ii)
availability under the Senior
Facility exceeds a minimum amount to
be agreed by the Borrower and the
Agents. At all other times, such
accounts will be automatically
blocked and the Administrative Agent
will use each day's proceeds to
reduce outstandings under the
Revolving Facility, to be applied on
the business day following receipt.
INTEREST RATES AND FEES: As set forth in Annex I hereto and
in the Senior Facility Fee Letter.
OPTIONAL PREPAYMENTS AND
REDUCTIONS IN COMMITMENTS: Optional prepayments of borrowings
under the Senior Facility, and
optional reductions of the
unutilized portion of the Senior
Facility commitments, will be
permitted at any time, in minimum
principal amounts to be agreed,
without premium or penalty, subject
to reimbursement of the Senior
Lenders' redeployment costs in the
case of a prepayment of LIBOR
borrowings other than on the last
day of the relevant interest period.
MANDATORY PREPAYMENTS: The Senior Facility will be subject
to mandatory prepayment with the
proceeds of sales of Specified
Assets (other than sales in the
ordinary course of business and
other limited exceptions to be
agreed) and certain permitted
capital markets transactions, but
only to the extent required to
ensure that the ratio of:
(a) Eligible Inventory and Eligible
Receivables, to
(b) outstanding loans and unused
commitments under the Senior
Facility,
after giving effect to any such sale
or transaction, is not less than
such ratio as of the closing date of
the Senior Facility. Proceeds not
required to be applied to the Senior
Facility may be applied to repay the
Agreement Debt.
Mandatory prepayments of the Senior
Facility will be allocated between
the Revolving Facility and the Term
Facility pro rata based on
outstanding amounts and unused
commitments. Commitments under the
Revolving Facility shall be
permanently reduced (with
corresponding prepayments of
obligations under the Revolving
Facility) by amounts allocated to
the Revolving Facility. Outstanding
principal under the Term Facility
will be prepaid with amounts
allocated to the Term Facility.
Borrowings under the Senior Facility
(including the face amount of
outstanding letters of credit) must
be prepaid (or cash collateralized)
on any date when the aggregate
principal amount thereof exceeds the
Borrowing Base by an amount
sufficient to eliminate such excess.
LETTERS OF CREDIT: Letters of credit under the
Revolving Facility will be issued by
one or more Senior Lenders (or an
affiliate thereof) to be agreed
(collectively, the "Issuing
Lender"). Each letter of credit
shall expire not later than the
earlier of (a) 12 months after its
date of issuance and (b) the fifth
business day before the final
maturity of the Revolving Facility.
Drawings under any letter of credit
shall be reimbursed by the Borrower
(or converted to loans under the
Revolving Facilities) on the same
business day. To the extent that the
Borrower does not reimburse the
Issuing Lender on the same business
day, the Senior Lenders under the
Revolving Facility shall be
irrevocably obligated to reimburse
the Issuing Lender pro rata based
upon their respective Revolving
Facility commitments, with the
amount of such reimbursement payment
being deemed to be a drawing under
the Revolving Facility.
The issuance of all letters of
credit shall be subject to the
customary procedures of the Issuing
Lender.
REPRESENTATIONS AND WARRANTIES: Usual for facilities and transactions
of this type and others to be
reasonably specified by the Agents
(with certain exceptions to be
agreed upon as a result of the
current circumstances of the
Borrower), including, without
limitation:
1. Corporate status and authority.
2. Execution, delivery, and
performance of loan documents
and transactions contemplated
thereby do not violate law or
other agreements.
3. No government or regulatory
approvals required, other than
approvals in effect.
4. Neither (a) any development in
any Current Litigation after
April 10, 2000, or (b) other
litigation or administrative
proceeding which could in case
of either clause (a) or (b)
reasonably be expected to (i)
have a material adverse effect
on the business, financial
position, results of operations
or prospects of the Borrower
and its subsidiaries, taken as
a whole, (ii) affect the
legality, validity and
enforceability of the loan
documents (including without
limitation, the validity,
enforceability or priority of
security interests to be
granted) or (iii) impair the
Borrower's or its subsidiaries'
ability to perform its or their
obligations under the loan
documents. "Current Litigation"
means the bondholders' class
actions and shareholders' class
actions currently pending in
the Eastern District of
Pennsylvania, and the related
pending Securities Exchange
Commission investigation.
5. Since November 2, 1999, and
until delivery by Rite Aid of
financial statements for the
fiscal quarter ending May 27,
2000, no material adverse
change in the revenues, store
operations, inventory, accounts
receivable, business or
prospects of Rite Aid and its
subsidiaries taken as a whole,
or to Rite Aid's knowledge, in
any relationship with any
vendor or third party insurance
payor of Rite Aid or any of its
subsidiaries, taken as a whole,
other than, in each case, as
publicly disclosed before April
10, 2000.
6. Effective upon delivery by Rite
Aid of financial statements for
the fiscal quarter ending May
27, 2000, no material adverse
change in the business,
financial position, results of
operations or prospects of the
Borrower and its subsidiaries,
taken as a whole since May 27,
2000.
7. Effective until delivery by
Rite Aid of financial
statements for the fiscal
quarter ending May 27, 2000,
accuracy of representations
concerning revenues, store
operations, inventory, accounts
receivable, business or
prospects of Rite Aid and its
subsidiaries, or to Rite Aid's
knowledge, in any relationship
with any vendor or third party
insurance payor of Rite Aid and
any of its subsidiaries.
8. Effective upon delivery by Rite
Aid of financial statements for
the fiscal quarter ending May
27, 2000, accuracy of financial
statements (except as
previously disclosed in writing
to the Agents and the Senior
Lenders) and other information.
9. Material compliance with laws
and regulations, including
ERISA, margin regulations and
all applicable environmental
laws and regulations, except as
previously disclosed before
April 10, 2000 to the Agents
and the Senior Lenders.
10. Legality, validity, binding
effect and enforceability of
the loan documents.
11. Inapplicability of the
Investment Company Act and
Public Utility Holding Company
Act.
12. Solvency.
13. Payment of taxes.
14. Validity, priority and
perfection of security
interests in the Collateral,
and location of accounts
receivable, inventory,
receivables, real estate and
intellectual property in
Subsidiary Guarantors.
15. No conflicts with laws,
material contracts, etc.
CONDITIONS PRECEDENT
TO INITIAL BORROWING: Usual for facilities and transactions
of this type, including those specified
in the Summary of Additional Conditions
Precedent attached as Exhibit C to the
Commitment Letter, and others to be
reasonably specified by the Agents
(with certain exceptions to be
agreed upon as a result of the
current circumstances of the
Borrower).
AFFIRMATIVE COVENANTS: Usual for facilities and transactions
of this type and others to be
reasonably specified by the Agents
(to be applicable to the Borrower
and the Borrower's subsidiaries),
including, without limitation, and
subject, in each case, to customary
exceptions to be agreed:
1. Preservation of corporate
existence.
2. Material compliance with laws
(including ERISA and applicable
environmental laws).
3. Payment of taxes.
4. Payment or performance of
obligations.
5. Delivery of audited and
unaudited financial statements
to be agreed, including
delivery by July 11, 2000 of
audited financial statements
for the fiscal year ended
February 26, 2000 and of
unaudited financial statements
for the fiscal quarter ending
May 27, 2000.
6. Other reporting requirements,
including with respect to the
Borrowing Base, and notices of
default and litigation.
7. Visitation rights, including
Collateral and Borrowing Base
reviews.
8. Maintenance of books and records.
9. Maintenance of properties.
10. Maintenance of insurance.
11. Use of proceeds.
12. Further assurances, including
future pledges of Specified
Assets to be owned and pledged
by Subsidiary Guarantors that
are "Unrestricted Subsidiaries"
under the Borrower's
indentures.
NEGATIVE COVENANTS: Usual for facilities and transactions
of this type and others to be reasonably
specified by the Agents (to be
applicable to the Borrower and the
Borrower's subsidiaries), including,
without limitation, subject in each
case to customary exceptions to be
agreed:
1. Limitations on liens. Security
interests with respect to
existing trade letters of
credit that continue after the
closing date will be permitted.
2. Limitations on incurrence of
debt (including obligations in
respect of foreign currency
exchange and other hedging
arrangements). Treatment of
existing trade letter of credit
arrangements will be as agreed
in the Operative Documents.
3. Limitations on dividends,
redemptions and repurchases
with respect to capital stock
and on loans and investments.
4. Limitations on prepayments,
redemptions and repurchases of
certain debt (other than loans
under the Senior Facility and
prepayments of the Exchange
Debt and the Agreement Debt
with proceeds of the
dispositions of the PCS
Companies, drugstore.com and
other first priority collateral
granted to the holders hereof).
5. Limitations on loans and
investments.
6. Limitations on capital
expenditures.
7. Limitations on mergers,
consolidations, acquisitions,
asset dispositions and
sale/leaseback transactions.
8. Limitations on transactions
with affiliates.
9. Limitations on changes in
business conducted by the
Borrower and its subsidiaries.
10. Limitations on amendment of
certain debt and other material
agreements.
11. Limitations on the issuance and
sale of capital stock of
subsidiaries.
12. Limitations on restrictions on
distributions from
subsidiaries.
13. Limitation on negative pledges
granted to other creditors.
SELECTED FINANCIAL
COVENANTS: Usual for facilities and
transactions of this type,
including, without limitation,
minimum EBITDA, a minimum interest
coverage ratio and a minimum fixed
charge coverage ratio.
EVENTS OF DEFAULT: Usual for facilities and
transactions of this type and others
to be reasonably specified by the
Agents, including, without
limitation:
1. Failure to pay principal,
interest or any other amount
when due.
2. Representations or warranties
materially incorrect when
given.
3. Failure to comply with
covenants (with notice and cure
periods as applicable).
4. Cross-default to payment
defaults on principal
aggregating $25,000,000, or
default or event of default if
the effect is to accelerate or
(with lapse of time, notice or
both) permit acceleration.
5. Unsatisfied judgment or order
in excess of $25,000,000
individually or of $25,000,000
in the aggregate.
6. Bankruptcy or insolvency.
7. ERISA events.
8. Change of control or ownership.
9. Actual invalidity, or
invalidity asserted by Rite Aid
or any of its subsidiaries, of
any loan document.
10. Invalidity, non-perfection or
loss of priority of any
material lien.
VOTING: Amendments and waivers of the loan
documents will require the approval
of Senior Lenders holding more than
50% of the aggregate amount of the
loans and commitments under the
Senior Facility, except that (a) the
consent of each affected Senior
Lender shall be required with
respect to, among other things, (i)
waiver of any condition precedent to
the initial borrowing, (ii)
increases in commitments of the
Senior Lenders, (iii) reductions of
principal, interest or fees, (iv)
extensions of final maturity and (v)
releases of all or any substantial
part of the Collateral (other than
in connection with any sale or
financing of Collateral permitted by
the loan documents) and (b) the
consent of Senior Lenders holding
more than 50% of each adversely
affected tranche of the Term
Facilities shall be required with
respect to any amendment that
changes the allocation between the
Term Facilities of any prepayments
of loans under the Term Facilities.
ASSIGNMENT AND PARTICIPATION: The Senior Lenders will have the
right to assign loans and
commitments to (i) their affiliates,
(ii) other Senior Lenders or (iii)
any Federal Reserve Bank, in each
case without restriction, or to
other financial institutions, with
the consent, not to be unreasonably
withheld, of the Agents and the
Borrower (but the Borrower's consent
shall not be required if an Event of
Default shall have occurred and be
continuing). Minimum aggregate
assignment level (except other
Senior Lenders) of $5,000,000 and
increments of $1,000,000 in excess
thereof. The parties to the
assignment (other than the Borrower)
shall pay to the Administrative
Agent an administrative fee of
$3,500.
Each Senior Lender will have the
right to sell participations in its
rights and obligations under the
loan documents, subject to customary
restrictions on the participants'
voting rights.
YIELD PROTECTION, TAXES
AND OTHER DEDUCTIONS: (1) The loan documents will contain
yield protection provisions,
customary for facilities of
this nature, protecting the
Senior Lenders in the event of
unavailability of funding,
funding losses, reserve and
capital adequacy requirements.
(2) All payments to be free and
clear of any present or future
taxes, withholdings or other
deductions whatsoever (other
than income taxes in the
jurisdiction of the Senior
Lender's applicable lending
office). The Senior Lenders
will use reasonable efforts to
minimize to the extent possible
any applicable taxes and the
Borrower will indemnify the
Senior Lenders and the Agents
for such taxes paid by the
Senior Lenders or the Agents.
EXPENSES: The Borrower will reimburse all
reasonable out-of- pocket expenses
(including, without limitation,
expenses incurred in connection with
due diligence, Collateral and
Borrowing Base appraisals and fees
and expenses of counsel) (a) of
Citi/SSB and SSBI incurred by them
in connection with the preparation,
syndication and execution of the
Senior Facility and the loan
documents and (b) of Citi/SSB, SSBI
and the Senior Lenders incurred by
them in connection with the waiver,
modification and enforcement of the
Senior Facility and the loan
documents. Such amounts shall be
reimbursed by the Borrower upon
presentation of a statement of
account, whether or not the Initial
Funding Date occurs or the loan
documents are executed and
delivered.
GOVERNING LAW AND FORUM: New York.
COUNSEL TO CITI/SSB AND SSBI: Cravath, Swaine & Moore.
ANNEX I
to Exhibit B
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
INTEREST RATES AND FEES
INTEREST RATES: The interest rates under the Senior
Facility are LIBOR plus a spread of
3.00% or Base Rate plus a spread of
2.00%.
The Borrower may choose LIBOR or
Base Rate pricing and may elect
interest periods of 7 days or 1, 1
1/2, 2, 3 or 6 months for LIBOR
borrowings, except that all swing
line loans will have Base Rate
pricing.
Calculation of interest shall be on
the basis of actual days elapsed in
a year of 360 days (or 365 or 366
days, as the case may be, in the
case of Base Rate loans).
Interest will be payable in arrears
(a) for loans accruing interest at a
rate based on LIBOR, at the end of
each interest period (but not less
frequently than every 3 months) and
on the maturity date, (b) for loans
accruing interest based on the Base
Rate, quarterly in arrears and on
the maturity date.
"Base Rate" means the highest of (a)
Citibank, N.A.'s base rate, (b) the
Federal Funds Effective Rate plus
1/2 of 1% and (c) the Base CD Rate
plus 1/2 of 1%.
LIBOR will at all times include
statutory reserves.
DEFAULT RATE: The applicable interest rate plus 2%
per annum.
COMMITMENT FEES: 0.5% per annum on the undrawn
portion of the commitments in
respect of the Senior Facility,
payable quarterly in arrears.
LETTER OF CREDIT FEE: A per annum fee equal to the spread
over LIBOR under the Revolving
Facility will accrue on the
aggregate face amount of outstanding
letters of credit under the
Revolving Facility, payable
quarterly in arrears and on the
termination of the Revolving
Facility, in each case for the
actual number of days elapsed over a
360-day year. Such fees shall be
distributed to the Senior Lenders
participating in the Revolving
Facility pro rata in accordance with
the amount of each such Senior
Lender's Revolving Facility
commitment. In addition, the
Borrower shall pay to the Issuing
Lender, for its own account, (a) a
fronting fee of 1/4 of 1% per annum
on the aggregate face amount of
outstanding letters of credit,
payable quarterly in arrears and on
the termination of the Revolving
Facility, in each case for the
actual number of days elapsed over a
360-day year, and (b) customary
issuance and administration fees.
CONFIDENTIAL EXHIBIT C
April 10, 2000
PROJECT SHIELD
$1,000,000,000 SENIOR SECURED CREDIT FACILITY
SUMMARY OF ADDITIONAL CONDITIONS PRECEDENT
All capitalized terms used herein but not defined herein shall have the
meanings provided in the Transaction Description and the Summary of
Principal Terms and Conditions relating to this Summary of Additional
Conditions Precedent.
The initial borrowing under the Senior Facility shall be subject to the
following additional conditions precedent:
1. CONSUMMATION OF DEBT MODIFICATION. The Debt Modification shall have been
consummated, and in connection therewith:
(a) The holders of the indebtedness under the Agreement Debt and
the Synthetic Leases shall have:
(i) Extended the maturity of such indebtedness to August 15,
2002, except that with respect to the Synthetic Leases, the
maturity date for each such Synthetic Lease shall be the
later of August 15, 2002 and the applicable maturity date
currently existing under such Synthetic Lease.
(ii) Modified certain existing covenants.
(iii) Agreed to a silent second priority security interest
in the Collateral.
(iv) Eliminated rights to additional collateral.
(b) Not less than 85% of the Existing Notes shall have been
exchanged, in an Exchange Offer, at par, for Exchange Notes
maturing on September 15, 2002 and having the same silent second
priority security interest in the Collateral as the Agreement Debt
and, other than maturity and interest rates, containing
substantially the same terms and provisions as the Existing Notes.
The terms and conditions of the Debt Modification, and all documentation
and agreements relating thereto, shall be reasonably satisfactory to the
Agents and the Senior Lenders.
2. SENIOR FACILITY DOCUMENTATION. The documentation for the Senior Facility
shall have been executed and delivered and shall be reasonably satisfactory
to each of the Agents and the Senior Lenders. The holders of the Second
Priority Indebtedness or their representatives shall have entered into, or
otherwise become subject to, intercreditor arrangements reasonably
satisfactory to the Agents and the Senior Lenders providing for the silent
second priority lien on the Collateral described under the heading
"Collateral" in the Summary of Principal Terms and Conditions.
3. COLLATERAL AND GUARANTEES. All Specified Assets of the Borrower and its
subsidiaries (other than foreign subsidiaries to the extent adverse tax
consequences would result and de minimis Specified Assets owned by the
Borrower) shall be owned by Subsidiary Guarantors and the Senior Lenders
shall have a first-priority perfected security interest in the Collateral.
Notwithstanding anything to the contrary, none of the assets of the
Borrower shall be pledged as Collateral. The Agents shall be reasonably
satisfied that all material Specified Assets acquired after the Funding
Date will be owned by Subsidiary Guarantors and subject to a first-priority
perfected security interest securing the Senior Facility obligations.
4. SECURITIZATION FACILITY. All outstanding uncollected receivables to be
collected by Rite Aid as collection agent under its accounts receivable
securitization facility (the "Securitization Facility") will be repurchased
by the sellers from the purchaser thereof, and the Securitization Facility
terminated, substantially simultaneously with the initial borrowing under
the Senior Facility.
5. CERTAIN FINANCIAL INFORMATION. The Agents and the Senior Lenders shall
have received certain financial information of the Borrower and its
subsidiaries as of a date or dates to be agreed upon, relating to
inventory, accounts receivable, certain owned real estate, funded debt
obligations and trade accounts payable (including the obligors thereof), in
each case with respect to the Borrower and its subsidiaries, together with
a certificate of the chief financial officer of the Borrower to the effect
that to such officer's knowledge such information accurately presents the
matters disclosed therein (subject to the limitations and qualifications
stated therein (which shall be reasonably satisfactory to the Agents) and
subject to adjustments to reflect the results of the Borrower's ongoing
audits), and the Agents and the Senior Lenders shall be satisfied that such
statements are not materially inconsistent with the forecasts and other
information previously provided to the Agents and the Senior Lenders.
6. BUSINESS PLAN. The Agents and the Senior Lenders shall have received a
three year business plan of the Borrower which shall be satisfactory in all
material respects to the Agents and the Senior Lenders.
7. BORROWING BASE; VALUATION AND APPRAISAL; FIELD EXAMINATION. The
Borrowing Base shall be sufficient to support the initial borrowings under
the Senior Facility. The Administrative Agent shall have received such
valuations and appraisals of the Borrowing Base by an independent appraisal
firm reasonably satisfactory to the Administrative Agent as the
Administrative Agent shall reasonably request. The Administrative Agent
shall have completed completion of a field examination of the Collateral,
the results of which shall be satisfactory to the Senior Lenders.
8. ENVIRONMENTAL AND EMPLOYEE HEALTH AND SAFETY. The Agents and the Senior
Lenders shall be reasonably satisfied as to the amount and nature of any
environmental liabilities and exposures relating to the properties to be
mortgaged, and any employee health and safety liabilities and exposures to
which the Borrower and its subsidiaries may be subject and with the plans
of the Borrower with respect thereto. The Agents and the Senior Lenders
shall have received Phase I desk audits relating to the properties to be
mortgages reasonably satisfactory to the Agents from an environmental
consulting firm satisfactory to Agents.
9. LITIGATION. There shall be (a) no development in any Current Litigation
after April 10, 2000, and (b) no litigation or administrative proceeding
that in case of either clause (a) or (b) could reasonably be expected to
have a material adverse effect on the business, financial position, results
of operations or prospects of the Borrower and its subsidiaries, taken as a
whole, or which in the Agents' judgment would affect the legality, validity
and enforceability of the loan documents (including without limitation, the
validity, enforceability or priority of security interests to be granted)
or would impair the Borrower's or its subsidiaries' ability to perform its
or their obligations under the loan documents. There shall be no
development in any Current Litigation after April 10, 2000, and there shall
be no litigation or administrative proceeding that, in the Senior Lenders'
sole judgment, could impair the validity, enforceability or priority of the
security interests to be granted in favor of the Senior Lenders under the
Operative Documents.
10. WORKING CAPITAL. The Agents shall be reasonably satisfied with the
sufficiency of amounts available under the Senior Facility to meet the
ongoing working capital requirements of the Borrower and its subsidiaries.
11. EXISTING MANAGEMENT. The Agents shall be satisfied with any proposed
changes in the management of the Borrower.
12. NO CONFLICTS. The consummation of the Transactions, including the
Senior Facility and the other transactions contemplated hereby, shall not
(a) violate any applicable law, statute, rule or regulation or (b) conflict
with, or result in a default or event of default or an acceleration of any
rights or benefits under, any material agreement of the Borrower or any of
its subsidiaries, and the Agents and the Senior Lenders shall have received
one or more legal opinions to such effect, satisfactory to the Agents, from
counsel to the Borrower satisfactory to the Agents.
13. CONSENTS. All requisite material governmental authorities and third
parties shall have approved or consented to the transactions contemplated
hereby to the extent required, all applicable appeal periods shall have
expired and there shall be no governmental or judicial action, actual or
threatened, that could reasonably be expected to restrain, prevent or
impose burdensome conditions on the transactions contemplated hereby.
14. MATERIAL ADVERSE CHANGE. Absence of any material adverse change in the
revenues, store operations, inventory, accounts receivable, business or
prospects of Rite Aid and its subsidiaries taken as a whole, or to Rite
Aid's knowledge, in any relationship with any vendor or third party
insurance payor of Rite Aid or any of its subsidiaries, taken as a whole,
since November 2, 1999, other than, in each case, as publicly disclosed
before April 10, 2000.
15. CONTRACTUAL RESTRICTIONS. The Senior Lenders' satisfaction that the
Borrower and its subsidiaries are not subject to material contractual or
other restrictions that would be violated by the contemplated transactions,
including the granting of security interests and guarantees by
subsidiaries.
16. TITLE SEARCHES. The Collateral Agent shall have received mortgage and
lien searches with respect to the real estate Collateral reasonably
satisfactory to the Agents.
17. MISCELLANEOUS CLOSING CONDITIONS. Other customary closing conditions,
including delivery of satisfactory legal opinions of the Borrower's and the
Agents' counsel, other financial information to be agreed; accuracy of
representations and warranties; absence of defaults, prepayment events or
creation of liens under debt instruments or other agreements as a result of
the transactions contemplated hereby; evidence of authority; compliance
with applicable laws and regulations (including but not limited to ERISA,
margin regulations and environmental laws); payment of fees and expenses;
and obtaining of satisfactory insurance.
FINAL
INVESTORS: MEDIA:
Doug Wilburne Karen Rugen
(717) 975-3710 (717) 730-7766
FOR IMMEDIATE RELEASE
RITE AID ANNOUNCES COMMITMENT
FOR NEW $1 BILLION SECURED CREDIT FACILITY
EXISTING LEAD BANKS SUPPORT TRANSACTION WHICH ALSO REQUIRES
MODIFICATIONS TO $3.3 BILLION OF EXISTING DEBT FACILITIES;
EXPECTED TO CLOSE DURING MAY 2000
J. P. MORGAN AGREES TO CONVERT $200 MILLION
OF EXISTING BANK DEBT INTO RITE AID COMMON STOCK
NEW MANAGEMENT SAYS FINANCING IS
"A CORNERSTONE OF OUR TURNAROUND PLAN"
CAMP HILL, PA., April 11, 2000--Rite Aid Corporation (NYSE, PSE:RAD) today
announced that it has received a fully underwritten commitment from
Citibank, N.A. to provide a new $1 billion senior secured credit facility.
The new facility, which is scheduled to close during May 2000 and which
will mature on August 1, 2002, is also being underwritten by Fleet Retail
Finance, Inc. and Heller Financial, Inc.
When completed, the new credit facility will provide Rite Aid with more
than $600 million in additional liquidity for general working capital
purposes, which the Company said would support the turnaround plan
developed by Rite Aid's new management team. The remainder of the facility
will be used to repay the Company's existing $300 million asset
securitization facility and to pay expenses associated with the planned
refinancing and debt modifications. Rite Aid said that after completion of
the planned transactions, the Company will have almost no debt maturing
prior to August 2002.
The closing of the facility is subject to customary financing conditions
and to the condition that the Company complete modifications to
approximately $3.3 billion of other existing indebtedness of Rite Aid,
including approximately $2.5 billion of indebtedness held by banks and
other financial institutions, $230 million of obligations under synthetic
leases, and $550 million of notes due in 2000 and 2001 (consisting of $200
million of 5.50% notes due 2000 and $350 million of 6.70% notes due 2001).
The new $1 billion senior secured credit facility will be secured by
inventory, accounts receivable, and certain other assets owned by Rite Aid
subsidiaries. The modified existing bank debt will continue to be secured
by the stock of PCS Health Systems, Inc. and drugstore.com. All of the
modified debt, including the modified existing bank debt and modified
notes, will be secured by a second lien on the collateral securing the new
$1 billion senior secured credit facility. Rite Aid said that the planned
transactions provide for the modified bank debt to mature on August 15,
2002 and the modified notes to mature on September 15, 2002. Rite Aid also
said that no modification of its remaining private or public debt was
required.
The Company said that one of its principal lenders, J. P. Morgan, has
agreed to convert $200 million of existing bank debt which it holds into
Rite Aid common stock at a price of $5.50 per share in connection with the
closing of the new facility. The financing transaction also contemplates
that up to approximately $85 million of additional outstanding bank debt
may be exchanged into Rite Aid common stock at $5.50 per share.
Bob Miller, who was named chairman and chief executive officer of Rite Aid
in December 1999, said, "When our new management team began work at the end
of last year, we made a commitment to improve this Company's performance as
quickly as possible. We now have had time to evaluate both the challenges
and the opportunities facing Rite Aid. The new financing commitment and
debt modifications that we are announcing today are a cornerstone of our
turnaround plan. We believe that these proposed transactions address, in
the most practical and balanced way possible, the interests of our
creditors, vendors and shareholders. We are excited about the commitment to
our business being made today by Citibank, Fleet and Heller and their
lending syndicate as well as the strong support expressed by the lead banks
in our existing credit facilities and other financing arrangements,
including J. P. Morgan, Citibank, Bank of America, The Chase Manhattan
Bank, and Bank One."
Miller emphasized that the proposed transactions benefit the Company and its
constituents by
o creating substantial additional liquidity for Rite Aid;
o extending the maturities of the Company's debt to, at the
earliest, August 2002, which provides time for management to
improve Rite Aid's operating and financial performance; and
o converting a minimum of $200 million and possible maximum of
up to approximately $285 million of the Company's debt into
equity.
"Our new credit facility and the related transactions announced today, when
completed, will provide us with the liquidity we need to support our
turnaround plan," Miller added.
Rite Aid said that the commitment letter, which will be filed on Form 8-K
with the Securities and Exchange Commission, and the closing of the new
facility are subject to various conditions including the completion of the
bank debt and note modifications discussed above, the execution of
appropriate documentation, the satisfactory completion of due diligence by
the bank agents, agreement concerning the final structure of the
transaction, and the absence of any material adverse change in the
revenues, store operations, inventory, accounts receivable, business or
prospects, including relationships with vendors and third party insurance
payors, of Rite Aid and its subsidiaries taken as a whole other than as
publicly disclosed as of April 11, 2000.
Rite Aid is one of the nation's leading drugstore chains with annual
revenues of approximately $14 billion and approximately 3,800 stores in 30
states and the District of Columbia. Rite Aid owns PCS Health Systems,
Inc., which provides pharmacy benefit management programs and services that
can help improve patient health and reduce health care costs. Rite Aid also
owns approximately 18 percent of drugstore.com, a leading online source for
health, beauty and pharmacy products. Information about Rite Aid, including
corporate background and press releases, can be found at the company's Web
site at http://www.riteaid.com.
This press release may contain forward-looking statements, which are
subject to certain risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in the forward-looking
statements. Factors that could cause actual results to differ materially
from those expressed or implied in such forward-looking statements include
the ability of the Company to satisfy the conditions and requirements of
financing commitments accepted by the Company including consummation of
various consent, amendment and exchange transactions involving
approximately $3.3 billion of existing debt of the Company as there can be
no assurances that the new facility will become available or that the
conditions and requirements of the financing commitments can be satisfied,
the preparation of restated historic financial statements, final audit
adjustments, completion of the SEC's review of the Company's financial
reporting and the impact of possible asset sales or other corporate
transactions which the Company is currently considering but the
consummation of which is not assured. Additional factors could include
competitive pricing pressures, third-party prescription reimbursement
levels, continued consolidation of the drugstore industry, consumer
preferences, regulatory changes governing pharmacy practices, general
economic conditions, inflation, merchandise supply constraints, interest
rate movements, access to capital, the development of the Internet market
for pharmaceuticals, availability of real estate, construction and start-up
of drugstore and distribution center facilities. Consequently, all of the
forward-looking statements made in this press release are qualified by
these and other factors, risks and uncertainties. Readers are also directed
to consider other risks and uncertainties discussed in documents filed by
the Company with the Securities and Exchange Commission.
