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
December 2, 1999
(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
AGREEMENTS WITH LENDERS
The company issued a press release on January 11, 2000 disclosing
certain agreements reached with its lenders under its credit facilities and
other financing arrangements. In December 1999, the company reached
agreements with its lenders to modify certain financial covenants in its
credit facilities and other financing arrangements, effective as of
December 2, 1999. The press release and agreements with lenders are
attached hereto as exhibits and incorporated herein by reference.
EMPLOYMENT AGREEMENTS
The company has entered into employment agreements, dated as of
December 5, 1999 (the "Agreements"), with Robert G. Miller, Mary F.
Sammons, David R. Jessick and John T. Standley (collectively, the
"Executives") to employ such persons as Chairman of the Board of Directors
and Chief Executive Officer, President and Chief Operating Officer, Senior
Executive Vice President and Chief Administrative Officer and Executive
Vice President and Chief Financial Officer, respectively. Pursuant to the
Agreements, the Executives were granted options to purchase shares of the
company's common stock (the "Common Stock") and shares of restricted Common
Stock. The agreements are attached hereto as exhibits and incorporated
herein by reference.
ITEM 7. EXHIBITS
4.1 Waiver dated as of January 11, 2000 to the Amended and Restated
Credit Agreement dated as of October 25, 1999 and amended as of December 2,
1999 among Rite Aid Corporation, the Banks party thereto and Morgan
Guaranty Trust Company of New York, as Agent.
4.2 Amendment dated as of December 2, 1999 to the Amended and Restated
Credit Agreement dated as of October 25, 1999 among Rite Aid Corporation,
the Banks party thereto and Morgan Guaranty Trust Company of New York, as
Agent.
4.3 Waiver dated as of January 11, 2000 to the Term Loan Agreement
dated as of October 25, 1999 among Rite Aid Corporation, the Banks party
thereto and Morgan Guaranty Trust Company of New York, as Administrative
Agent.
4.4 Amendment dated as of December 2, 1999 to the Term Loan Agreement
dated as of October 25, 1999 among Rite Aid Corporation, the Banks party
thereto and Morgan Guaranty Trust Company of New York, as Administrative
Agent.
4.5 Waiver dated as of January 11, 2000 to the Term Loan Agreement
dated as of October 27, 1999 among Rite Aid Corporation, the Banks party
thereto and Morgan Guaranty Trust Company of New York, as Administrative
Agent.
4.6 Term Loan Agreement dated as of October 27, 1999 among Rite Aid
Corporation, the Banks party thereto and Morgan Guaranty Trust Company of
New York, as Administrative Agent.
4.7 Waiver dated as of January 11, 2000 to Guaranty dated as of March
19, 1998, as amended by Amendment No. 1, dated as of June 22, 1998, and as
further amended by Amendment No. 2, dated as of October 25, 1999, and as
further amended by Amendment No. 3, dated as of December 2, 1999 between
Rite Aid Corporation and RAC Leasing LLC.
4.8 Amendment No. 3, dated as of December 23, 1999 to Master Lease and
Security Agreement, dated as of March 19, 1998, (as amended by Amendment
No. 1, dated as of June 22, 1998, and Amendment No. 2 dated as of October
25, 1999) between RAC Leasing LLC and Rite Aid Realty Corp.
4.9 Amendment No. 3 dated as of December 2, 1999 to Guaranty dated as
of March 19, 1998, as amended by Amendment No. 1, dated as of June 22,
1998, and as further amended by Amendment No. 2, dated as of October 25,
1999, from Rite Aid Corporation to RAC Leasing LLC.
4.10 Amendment No. 2 dated as of October 25, 1999 to Guaranty dated
March 19, 1998 (as amended by Amendment No. 1, dated as of June 22, 1998)
from Rite Aid Corporation to RAC Leasing LLC.
4.11 Amendment No. 1 dated as of June 22, 1998, to Guaranty dated
March 19, 1998, from Rite Aid Corporation to RAC Leasing LLC.
4.12 Amendment No. 2 dated as of October 25, 1999 to Master Lease and
Security Agreement, dated as of March 19, 1998 (as amended by Amendment No.
1, dated as of June 22, 1998) between RAC Leasing LLC and Rite Aid Realty
Corp.
4.13 Amendment No. 1 dated as of June 22, 1998 to Master Lease and
Security Agreement, dated as of March 19, 1998 between RAC Leasing LLC and
Rite Aid Realty Corp.
4.14 Guaranty, dated as of March 19, 1998, from Rite Aid Corporation
to RAC Leasing LLC.
4.15 Master Lease and Security Agreement, dated as of March 19, 1998,
between RAC Leasing LLC and Rite Aid Realty Corp.
4.16 Waiver dated as of January 11, 2000 to Guaranty dated as of
May 30, 1997, as amended by Amendment No. 1, dated as of October 25, 1999,
and as further amended by Amendment No. 2, dated as of December 2, 1999
between Rite Aid Corporation and Sumitomo Bank Leasing and Finance, Inc.
4.17 Amendment No. 2 dated as of December 2, 1999 to Guaranty dated as
of May 30, 1997, as amended by Amendment No. 1, dated as of October 25,
1999, from Rite Aid Corporation to Sumotomo Bank Leasing and Finance, Inc.
4.18 Amendment No. 1 dated as of October 25, 1999 to Guaranty dated as
of May 30, 1997 from Rite Aid Corporation to Sumotomo Bank Leasing and
Finance, Inc.
4.19 Amendment No. 4, dated as of October 25, 1999 to Master Lease and
Security Agreement, dated as of May 30, 1997, as amended by Amendment No.
1, dated as of March 11, 1998, and as further amended by Amendment No. 2,
dated as of June 22, 1998, and as further amended by Amendment No. 3, dated
as of May 26, 1999 between Sumitomo Bank Leasing and Finance, Inc. and Rite
Aid Realty Corp.
4.20 Amendment No. 3, dated as of May 26, 1999, to Master Lease and
Security Agreement, dated as of May 30, 1997, (as amended by Amendment No.
1, dated as of March 11, 1998, as further amended by Amendment No. 2, dated
as of June 22, 1998) between Sumitomo Bank Leasing and Finance, Inc. and
Rite Aid Realty Corp.
4.21 Amendment No. 2, dated as of June 22, 1998 to Master Lease and
Security Agreement, dated as of May 30, 1997, as amended by Amendment No. 1
to Master Lease and Security Agreement, dated as of March 11, 1998 between
Sumitomo Bank Leasing and Finance, Inc. and Rite Aid Realty Corp.
4.22 Amendment No. 1, dated as of March 11, 1998 to Master Lease and
Security Agreement, dated as of May 30, 1997 between Sumitomo Bank Leasing
and Finance, Inc. and Rite Aid Realty Corp.
4.23 Guaranty, dated as of May 30, 1997 from Rite Aid Corporation to
Sumotomo Bank Leasing and Finance, Inc.
4.24 Master Lease and Security Agreement, dated as of May 30, 1997,
between Sumitomo Bank Leasing and Finance, Inc. and Rite Aid Realty Corp.
4.25 Waiver No. 1 dated as of January 10, 2000 to Note Agreement dated
as of September 30, 1996 (as previously amended pursuant to Amendment No. 1
dated as of October 25, 1999 and Amendment No. 2 dated as of December 2,
1999) among Finco, Inc., Rite Aid Corporation, The Prudential Life
Insurance Company of America and PruCo Life Insurance Company and Waiver
No. 1 dated as of January 10, 2000 to Guaranty Agreement dated as of
September 30, 1996 (as previously amended pursuant to Amendment No. 1 dated
as of October 25, 1999 and Amendment No. 2 dated as of December 2, 1999)
among Finco, Inc., Rite Aid Corporation, The Prudential Life Insurance
Company of America and PruCo Life Insurance Company.
4.26 Amendment No. 2 dated as of December 2, 1999 to Note Agreement
dated as of September 30, 1996 (as previously amended pursuant to Amendment
No. 1 dated as of October 25, 1999) among Finco, Inc., Rite Aid
Corporation, The Prudential Insurance Company of America and PruCo Life
Insurance Company and Amendment No. 2 dated as of December 2, 1999 to
Guaranty Agreement dated as of September 30, 1996 (as previously amended
pursuant to Amendment No. 1 dated as of October 25, 1999) among Finco,
Inc., Rite Aid Corporation, The Prudential Insurance Company of America and
PruCo Life Insurance Company.
4.27 Amendment No. 1 dated as of October 25, 1999 to Note Agreement
dated as of September 30, 1996 among Finco, Inc., Rite Aid Corporation, The
Prudential Insurance Company of America and PruCo Life Insurance Company
and Amendment No. 1 dated as of October 25, 1999 to Guaranty Agreement
dated as of September 30, 1996 among Finco, Inc., Rite Aid Corporation, The
Prudential Insurance Company of America and PruCo Life Insurance Company.
4.28 Guaranty Agreement dated as of September 30, 1996 from Rite Aid
Corporation to The Prudential Insurance Company of America and PruCo Life
Insurance Company.
4.29 Note Agreement dated as of September 30, 1996 among Finco, Inc.,
The Prudential Insurance Company of America and PruCo Life Insurance
Company.
4.30 Amended and Restated Receivables Purchase Agreement dated as of
January 11, 2000 among Rite Aid Funding LLC and Corporate Asset Funding
Company, Inc. and Corporate Receivables Corporation and Citibank, N.A. and
Citicorp North American, Inc, as agent for the Investors and the Banks, and
Rite Aid Corporation, as Collection Agent.
4.31 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid Corporation
and Robert G. Miller.
4.32 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid Corporation
and Mary F. Sammons.
4.33 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid Corporation
and David R. Jessick.
4.34 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid Corporation
and John T. Standley.
10.1 Employment Agreement by and between Rite Aid Corporation and
Robert G. Miller, dated as of December 5, 1999.
10.2 Employment Agreement by and between Rite Aid Corporation and
Mary F. Sammons dated as of December 5, 1999.
10.3 Employment Agreement by and between Rite Aid Corporation and
David R. Jessick, dated as of December 5, 1999.
10.4 Employment Agreement by and between Rite Aid Corporation and
John T. Standley, dated as of December 5, 1999.
99.1 Press Release, dated January 11, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
RITE AID CORPORATION
Dated: January 14, 2000 By: /s/ Elliott S. Gerson
--------------------------------------
Name: Elliott S. Gerson
Title: Senior Executive Vice President
and General Counsel
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
4.1 Waiver dated as of January 11, 2000 to the Amended and
Restated Credit Agreement dated as of October 25, 1999 and
amended as of December 2, 1999 among Rite Aid Corporation, the
Banks party thereto and Morgan Guaranty Trust Company of New
York, as Agent.
4.2 Amendment dated as of December 2, 1999 to the Amended and
Restated Credit Agreement dated as of October 25, 1999 among
Rite Aid Corporation, the Banks party thereto and Morgan
Guaranty Trust Company of New York, as Agent.
4.3 Waiver dated as of January 11, 2000 to the Term Loan Agreement
dated as of October 25, 1999 among Rite Aid Corporation, the
Banks party thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent.
4.4 Amendment dated as of December 2, 1999 to the Term Loan
Agreement dated as of October 25, 1999 among Rite Aid
Corporation, the Banks party thereto and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
4.5 Waiver dated as of January 11, 2000 to the Term Loan Agreement
dated as of October 27, 1999 among Rite Aid Corporation, the
Banks party thereto and Morgan Guaranty Trust Company of New
York, as Administrative Agent.
4.6 Term Loan Agreement dated as of October 27, 1999 among Rite
Aid Corporation, the Banks party thereto and Morgan Guaranty
Trust Company of New York, as Administrative Agent.
4.7 Waiver dated as of January 11, 2000 to Guaranty dated as of
March 19, 1998, as amended by Amendment No. 1, dated as of
June 22, 1998, and as further amended by Amendment No. 2,
dated as of October 25, 1999, and as further amended by
Amendment No. 3, dated as of December 2, 1999 between Rite Aid
Corporation and RAC Leasing LLC.
4.8 Amendment No. 3, dated as of December 23, 1999 to Master Lease
and Security Agreement, dated as of March 19, 1998, (as
amended by Amendment No. 1, dated as of June 22, 1998, and
Amendment No. 2 dated as of October 25, 1999) between RAC
Leasing LLC and Rite Aid Realty Corp.
4.9 Amendment No. 3 dated as of December 2, 1999 to Guaranty dated
as of March 19, 1998, as amended by Amendment No. 1, dated as
of June 22, 1998, and as further amended by Amendment No. 2,
dated as of October 25, 1999, from Rite Aid Corporation to RAC
Leasing LLC.
4.10 Amendment No. 2 dated as of October 25, 1999 to Guaranty dated
March 19, 1998 (as amended by Amendment No. 1, dated as of
June 22, 1998) from Rite Aid Corporation to RAC Leasing LLC.
4.11 Amendment No. 1 dated as of June 22, 1998, to Guaranty dated
March 19, 1998, from Rite Aid Corporation to RAC Leasing LLC.
4.12 Amendment No. 2 dated as of October 25, 1999 to Master Lease
and Security Agreement, dated as of March 19, 1998 (as amended
by Amendment No. 1, dated as of June 22, 1998) between RAC
Leasing LLC and Rite Aid Realty Corp.
4.13 Amendment No. 1 dated as of June 22, 1998 to Master Lease and
Security Agreement, dated as of March 19, 1998 between RAC
Leasing LLC and Rite Aid Realty Corp.
4.14 Guaranty, dated as of March 19, 1998, from Rite Aid
Corporation to RAC Leasing LLC.
4.15 Master Lease and Security Agreement, dated as of March 19,
1998, between RAC Leasing LLC and Rite Aid Realty Corp.
4.16 Waiver dated as of January 11, 2000 to Guaranty dated as of
May 30, 1997, as amended by Amendment No. 1, dated as of
October 25, 1999, and as further amended by Amendment No. 2,
dated as of December 2, 1999 between Rite Aid Corporation and
Sumitomo Bank Leasing and Finance, Inc.
4.17 Amendment No. 2 dated as of December 2, 1999 to Guaranty dated
as of May 30, 1997, as amended by Amendment No. 1, dated as of
October 25, 1999, from Rite Aid Corporation to Sumotomo Bank
Leasing and Finance, Inc.
4.18 Amendment No. 1 dated as of October 25, 1999 to Guaranty dated
as of May 30, 1997 from Rite Aid Corporation to Sumotomo Bank
Leasing and Finance, Inc.
4.19 Amendment No. 4, dated as of October 25, 1999 to Master Lease
and Security Agreement, dated as of May 30, 1997, as amended
by Amendment No. 1, dated as of March 11, 1998, and as further
amended by Amendment No. 2, dated as of June 22, 1998, and as
further amended by Amendment No. 3, dated as of May 26, 1999
between Sumitomo Bank Leasing and Finance, Inc. and Rite Aid
Realty Corp.
4.20 Amendment No. 3, dated as of May 26, 1999, to Master Lease and
Security Agreement, dated as of May 30, 1997, (as amended by
Amendment No. 1, dated as of March 11, 1998, as further
amended by Amendment No. 2, dated as of June 22, 1998) between
Sumitomo Bank Leasing and Finance, Inc. and Rite Aid Realty Corp.
4.21 Amendment No. 2, dated as of June 22, 1998 to Master Lease and
Security Agreement, dated as of May 30, 1997, as amended by
Amendment No. 1 to Master Lease and Security Agreement, dated as
of March 11, 1998 between Sumitomo Bank Leasing and Finance, Inc.
and Rite Aid Realty Corp.
4.22 Amendment No. 1, dated as of March 11, 1998 to Master Lease and
Security Agreement, dated as of May 30, 1997 between Sumitomo
Bank Leasing and Finance, Inc. and Rite Aid Realty Corp.
4.23 Guaranty, dated as of May 30, 1997 from Rite Aid Corporation to
Sumotomo Bank Leasing and Finance, Inc.
4.24 Master Lease and Security Agreement, dated as of May 30, 1997,
between Sumitomo Bank Leasing and Finance, Inc. and Rite Aid
Realty Corp.
4.25 Waiver No. 1 dated as of January 10, 2000 to Note Agreement dated
as of September 30, 1996 (as previously amended pursuant to
Amendment No. 1 dated as of October 25, 1999 and Amendment No. 2
dated as of December 2, 1999) among Finco, Inc., Rite Aid
Corporation, The Prudential Life Insurance Company of America and
PruCo Life Insurance Company and Waiver No. 1 dated as of January
10, 2000 to Guaranty Agreement dated as of September 30, 1996 (as
previously amended pursuant to Amendment No. 1 dated as of
October 25, 1999 and Amendment No. 2 dated as of December 2,
1999) among Finco, Inc., Rite Aid Corporation, The Prudential
Life Insurance Company of America and PruCo Life Insurance
Company.
4.26 Amendment No. 2 dated as of December 2, 1999 to Note Agreement
dated as of September 30, 1996 (as previously amended pursuant to
Amendment No. 1 dated as of October 25, 1999) among Finco, Inc.,
Rite Aid Corporation, The Prudential Insurance Company of America
and PruCo Life Insurance Company and Amendment No. 2 dated as of
December 2, 1999 to Guaranty Agreement dated as of September 30,
1996 (as previously amended pursuant to Amendment No. 1 dated as
of October 25, 1999) among Finco, Inc., Rite Aid Corporation, The
Prudential Insurance Company of America and PruCo Life Insurance
Company.
4.27 Amendment No. 1 dated as of October 25, 1999 to Note Agreement
dated as of September 30, 1996 among Finco, Inc., Rite Aid
Corporation, The Prudential Insurance Company of America and
PruCo Life Insurance Company and Amendment No. 1 dated as of
October 25, 1999 to Guaranty Agreement dated as of September 30,
1996 among Finco, Inc., Rite Aid Corporation, The Prudential
Insurance Company of America and PruCo Life Insurance Company.
4.28 Guaranty Agreement dated as of September 30, 1996 from Rite Aid
Corporation to The Prudential Insurance Company of America and
PruCo Life Insurance Company.
4.29 Note Agreement dated as of September 30, 1996 among Finco, Inc.,
The Prudential Insurance Company of America and PruCo Life
Insurance Company.
4.30 Amended and Restated Receivables Purchase Agreement dated as of
January 11, 2000 among Rite Aid Funding LLC and Corporate Asset
Funding Company, Inc. and Corporate Receivables Corporation and
Citibank, N.A. and Citicorp North American, Inc, as agent for the
Investors and the Banks, and Rite Aid Corporation, as Collection
Agent.
4.31 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid
Corporation and Robert G. Miller.
4.32 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid
Corporation and Mary F. Sammons.
4.33 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid
Corporation and David R. Jessick.
4.34 Rite Aid Corporation Restricted Stock and Stock Option Award
Agreement, made as of December 5, 1999, by and between Rite Aid
Corporation and John T. Standley.
10.1 Employment Agreement by and between Rite Aid Corporation and
Robert G. Miller, dated as of December 5, 1999.
10.2 Employment Agreement by and between Rite Aid Corporation and Mary
F. Sammons dated as of December 5, 1999.
10.3 Employment Agreement by and between Rite Aid Corporation and
David R. Jessick, dated as of December 5, 1999.
10.4 Employment Agreement by and between Rite Aid Corporation and John
T. Standley, dated as of December 5, 1999.
99.1 Press Release, dated January 11, 2000.
Exhibit 4.1
EXECUTION COPY
WAIVER NO. 1 TO AMENDED AND
RESTATED CREDIT AGREEMENT
WAIVER dated as of January 11, 2000 to the Amended and Restated
Credit Agreement dated as of October 25, 1999 and amended as of December 2,
1999 (the "CREDIT AGREEMENT") among RITE AID CORPORATION (the "BORROWER"),
the BANKS party thereto (the "BANKS") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent (the "AGENT").
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. Defined Terms; References. (a) Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby"
and each other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement shall, after
this Waiver becomes effective, refer to the Credit Agreement as amended
hereby.
(b) The following additional term, as used herein, has the following
meaning:
"PUBLIC DEBT" means debt securities of the Borrower issued pursuant
to an indenture qualified under (or in form suitable for qualification
under) the Trust Indenture Act of 1939, as amended.
SECTION 2. Limited Waiver. At the request of the Borrower, the Banks
hereby waive (a) any Default under Section 5.01(a), Section 5.01(b),
Section 5.01(c) or Section 5.01(d) of the Credit Agreement, to the extent
that such Default would arise from failure of the Borrower to deliver to
the Banks the financial statements referred to in Section 5.01(a) or
Section 5.01(b) of the Credit Agreement and the related officer's
certificate and statement of the Borrower's independent accountants
referred to in Sections 5.01(c) and 5.01(d) of the Credit Agreement and (b)
any Default that would arise under Section 6.01(f) of the Credit Agreement
by reason of a default under any Public Debt as a result of the failure of
the Borrower to file or deliver financial statements or reports
substantially the same as those described in clause (a) above, such waivers
to be effective solely for the period commencing on January 11, 2000 and
ending on July 11, 2000; provided, however, that (i) the effectiveness of
this Waiver is subject to the satisfaction of the conditions specified in
Section 3 of this Waiver and (ii) the waiver set forth in clause (b) shall
terminate on the earlier of (x) July 11, 2000 or (y) the date that is 10
days prior to the earliest date on which any holder of Public Debt or any
trustee or other representative of any such holder shall have a present
right to accelerate the maturity thereof by reason of any such default
waived hereunder. This Waiver shall be limited precisely as written, and
shall not extend to any Default under any other provision of the Credit
Agreement or to any Default under Section 5.01(a), Section 5.01(b), Section
5.01(c) or Section 5.0(d) of the Credit Agreement during any other period
or to any other Default under Section 6.01(f) of the Credit Agreement.
SECTION 3. Conditions to Waiver. The waivers granted pursuant to
Section 2 above are subject to the conditions that:
(a) the Borrower shall deliver to each of the Banks the following
items on or prior to the dates specified below (or, in the reasonable
discretion of the Agent, no later than 5 days thereafter):
(i) a monthly forecast of cash receipts and disbursements,
commencing with February, 2000, no later than the first day of each
month in respect of such forecast ;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant to
clause (i) above, no later than the 25th day of the next succeeding
month;
(iii) a weekly sales report for each week, commencing with the
week ending January 8, 2000, no later than the 4th day following the
last day of the week in respect of which such sales report is to be
delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March 31,
2000; and
(v) a monthly reconciliation of actual operating results for each
month specified in the operating forecast delivered pursuant to
clause (iv) above to the budget for such month, no later than the
30th day of the next succeeding month; and
(b) the Borrower shall not directly or indirectly, make or agree to
make any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
SECTION 4. Governing Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Effectiveness. This Waiver shall become
effective on the date when the following conditions are met:
(a) the Agent shall have received from each of the Borrower
and the Required Banks a counterpart hereof signed by such party or
facsimile or other written confirmation (in form satisfactory to the
Agent) that such party has signed a counterpart hereof; and
(b) the Agent shall have received evidence satisfactory to it
that substantially identical waivers to any covenant requiring
delivery of financial statements or reports set forth in any other
agreement obligations under which are secured by the Collateral shall
have become or shall simultaneously become effective.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed as of the date first above written.
RITE AID CORPORATION
By: ____________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: ____________________________________
Name:
Title:
Exhibit 4.2
EXECUTION COPY
AMENDMENT NO. 1 TO AMENDED AND
RESTATED CREDIT AGREEMENT
AMENDMENT dated as of December 2, 1999 to the Amended and Restated
Credit Agreement dated as of October 25, 1999 (the "CREDIT AGREEMENT")
among RITE AID CORPORATION (the "BORROWER"), the BANKS party thereto (the
"BANKS") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT").
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each
other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Credit Agreement shall, after this
Amendment becomes effective, refer to the Credit Agreement as amended
hereby.
SECTION 2. Amendments to the Credit Agreement. (a) The following new
definition is added to Section 1.01 in its appropriate alphabetical
position:
"LIFO ADJUSTMENTS" means, for any period, the net adjustment to
costs of goods sold for such period required by the Borrower's LIFO
inventory method, determined in accordance with generally accepted
accounting principles.
(b) The following definitions in Section 1.01 are amended to read in
their entirety as follows:
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period, plus (a), to the extent deducted in
determining Consolidated Net Income for such period, the aggregate
amount of (i) Consolidated Interest Charges, (ii) provision for
income taxes, (iii) depreciation and amortization, (iv) LIFO
Adjustments, (v) store closing expenses and (vi) any other
nonrecurring charge to the extent such nonrecurring charge does not
involve any cash expenditure during such period, less (b), to the
extent not deducted in determining Consolidated Net Income for such
period, the aggregate amount of (i) any cash expenditure during such
period in connection with which a nonrecurring charge was taken in
any prior period and (ii) LIFO Adjustments.
"CONSOLIDATED NET INCOME" means, for any period, the net income
(or loss) of the Borrower and its Consolidated Subsidiaries
(exclusive of (a) extraordinary items of gain or loss, (b) any gain
or loss in connection with any sale of assets other than sales of
inventory in the ordinary course of business, but in the case of loss
only to the extent that such loss does not involve any cash
expenditure during such period and (c) the Borrower's share of the
net income (or loss) of drugstore.com), determined on a consolidated
basis for such period.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated
Subsidiaries determined as of such date; provided that such
consolidated stockholders' equity shall be adjusted to exclude the
effect of items which have been excluded from Consolidated Net Income
for any period commencing after August 28, 1999 by reason of the
parenthetical phrase contained in the definition of such term.
Consolidated Net Worth includes the Borrower's 8% Convertible
Pay-In-Kind Preferred Stock.
"CONSOLIDATED RENT" means, for any period, the consolidated
rental expense of the Borrower and its Consolidated Subsidiaries for
such period, and including in any event rental costs of closed stores
for such period whether or not reflected as an expense in the
determination of Consolidated Net Income for such period.
(c) The definition of October Special Charges in Section 1.01 and
Section 1.02(b) are deleted, and Section 1.02(a) is redesignated Section
1.02.
(d) Section 5.12 is amended to read in its entirety as follows:
SECTION 5.12 Capitalization Leverage Ratio. At no time shall
the ratio of (i) Consolidated Debt at such time to (ii) Total Capital
at such time, exceed 0.695; provided that upon any sale of the
capital stock of PCS, such maximum ratio shall be reset at the level
which produces the result that the amount of additional Debt that the
Borrower may incur within the limits of this ratio immediately after
giving effect to such sale and the repayment of any Debt required in
connection therewith is equal to the amount of additional Debt that
the Borrower could incur within the limits of this ratio immediately
before giving effect to such sale and the repayment of any Debt
required in connection therewith.
(e) Section 5.13 is amended to read in its entirety as follows:
SECTION 5.13. Limitation on Debt. The Borrower will not, and
will not permit any of its Subsidiaries to, incur or at any time be
liable with respect to any Debt except:
(a) Debt under this Agreement or the 1999 Facility;
(b) Debt outstanding on December 2, 1999;
(c) Debt incurred to refinance Debt referred to in clause
(a) or clause (b) above, provided that the amount thereof that
is at the time outstanding or committed is not increased and
the maturity thereof is not shortened; and
(d) Debt not permitted by clauses (a), (b) and (c) above
in an aggregate principal amount at any time outstanding not to
exceed $25,000,000.
(f) Section 5.14 is amended to read in its entirety as follows:
SECTION 5.14. Fixed Charge Coverage. At no time during any
period set forth below shall the Fixed Charge Coverage Ratio be less
than the ratio set forth below opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 2000 and 1.25
thereafter
SECTION 3. Representations of Borrower. The Borrower represents and
warrants that (i) the representations and warranties of the Borrower set
forth in Article 4 of the Credit Agreement will be true on and as of the
Amendment Effective Date and (ii) no Default will have occurred and be
continuing on such date.
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Effectiveness. This Amendment shall become effective on
the date (not later than December 9, 1999) when the following conditions
are met (the "AMENDMENT EFFECTIVE DATE"):
(a) the Agent shall have received from each of the Borrower and the
Required Banks a counterpart hereof signed by such party or facsimile
or other written confirmation (in form satisfactory to the
Agent) that such party has signed a counterpart hereof;
(b) the Agent shall have received (i) an amendment fee for the account
of each Bank from which a signed counterpart hereof (or other written
confirmation) shall have been received by the Agent not later than
the later of (x) the date on which the other conditions set forth in
this Section 6 have been satisfied and (y) the date hereof, in an
amount equal to 0.25% of such Bank's Commitment and (ii) payment of
all expenses then payable pursuant to Section 9.03 of the Credit
Agreement;
(c) the Agent shall have received evidence satisfactory to it that (i)
the incoming officers of the Borrower previously identified to the
Agent as such shall have accepted employment with the Borrower on
mutually satisfactory terms and (ii) the Borrower shall have made a
public announcement that such incoming officers have accepted such
employment; and
(d) the Agent shall have received evidence satisfactory to it that
substantially identical amendments to the covenants set forth in any
other agreement with substantially identical covenants as those set
forth in the Credit Agreement and to which the Borrower or any of its
Subsidiaries is a party shall have become or shall simultaneously
become effective.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
RITE AID CORPORATION
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: __________________________________
Name:
Title:
Exhibit 4.3
EXECUTION COPY
WAIVER NO. 1 TO TERM LOAN AGREEMENT
WAIVER dated as of January 10, 2000 to the Term Loan Agreement dated
as of October 25, 1999 (the "CREDIT AGREEMENT") among RITE AID CORPORATION
(the "BORROWER"), the BANKS party thereto (the "BANKS") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent (the "ADMINISTRATIVE
AGENT").
W I T N E S S E T H :
The parties hereto agree as follows:
Section 1. Defined Terms; References. (a) Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby"
and each other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement shall, after
this Waiver becomes effective, refer to the Credit Agreement as amended
hereby.
(b) The following additional term, as used herein, has the following
meaning:
"PUBLIC DEBT" means debt securities of the Borrower issued pursuant to
an indenture qualified under (or in form suitable for qualification under)
the Trust Indenture Act of 1939, as amended.
Section 2. Limited Waiver. At the request of the Borrower, the Banks
hereby waive (a) any Default under Section 5.01(a), Section 5.01(b),
Section 5.01(c) or Section 5.01(d) of the Credit Agreement, to the extent
that such Default would arise from failure of the Borrower to deliver to
the Banks the financial statements referred to in Section 5.01(a) or
Section 5.01(b) of the Credit Agreement and the related officer's
certificate and statement of the Borrower's independent accountants
referred to in Sections 5.01(c) and 5.01(d) of the Credit Agreement and (b)
any Default that would arise under Section 6.01(f) of the Credit Agreement
by reason of a default under any Public Debt as a result of the failure of
the Borrower to file or deliver financial statements or reports
substantially the same as those described in clause (a) above, such waivers
to be effective solely for the period commencing on January 11, 2000 and
ending on July 11, 2000; provided, however, that (i) the effectiveness of
this Waiver is subject to the satisfaction of the conditions specified in
Section 3 of this Waiver and (ii) the waiver set forth in clause (b) shall
terminate on the earlier of (x) July 11, 2000 or (y) the date that is 10
days prior to the earliest date on which any holder of Public Debt or any
trustee or other representative of any such holder shall have a present
right to accelerate the maturity thereof by reason of any such default
waived hereunder. This Waiver shall be limited precisely as written, and
shall not extend to any Default under any other provision of the Credit
Agreement or to any Default under Section 5.01(a), Section 5.01(b), Section
5.01(c) or Section 5.0(d) of the Credit Agreement during any other period
or to any other Default under Section 6.01(f) of the Credit Agreement.
Section 3. Conditions to Waiver. The waivers granted pursuant to
Section 2 above are subject to the conditions that:
(a) the Borrower shall deliver to each of the Banks the following
items on or prior to the dates specified below (or, in the reasonable
discretion of the Administrative Agent, no later than 5 days thereafter):
(i) a monthly forecast of cash receipts and disbursements,
commencing with February, 2000, no later than the first day of each
month in respect of such forecast;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant to
clause (i) above, no later than the 25th day of the next succeeding
month;
(iii) a weekly sales report for each week, commencing with the week
ending January 8, 2000, no later than the 4th day following the last
day of the week in respect of which such sales report is to be
delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March 31,
2000; and
(v) a monthly reconciliation of actual operating results for each
month specified in the operating forecast delivered pursuant to clause
(iv) above to the budget for such month, no later than the 30th day of
the next succeeding month; and
(b) the Borrower shall not directly or indirectly, make or agree to
make any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
Section 4. Governing Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5. Counterparts. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
Section 6. Effectiveness. This Waiver shall become effective on the
date when the following conditions are met:
(a) the Administrative Agent shall have received from each of the
Borrower and the Required Banks a counterpart hereof signed by such
party or facsimile or other written confirmation (in form satisfactory
to the Administrative Agent) that such party has signed a counterpart
hereof; and
(b) the Administrative Agent shall have received evidence
satisfactory to it that substantially identical waivers to any
covenant requiring delivery of financial statements or reports set
forth in any other agreement obligations under which are secured by
the Collateral shall have become or shall simultaneously become
effective.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed as of the date first above written.
RITE AID CORPORATION
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: __________________________________
Name:
Title:
Exhibit 4.4
EXECUTION COPY
AMENDMENT NO. 1 TO TERM LOAN AGREEMENT
AMENDMENT dated as of December 2, 1999 to the Term Loan Agreement
dated as of October 25, 1999 (the "CREDIT AGREEMENT") among RITE AID
CORPORATION (the "BORROWER"), the BANKS party thereto (the "BANKS") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each
other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Credit Agreement shall, after this
Amendment becomes effective, refer to the Credit Agreement as amended
hereby.
SECTION 2. Amendments to the Credit Agreement. (a) The following new
definition is added to Section 1.01 in its appropriate alphabetical
position:
"LIFO ADJUSTMENTS" means, for any period, the net adjustment to
costs of goods sold for such period required by the Borrower's LIFO
inventory method, determined in accordance with generally accepted
accounting principles.
(b) The following definitions in Section 1.01 are amended to read in
their entirety as follows:
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period, plus (a), to the extent deducted in
determining Consolidated Net Income for such period, the aggregate
amount of (i) Consolidated Interest Charges, (ii) provision for
income taxes, (iii) depreciation and amortization, (iv) LIFO
Adjustments, (v) store closing expenses and (vi) any other
nonrecurring charge to the extent such nonrecurring charge does not
involve any cash expenditure during such period, less (b), to the
extent not deducted in determining Consolidated Net Income for such
period, the aggregate amount of (i) any cash expenditure during such
period in connection with which a nonrecurring charge was taken in
any prior period and (ii) LIFO Adjustments.
"CONSOLIDATED NET INCOME" means, for any period, the net income
(or loss) of the Borrower and its Consolidated Subsidiaries
(exclusive of (a) extraordinary items of gain or loss, (b) any gain
or loss in connection with any sale of assets other than sales of
inventory in the ordinary course of business, but in the case of loss
only to the extent that such loss does not involve any cash
expenditure during such period and (c) the Borrower's share of the
net income (or loss) of drugstore.com), determined on a consolidated
basis for such period.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated
Subsidiaries determined as of such date; provided that such
consolidated stockholders' equity shall be adjusted to exclude the
effect of items which have been excluded from Consolidated Net Income
for any period commencing after August 28, 1999 by reason of the
parenthetical phrase contained in the definition of such term.
Consolidated Net Worth includes the Borrower's 8% Convertible
Pay-In-Kind Preferred Stock.
"CONSOLIDATED RENT" means, for any period, the consolidated
rental expense of the Borrower and its Consolidated Subsidiaries for
such period, and including in any event rental costs of closed stores
for such period whether or not reflected as an expense in the
determination of Consolidated Net Income for such period.
(c) The definition of October Special Charges in Section 1.01 and
Section 1.02(b) are deleted, and Section 1.02(a) is redesignated Section
1.02.
(d) Section 5.12 is amended to read in its entirety as follows:
SECTION 5.12 Capitalization Leverage Ratio. At no time shall
the ratio of (i) Consolidated Debt at such time to (ii) Total Capital
at such time, exceed 0.695; provided that upon any sale of the
capital stock of PCS, such maximum ratio shall be reset at the level
which produces the result that the amount of additional Debt that the
Borrower may incur within the limits of this ratio immediately after
giving effect to such sale and the repayment of any Debt required in
connection therewith is equal to the amount of additional Debt that
the Borrower could incur within the limits of this ratio immediately
before giving effect to such sale and the repayment of any Debt
required in connection therewith.
(e) Section 5.13 is amended to read in its entirety as follows:
SECTION 5.13. Limitation on Debt. The Borrower will not, and
will not permit any of its Subsidiaries to, incur or at any time be
liable with respect to any Debt except:
(a) Debt under this Agreement or the Pro Rata
Credit Agreement;
(b) Debt outstanding on December 2, 1999;
(c) Debt incurred to refinance Debt referred to in clause
(a) or clause (b) above, provided that the amount thereof that
is at the time outstanding or committed is not increased and
the maturity thereof is not shortened; and
(d) Debt not permitted by clauses (a), (b) and (c) above
in an aggregate principal amount at any time outstanding not to
exceed $25,000,000.
(f) Section 5.14 is amended to read in its entirety as follows:
SECTION 5.14. Fixed Charge Coverage. At no time during any
period set forth below shall the Fixed Charge Coverage Ratio be less
than the ratio set forth below opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 2000 and 1.25
thereafter
SECTION 3. Representations of Borrower. The Borrower represents and
warrants that (i) the representations and warranties of the Borrower set
forth in Article 4 of the Credit Agreement will be true on and as of the
Amendment Effective Date and (ii) no Default will have occurred and be
continuing on such date.
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Effectiveness. This Amendment shall become effective on
the date (not later than December 9, 1999) when the following conditions
are met (the "AMENDMENT EFFECTIVE DATE"):
(a) the Administrative Agent shall have received from each of the
Borrower and the Required Banks a counterpart hereof signed by such
party or facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that such party has signed
a counterpart hereof;
(b) the Administrative Agent shall have received (i) an amendment fee
for the account of each Bank from which a signed counterpart hereof
(or other written confirmation) shall have been received by the
Administrative Agent not later than the later of (x) the date on
which the other conditions set forth in this Section 6 have been
satisfied and (y) the date hereof, in an amount equal to 0.25% of
such Bank's outstanding Loans and (ii) payment of all expenses then
payable pursuant to Section 9.03 of the Credit Agreement;
(c) the Administrative Agent shall have received evidence satisfactory
to it that (i) the incoming officers of the Borrower previously
identified to the Administrative Agent as such shall have accepted
employment with the Borrower on mutually satisfactory terms and (ii)
the Borrower shall have made a public announcement that such incoming
officers have accepted such employment; and
(d) the Administrative Agent shall have received evidence satisfactory
to it that substantially identical amendments to the covenants set
forth in any other agreement with substantially identical covenants
as those set forth in the Credit Agreement and to which the Borrower
or any of its Subsidiaries is a party shall have become or shall
simultaneously become effective.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
RITE AID CORPORATION
By: __________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: __________________________________
Name:
Title:
EXECUTION COPY
WAIVER NO. 1 TO
TERM LOAN AGREEMENT
WAIVER dated as of January 11, 2000 to the Term Loan Agreement dated
as of October 27, 1999 (the "CREDIT AGREEMENT") among RITE AID CORPORATION
(the "BORROWER"), the BANKS party thereto (the "Banks") and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Administrative Agent (the "ADMINISTRATIVE
AGENT").
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. Defined Terms; References. (a) Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby"
and each other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement shall, after
this Waiver becomes effective, refer to the Credit Agreement as amended
hereby.
(b) The following additional term, as used herein, has the
following meaning:
"PUBLIC DEBT" means debt securities of the Borrower issued pursuant
to an indenture qualified under (or in form suitable for qualification
under) the Trust Indenture Act of 1939, as amended.
SECTION 2. Limited Waiver. At the request of the Borrower, the Banks
hereby waive (a) any Default under Section 5.01(a), Section 5.01(b),
Section 5.01(c) or Section 5.01(d) of the Credit Agreement, to the extent
that such Default would arise from failure of the Borrower to deliver to
the Banks the financial statements referred to in Section 5.01(a) or
Section 5.01(b) of the Credit Agreement and the related officer's
certificate and statement of the Borrower's independent accountants
referred to in Sections 5.01(c) and 5.01(d) of the Credit Agreement and (b)
any Default that would arise under Section 6.01(f) of the Credit Agreement
by reason of a default under any Public Debt as a result of the failure of
the Borrower to file or deliver financial statements or reports
substantially the same as those described in clause (a) above, such waivers
to be effective solely for the period commencing on January 11, 2000 and
ending on July 11, 2000; provided, however, that (i) the effectiveness of
this Waiver is subject to the satisfaction of the conditions specified in
Section 3 of this Waiver and (ii) the waiver set forth in clause (b) shall
terminate on the earlier of (x) July 11, 2000 or (y) the date that is 10
days prior to the earliest date on which any holder of Public Debt or any
trustee or other representative of any such holder shall have a present
right to accelerate the maturity thereof by reason of any such default
waived hereunder. This Waiver shall be limited precisely as written, and
shall not extend to any Default under any other provision of the Credit
Agreement or to any Default under Section 5.01(a), Section 5.01(b), Section
5.01(c) or Section 5.0(d) of the Credit Agreement during any other period
or to any other Default under Section 6.01(f) of the Credit Agreement.
SECTION 3. Conditions to Waiver. The waivers granted pursuant to
Section 2 above are subject to the conditions that:
(a) the Borrower shall deliver to each of the Banks the following
items on or prior to the dates specified below (or, in the reasonable
discretion of the Administrative Agent, no later than 5 days thereafter):
(i) a monthly forecast of cash receipts and disbursements,
commencing with February, 2000, no later than the first day of each
month in respect of such forecast ;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant to
clause (i) above, no later than the 25th day of the next succeeding
month;
(iii) a weekly sales report for each week, commencing with the
week ending January 8, 2000, no later than the 4th day following the
last day of the week in respect of which such sales report is to be
delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March 31,
2000; and
(v) a monthly reconciliation of actual operating results for each
month specified in the operating forecast delivered pursuant to
clause (iv) above to the budget for such month, no later than the
30th day of the next succeeding month; and
(b) the Borrower shall not directly or indirectly, make or agree to
make any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
SECTION 4. Governing Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Effectiveness. This Waiver shall become effective on the
date when the following conditions are met:
(a) the Administrative Agent shall have received from each of
the Borrower and the Required Banks a counterpart hereof signed by
such party or facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that such party has signed
a counterpart hereof; and
(b) the Administrative Agent shall have received evidence
satisfactory to it that substantially identical waivers to any
covenant requiring delivery of financial statements or reports set
forth in any other agreement obligations under which are secured by
the Collateral shall have become or shall simultaneously become
effective.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed as of the date first above written.
RITE AID CORPORATION
By: __________________________________
Name:
Title:
J.P. MORGAN VENTURES
CORPORATION
By: __________________________________
Name:
Title:
Exhibit 4.6
$300,000,000
TERM LOAN AGREEMENT
dated as of
October 27, 1999
among
Rite Aid Corporation,
The Banks from time to time
parties hereto
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
------------------------------------
JP Morgan Securities Inc.,
Lead Arranger and Book Runner
TABLE OF CONTENTS 1
---------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.......................................1
SECTION 1.02. Accounting Terms and Determinations..............16
SECTION 1.03. Other Definitional Provisions....................16
ARTICLE 2
THE CREDITS
SECTION 2.01. Initial Outstandings.............................17
SECTION 2.02. Notes............................................17
SECTION 2.03. Maturity of Loans................................18
SECTION 2.04. Interest Rates...................................18
SECTION 2.05. Method of Electing Interest Rates................19
SECTION 2.06. Reduction Events; Mandatory Prepayments..........21
SECTION 2.07. Optional Prepayments.............................22
SECTION 2.08. General Provisions as to Payments................23
SECTION 2.09. Funding Losses...................................24
SECTION 2.10. Computation of Interest..........................24
SECTION 2.11. Regulation D Compensation........................24
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness....................................25
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power....................26
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention....................................26
SECTION 4.03. Binding Effect...................................26
SECTION 4.04. Financial Information............................26
SECTION 4.05. Full Disclosure..................................27
SECTION 4.06. Litigation.......................................27
SECTION 4.07. Compliance with ERISA............................28
SECTION 4.08. Taxes............................................28
SECTION 4.09. Subsidiaries.....................................28
SECTION 4.10. Environmental Matters............................28
SECTION 4.11. Year 2000 Compliance.............................29
SECTION 4.12. Pledge Agreements................................29
ARTICLE 5
COVENANTS
SECTION 5.01. Information......................................29
SECTION 5.02. Payment of Obligations...........................32
SECTION 5.03. Maintenance of Property; Insurance...............32
SECTION 5.04. Conduct of Business and Maintenance of Existence.32
SECTION 5.05. Compliance with Laws.............................33
SECTION 5.06. Inspection of Property, Books and Records........33
SECTION 5.07. Restriction on Other Agreements..................33
SECTION 5.08. Restriction on Debt of Subsidiaries..............33
SECTION 5.09. Restriction on Sales with Leases Back............34
SECTION 5.10. Restriction on Liens.............................34
SECTION 5.11. Capital Expenditures.............................36
SECTION 5.12. Capitalization Leverage Ratio....................36
SECTION 5.13. Limitation on Debt...............................36
SECTION 5.14. Fixed Charge Coverage............................36
SECTION 5.15. Limitation on Investments and Acquisitions.......37
SECTION 5.16. Consolidations, Mergers and Sales of Assets......38
SECTION 5.17. Use of Proceeds..................................38
SECTION 5.18. Restricted Payments..............................38
SECTION 5.19. Synthetic Leases.................................38
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default................................38
SECTION 6.02. Notice of Default................................41
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authorization....................41
SECTION 7.02. Administrative Agent and Affiliates..............41
SECTION 7.03. Action by Administrative Agent...................41
SECTION 7.04. Consultation with Experts........................41
SECTION 7.05. Liability of Administrative Agent................42
SECTION 7.06. Indemnification..................................42
SECTION 7.07. Credit Decision..................................42
SECTION 7.08. Successor Administrative Agent...................42
SECTION 7.09. Administrative Agent's Fees......................43
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair........................................43
SECTION 8.02. Illegality.......................................44
SECTION 8.03. Increased Cost and Reduced Return................44
SECTION 8.04. Taxes............................................46
SECTION 8.05. Base Rate Loans Substituted for Affected
Euro-Dollar Loans................................47
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices..........................................48
SECTION 9.02. No Waivers.......................................48
SECTION 9.03. Expenses; Indemnification........................49
SECTION 9.04. Sharing of Set-Offs..............................49
SECTION 9.05. Amendments and Waivers...........................50
SECTION 9.06. Successors and Assigns...........................50
SECTION 9.07. Governing Law; Submission to Jurisdiction........52
SECTION 9.08. Counterparts.....................................52
SECTION 9.09. WAIVER OF JURY TRIAL.............................52
Pricing Schedule
Exhibit A -Note
Exhibit B -Assignment and Assumption Agreement
TERM LOAN AGREEMENT
AGREEMENT dated as of October 27, 1999 among RITE AID CORPORATION,
the BANKS from time to time parties hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent.
RECITALS:
A. The Borrower (as this and other capitalized terms used in these
recitals but not defined in these recitals are defined in Section 1.01
below) is indebted to Morgan in the principal amount of $300,000,000, which
indebtedness is evidenced by the Borrower's Demand Promissory Note dated
June 16, 1999 (the "ORIGINAL DEMAND NOTE"), certain of the terms of which
were modified pursuant to a letter agreement dated October 25, 1999 between
the Borrower and Morgan (the "LETTER AGREEMENT", and the Original Demand
Note, as modified by the Letter Agreement, the "DEMAND NOTE").
B. Pursuant to the Letter Agreement, the Borrower has agreed to enter
into this Agreement so as to, among other things, facilitate assignments of
the indebtedness evidenced by the Demand Note;
C. The parties intend that, on and after the Effective Date, the
Demand Note shall be superseded by the terms of this Agreement and the
Notes issued hereunder, and that the indebtedness evidenced and governed by
the Demand Note shall on and after the Effective Date be evidenced and
governed by this Agreement and the Notes.
Therefore, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks under the Loan Documents, and
its successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative
Agent and submitted to the Administrative Agent (with a copy to the
Borrower) duly completed by such Bank.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"ASSET SALE" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by the
Borrower or any of its Subsidiaries of any asset, but excluding (i) any
sale, lease or other disposition by PCS or any of its Subsidiaries, (ii)
the sale or other disposition of capital stock of PCS (or of any non-cash
proceeds thereof), (iii) dispositions of inventory, cash, cash equivalents
and other cash management investments and obsolete, unused or unnecessary
equipment, in each case in the ordinary course of business, (iv)
dispositions to the Borrower or a Wholly-Owned Consolidated Subsidiary, (v)
any Sale and Leaseback Transaction and (vi) sales of accounts receivable
pursuant to the Rite Aid Funding LLC receivables securitization facility in
existence on the date hereof, or any successor receivables securitization
facility, if and to the extent that the amount of financing available
thereunder is not increased above that available on the date hereof.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"ATTRIBUTABLE DEBT" means, as to any particular Sale and Leaseback
Transaction under which the Borrower or any Subsidiary is at the time
liable, at any date as of which the amount thereof is to be determined (i)
in the case of any such transaction involving a Capital Lease, the amount
on such date of the Capital Lease Obligation thereunder, or (ii) in the
case of any other Sale and Leaseback Transaction, the then present value of
the minimum rental obligations under such Sale and Leaseback Transaction
during the remaining term thereof (after giving effect to any extensions at
the option of the lessor) computed by discounting the respective rental
payments at the actual interest factor included in such payments or, if
such interest factor cannot be readily determined, at the rate of 14% per
annum. The amount of any rental payment required to be made under any such
Sale and Leaseback Transaction not involving a Capital Lease may exclude
amounts required to be paid by the lessee on account of maintenance and
repairs, insurance, taxes, assessments, utilities, operating and labor
costs and similar charges.
"BANK" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means a Loan that bears interest at a rate per
annum, based on the Base Rate pursuant to the Notice of Borrowing, a Notice
of Interest Rate Election, the last sentence of Section 2.05(a) or Article 8.
"BASE RATE MARGIN" has the meaning specified in the Pricing
Schedule.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWER" means Rite Aid Corporation, a Delaware
corporation, and its successors.
"BORROWER'S 1999 FORM 10-K" means the Borrower's annual report on
Form 10-K for the fiscal year ended February 27, 1999, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended.
"BUSINESS ACQUISITION" means (i) an Investment by the Borrower or any
of its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such
Person shall become a Subsidiary or shall be merged into or consolidated
with the Borrower or any of its Subsidiaries or (ii) an acquisition by the
Borrower or any of its Subsidiaries of the property and assets of any
Person (other than the Borrower or any of its Subsidiaries) that constitute
substantially all the assets of such Person or any division or other
business unit of such Person.
"CAPITAL LEASE" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's balance sheet; and "CAPITAL LEASE OBLIGATION" means the amount of
the liability so capitalized in respect of a Capital Lease.
"CAPITAL MARKETS TRANSACTION" means the receipt by the Borrower or a
Subsidiary of proceeds of (a) an issuance in the public or private capital
markets of long-term debt securities, of equity securities or of
equity-linked (e.g., trust preferred) securities (other than the LPG
Transaction), (b) a Sale and Leaseback Transaction (other than a Sale and
Leaseback Transaction (i) between the Borrower and a Wholly-Owned
Consolidated Subsidiary or between Wholly- Owned Consolidated Subsidiaries
or (ii) entered into in respect of property acquired by the Borrower or a
Subsidiary if such Sale and Leaseback Transaction is entered into within 24
months from the date of such acquisition) or (c) bank borrowings under
facilities entered into after the date hereof, to the extent the aggregate
incremental financing available thereunder exceeds $200,000,000.
"COLLATERAL" means collateral subject to the Collateral
Documents.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, any additional
pledge agreements required to be delivered pursuant to the Loan Documents
and any other instruments or agreements executed pursuant to the
foregoing.
"COMMITMENT SCHEDULE" means the Schedule attached hereto
identified as such.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of expenditures by the Borrower and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction permitted by Section 5.09.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income
for such period, plus (a), to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of (i)
Consolidated Interest Charges, (ii) provision for income taxes, (iii)
depreciation and amortization, (iv) LIFO Adjustments, (v) store closing
expenses and (vi) any other nonrecurring charge to the extent such
nonrecurring charge does not involve any cash expenditure during such
period, less (b), to the extent not deducted in determining Consolidated
Net Income for such period, the aggregate amount of (i) any cash
expenditure during such period in connection with which a nonrecurring
charge was taken in any prior period and (ii) LIFO Adjustments.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the aggregate
amount of interest charges, whether expensed or capitalized, incurred or
accrued by the Borrower and its Consolidated Subsidiaries during such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries (exclusive of (a)
extraordinary items of gain or loss, (b) any gain or loss in connection
with any sale of assets other than sales of inventory in the ordinary
course of business, but in the case of loss only to the extent that such
loss does not involve any cash expenditure during such period and (c) the
Borrower's share of the net income (or loss) of drugstore.com), determined
on a consolidated basis for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
(less applicable reserves and other properly deductible items) which under
generally accepted accounting principles would be included on a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries after deducting therefrom (i) all liabilities and liability
items, including amounts in respect of obligations or guarantees of
obligations under leases, which under generally accepted accounting
principles would be included on such balance sheet, except Funded Debt,
capital stock and surplus, surplus reserves and provisions for deferred
income taxes, and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included
on such consolidated balance sheet.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date; provided that such consolidated stockholders'
equity shall be adjusted to exclude the effect of items which have been
excluded from Consolidated Net Income for any period commencing after
August 28, 1999 by reason of the parenthetical phrase contained in the
definition of such term. Consolidated Net Worth includes the Borrower's 8%
Convertible Pay-In-Kind Preferred Stock.
"CONSOLIDATED RENT" means, for any period, the consolidated rental
expense of the Borrower and its Consolidated Subsidiaries for such period,
and including in any event rental costs of closed stores for such period
whether or not reflected as an expense in the determination of Consolidated
Net Income for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"CREDIT EXPOSURE" means, with respect to any Bank, the aggregate
outstanding principal amount of such Bank's Loans.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles,
(v) all non-contingent obligations (and, for purposes of Section 5.10 and
the definitions of Material Debt and Material Financial Obligations, all
contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and
(vii) all Debt of others Guaranteed by such Person.
"DEMAND NOTE" has the meaning set forth in the recitals hereto.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including
any option with respect to any of the foregoing transactions) or any
combination of the foregoing transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Administrative Agent.
"DRUGSTORE.COM" means drugstore.com, inc., a Delaware corporation,
and its successors.
"DRUGSTORE.COM PLEDGE AGREEMENT" means the drugstore.com Pledge
Agreement dated as of October 25, 1997 between the Borrower and Morgan
Guaranty Trust Company of New York, as agent thereunder.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414 of the
Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings
in dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office
by notice to the Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan that bears interest at a Euro-Dollar
Rate pursuant to a Notice of Interest Rate Election.
"EURO-DOLLAR MARGIN" has the meaning specified in the Pricing
Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.11.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Administrative Agent.
"FIXED CHARGE COVERAGE RATIO" means at any date, the ratio of (i)
Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated Interest
Charges plus Consolidated Rent, in each case for the period of four
consecutive fiscal quarters most recently ended on or prior to such date.
"FUNDED DEBT" means any Debt maturing more than one year after the
date of determination thereof and any Debt, regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include:
(a) any Debt for the payment, redemption or satisfaction of which
money (or evidences of indebtedness, if permitted under the
instrument creating such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or proper depository
either at or before maturity or redemption date thereof; or
(b) guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising, in the
ordinary course of business, out of installment or conditional sales
to or by, or transactions involving title retention with,
distributors, dealers or other customers of merchandise, equipment or
services or guarantees other than guarantees of indebtedness for
borrowed money.
"GROUP OF LOANS" means, at any time, a group of Loans consisting of
(i) all Loans which are Base Rate Loans at such time and (ii) all
Euro-Dollar Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Bank is converted to or made as a Base
Rate Loan pursuant to Article 8, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INDENTURES" means (i) the Indenture dated as of December 21, 1998
between the Borrower and Harris Trust and Savings Bank, as trustee, (ii)
the Indenture dated as of September 22, 1998 between the Borrower and
Harris Trust and Savings Bank, as trustee and (iii) the Indenture dated as
of August 1, 1993, between the Borrower and First Trust of New York,
National Association, as successor trustee.
"INFORMATION" means, collectively, (i) the information provided to
the Banks in connection with the waiver dated as of September 29, 1999 to
the Existing Credit Agreement and (ii) the information presented to the
Banks at meetings in New York City on October 4, 1999 and October 18, 1999
among the Borrower and certain financial institutions.
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the
period commencing on the date specified in an applicable Notice of Interest
Rate Election and ending one, two, three or six months thereafter, as the
Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to clause (c) below, end on the
last Euro-Dollar Business Day of a calendar month; and
(c) no Interest Period may end after the Maturity Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise. Any
repurchase by the Borrower of its own capital stock shall not constitute an
Investment for purposes of this Agreement. The amount of any Investment
shall be the original principal or capital amount thereof less all returns
of principal or equity thereon (and without adjustment by reason of the
financial condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal, to the fair market
value of such property at the time of such transfer or exchange.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease or other title retention agreement relating
to such asset.
"LIFO ADJUSTMENTS" means, for any period, the net adjustment to costs
of goods sold for such period required by the Borrower's LIFO inventory
method, determined in accordance with generally accepted accounting
principles.
"LOAN" means a Base Rate Loan or a Euro-Dollar Loan and "LOANS" means
Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing.
"LOAN DOCUMENTS" means this Agreement, the Notes and the Collateral
Documents.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.04(b).
"LPG COMMITMENT" means the Commitment with Respect to Investment in
Rite Aid Corporation dated October 18, 1999 between the Borrower and Green
Equity Investors III.
"LPG TRANSACTION" means the purchase and sale of 3,000,000 shares of
8% Convertible Pay-In-Kind Preferred Stock of the Borrower for a purchase
price of $100.00 per share pursuant to the LPG Commitment.
"MATERIAL FINANCIAL OBLIGATIONS" means (i) a principal or face amount
of Debt (except Debt outstanding hereunder) and/or (ii) payment or
collateralization obligations in respect of Derivatives Obligations and/or
(iii) payment or collateralization obligations in respect of leases (other
than Capital Leases, which are Debt) of the Borrower and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"MATURITY DATE" means November 1, 2000.
"MORGAN" means J.P. Morgan Ventures Corporation, a Delaware
corporation and its successors.
"MORGAN PRO RATA EXPOSURE" means the Loans.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"NET CASH PROCEEDS" means, with respect to any Reduction Event, an
amount equal to the cash proceeds received by the Borrower or any of its
Subsidiaries from or in respect of such Reduction Event (including, when
received, any cash proceeds received as income or other proceeds of any
noncash proceeds of any Asset Sale), less (x) any investment banking and
underwriting fees and any other expenses reasonably incurred by such Person
in respect of such Reduction Event and (y) if such Reduction Event is an
Asset Sale, (I) the amount of any Debt secured by a Lien on any asset
disposed of in such Asset Sale and discharged from the proceeds thereof and
(II) any taxes actually paid or to be payable by such Person (as estimated
by a senior financial or accounting officer of the Borrower, giving effect
to the overall tax position of the Borrower) in respect of such Asset Sale.
"1999 FACILITY" means the $1,300,000,000 Term Loan Agreement dated as
of the date of this Amended Agreement among Rite Aid Corporation, the banks
listed therein and Morgan Guaranty Trust Company of New York, as
administrative agent thereunder.
"1999 EXPOSURES" means the undrawn commitments and/or the outstanding
loans under the 1999 Facility.
"1999 LOAN DOCUMENTS" means the "Loan Documents" as defined in the
1999 Facility.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, and "NOTE" means any one of such promissory notes issued
hereunder.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in
Section 2.07.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PCS" means PCS Holding Corporation, a Delaware corporation, and its
successors.
"PCS EVENT" means (i) the sale or other disposition of capital stock
of PCS (or of any non-cash proceeds thereof) or (ii) any sale, lease or
other disposition by PCS or any of its Subsidiaries of any asset which
would constitute an Asset Sale but for clause (i) of the definition of such
term.
"PCS PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as of
October 25, 1997 between the Borrower and Morgan Guaranty Trust Company of
New York, as agent thereunder.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENTS" means the drugstore.com Pledge
Agreement and the PCS Pledge Agreement.
"PRICING SCHEDULE" means the Schedule attached hereto identified as
such.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"PRO RATA CREDIT AGREEMENT" means the $1,000,000,000 Amended and
Restated Credit Agreement dated as of July 19, 1996 and amended and
restated as of October 25, 1999 among the Borrower, the banks listed
therein and Morgan Guaranty Trust Company of New York, as administrative
agent thereunder.
"PRO RATA EXPOSURES" means, collectively, the Pro Rata Credit
Agreement, the Prudential Pro Rata Exposure and the Morgan Pro Rata
Exposure.
"PRUDENTIAL PRO RATA EXPOSURE" means the 7.30% Senior Secured Notes
due February 28, 2002 issued by Finco, Inc. and guaranteed by the Borrower.
"QUARTERLY DATE" means the last day of each Quarterly Period.
"QUARTERLY PERIOD" means a three-month period consisting of (i)
February, March and April, (ii) May, June and July, (iii) August, September
and October or (iv) November, December and January.
"REDUCTION EVENT" means the receipt on or after October 15, 1999 by
the Borrower or a Subsidiary of proceeds of (i) a PCS Event, (ii) a Capital
Markets Transaction or (iii) an Asset Sale.
"REFERENCE BANKS" means the principal London offices of Citibank,
N.A., Bank of America, N. A. and Morgan Guaranty Trust Company of New York.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Credit Exposures.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely
in shares of its capital stock) or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock (other than such payments in
connection with employee benefit plans in the ordinary course of business).
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in Section
5.09.
"SEC" means the Securities and Exchange Commission, or any Person
succeeding to its functions under the Securities Exchange Act of 1934, as
amended.
"SECURED DEBT" means Debt which is secured by a Lien on property of
the Borrower or any Subsidiary, but shall not include guarantees arising in
connection with the sale, discount, guarantee or pledge of notes, chattel
mortgages, leases, accounts receivable, trade acceptances and other papers
arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or
services.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 8% of the consolidated assets of the
Borrower and its Consolidated Subsidiaries at such time.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"SUPER-MAJORITY BANKS" means at any time Banks having at least 90% of
the aggregate amount of the Credit Exposures.
"SYNTHETIC LEASE" means a lease which is treated as an operating
lease under generally accepted accounting principles but as ownership of
the leased asset by the lessee for purposes of the Internal Revenue Code.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial
paper rated at least A-1 by S&P (as defined in the Pricing Schedule) and
P-1 by Moody's (as defined in the Pricing Schedule), (iii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000,
(iv) repurchase agreements with respect to securities described in clause
(i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, provided in each case that
such Investment matures within one year from the date of acquisition
thereof by the Borrower or a Subsidiary or (v) money market mutual funds at
least 90% the assets of which are held in Investments referred to in
clauses (i) through (iv) above (except that the maturities of certain
Investments held by any such money market funds may exceed one year so long
as the dollar-weighted average life of the Investments of such money market
mutual fund is less than one year).
"TOTAL CAPITAL" means, at any date, the sum of Consolidated Debt and
Consolidated Net Worth, each determined as of such date.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii)
the fair market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but unpaid contributions),
all determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred
in by the Borrower's independent public accountants) with the most recent
audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Administrative Agent that the Borrower wishes to
amend any covenant in Article 5 to eliminate the effect of any change in
generally accepted accounting principles on the operation of such covenant
(or if the Administrative Agent notifies the Borrower that the Required
Banks wish to amend Article 5 for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant
change in generally accepted accounting principles became effective, until
either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Other Definitional Provisions. References in this
Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to
Articles, Sections, Schedules or Exhibits of or to this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.01
may, unless the context otherwise requires, be used in the singular or
plural depending on the reference. "Include" or "includes" and "including"
shall be deemed to be followed by "without limitation" whether or not they
are in fact followed by such words or words of like import. "Writing",
"written" and comparable terms refer to printing, typing and other means of
reproducing words in a visible form. References to any agreement or
contract are to such agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms hereof and
thereof; provided that amendments, modifications or supplements to the 1999
Loan Documents or the Pro Rata Facilities shall be effective for purposes
of references thereto in the Loan Documents only if such amendments are
consented to in writing for such purpose by the Super-Majority Banks.
References to any Person include the successors and assigns of such Person.
References "from" or "through" any date mean, unless otherwise specified,
"from and including" or "through and including", respectively.
ARTICLE 2
THE CREDITS
SECTION 2.01. Initial Outstandings. On the date hereof, $300,000,000
principal amount is outstanding as a Base Rate Loan made by Morgan. Neither
Morgan nor any other Bank has any commitment hereunder to extend additional
credit, on a revolving basis or otherwise.
SECTION 2.02. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Loans of a particular type be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount
of such Loans. Each such Note shall be in substantially the form of Exhibit
A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference in this
Agreement to the "NOTE" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(d), the
Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and
when required.
SECTION 2.03. Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable, on the Maturity Date.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to
the sum of the Base Rate Margin plus the Base Rate for such day. Such
interest shall be payable monthly in arrears on the last day of each
calendar month and on the Maturity Date and, with respect to the principal
amount of any Base Rate Loan that is prepaid or converted to a Euro-Dollar
Loan, on the date of such prepayment or conversion. Any overdue principal
of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the applicable London Interbank Offered Rate for
such Interest Period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before
the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro-Dollar Loan of such Reference Bank to
which such Interest Period is to apply and for a period of time comparable
to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment,
at a rate per annum equal to the sum of 2% plus the higher of (i) the sum
of the Euro-Dollar Margin for such day plus the London Interbank Offered
Rate applicable to such Loan and (ii) the Euro-Dollar Margin for such day
plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum
at which one day (or, if such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period of time not longer
than six months as the Administrative Agent may select) deposits in dollars
in an amount approximately equal to such overdue payment due to each of the
Reference Banks are offered to such Reference Bank in the London interbank
market for the applicable period determined as provided above by (y) 1.00
minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause (a) or (b) of Section 8.01 shall exist, at a rate per
annum equal to the sum of 2% plus the rate applicable to Base Rate Loans
for such day).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(e) Each Reference Bank party hereto agrees to use its best efforts
to furnish quotations to the Administrative Agent as contemplated by this
Section. If any Reference Bank does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the
basis of the quotation or quotations furnished by the remaining Reference
Bank or Banks or, if none of such quotations is available on a timely
basis, the provisions of Section 8.01 shall apply.
SECTION 2.05. Method of Electing Interest Rates. (a) The Loans
included in each Group of Loans shall bear interest initially at the type
of rate specified by the Borrower in the Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject to Section 2.05(d) and
the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans as of any Domestic
Business Day or may elect to continue such Loans as Euro-Dollar
Loans, as of the end of any Interest Period applicable thereto, for
an additional Interest Period, subject to Section 2.09 if any such
conversion is effective on any day other than the last day of an
Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF
INTEREST RATE ELECTION") to the Administrative Agent not later than 10:30
A.M. (New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective. A
Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies,
and the remaining portion to which it does not apply, are each at least
$100,000,000 (unless such portion is comprised of Base Rate Loans). If no
such notice is timely received before the end of an Interest Period for any
Group of Euro-Dollar Loans, the Borrower shall be deemed to have elected
that such Group of Loans be converted to Base Rate Loans at the end of such
Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of Section 2.05(a);
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans resulting from such
conversion are to be Euro-Dollar Loans, the duration of the next
succeeding Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans
for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to Section 2.05(a) the Administrative Agent shall
notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amount of any Group of Euro-Dollar
Loans created or continued as a result of such election would be less than
$100,000,000 or (ii) a Default shall have occurred and be continuing when
the Borrower delivers notice of such election to the Administrative Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such
date on the principal amount being converted.
SECTION 2.06. Reduction Events; Mandatory Prepayments. (a) In the
event that the Borrower or any of its Subsidiaries shall at any time, or
from time to time, receive any Net Cash Proceeds of any Reduction Event,
(x) the Borrower shall, not later than the Domestic Business Day following
the date of receipt of such Net Cash Proceeds, notify the Agent of such
fact and of the amount of such Net Cash Proceeds, (y) the Borrower shall,
not later than the Domestic Business Day following the date of receipt of
such Net Cash Proceeds, cause the same to be transferred to the
Administrative Agent to be held in an escrow account pending application in
accordance with the provisions of this Agreement, the Pro Rata Credit
Agreement and the 1999 Facility and (z) the Borrower shall, on the third
Euro-Dollar Business Day following the date of receipt of such Net Cash
Proceeds, apply an amount equal to the largest multiple of $1,000,000 which
does not exceed the amount of such Net Cash Proceeds to reduction of the
1999 Exposures and/or the Pro Rata Exposures in accordance with the
following provisions of this Section:
(i) if the amount of the Net Cash Proceeds in respect of any
Reduction Event is less than $5,000,000, then, unless the Required
Banks (as defined in the Pro Rata Credit Agreement) otherwise elect,
the application thereof shall be deferred until receipt of proceeds
such that, together with all other such amounts received and not
previously applied, the amount of such Net Cash Proceeds is equal to
at least $5,000,000;
(ii) if such Reduction Event is a PCS Event, such Net Cash
Proceeds shall FIRST be applied ratably to reduce the 1999 Exposures,
until the same shall have been reduced to zero, then SECOND shall be
applied ratably to reduce the Tranche A Exposures (as defined in the
Pro Rata Credit Agreement) until the Tranche A Exposures (as defined
in the Pro Rata Credit Agreement) shall have been reduced to zero and
then THIRD applied in accordance with paragraph (iv) below;
(iii) if such Reduction Event is a Capital Markets
Transaction, such Net Cash Proceeds shall first be applied ratably to
reduce the 1999 Exposures, subject to Section 2.09(a)(ii) of the 1999
Facility, until the same shall have been reduced to zero, and then
applied in accordance with paragraph (iv) below;
(iv) if such Reduction Event is not covered by paragraph (ii)
or (iii) above, or if there are Net Cash Proceeds in excess of those
applied in accordance with paragraphs (ii) and (iii) above, such Net
Cash Proceeds shall first be applied ratably to the Pro Rata
Exposures until the Pro Rata Exposures shall have been reduced to
zero, and then ratably to prepay loans outstanding under the 1999
Facility;
(v) the ratable application of Net Cash Proceeds to the Pro
Rata Credit Agreement based upon the full amount of the Credit
Exposures (as defined in the Pro Rata Credit Agreement) at the
relevant time; and
(vi) Net Cash Proceeds applied to the Credit Exposures
pursuant to paragraph (iv) above shall be applied ratably to prepay
the outstanding Loans of the Banks;
(b) Upon receipt from the Borrower of a notice pursuant to Section
2.06(a)(y) the Administrative Agent will promptly notify each Bank of the
contents thereof, and of the date of the related reduction required
hereunder. Any required prepayment shall be made together with accrued
interest on the amount prepaid, and shall be applied first to the Group of
Base Rate Loans and then to such outstanding Groups of Euro-Dollar Loans
the Borrower may elect in such notice, or failing such election as the
Administrative Agent may determine in its discretion.
(c) Amounts held by the Administrative Agent in escrow pending
application as contemplated by this Section 2.06 shall be invested upon the
instruction of the Borrower in Temporary Cash Investments for the account
of the Borrower.
(d) It is expressly understood and agreed that the provisions of this
Section 2.06 are not intended to, and do not, create a Lien in any Net Cash
Proceeds (except to the extent the same represent proceeds of
Collateral).
(e) Net Cash Proceeds of a Reduction Event received by the Borrower or
a Subsidiary prior to the date hereof shall be deemed for purposes of this
Section to have been received on the date hereof.
SECTION 2.07. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Loans to Section 2.09, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay any Base
Rate Borrowing or (ii) upon at least three Euro-Business Days' notice to
the Administrative Agent, prepay any Euro-Dollar Borrowing, in each case in
whole at any time, or from time to time in part in amounts aggregating
$10,000,000 or any larger multiple of $1,000,000, by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.08. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of
fees hereunder, not later than 12:00 Noon (New York City time) on the date
when due, in Federal or other funds immediately available in New York City,
to the Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Base Rate Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If and
to the extent that the Borrower shall not have so made such payment, each
Bank shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal
Funds Rate.
SECTION 2.09. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article 2, 6 or
8 or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to
Section 2.04(c) or if the Borrower fails to prepay, continue or convert any
Euro-Dollar Loans after notice has been given to any Bank in accordance
with Section 2.05(c), 2.06(b) or 2.07(b), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred
by it (or by an existing or prospective Participant in the related Loan),
including (without limitation) any loss incurred in obtaining, liquidating
or employing deposits from third parties, but excluding loss of margin for
the period after any such payment or failure to borrow, prepay, continue or
convert, provided that such Bank shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate
shall be conclusive in the absence of clearly demonstrable error.
SECTION 2.10. Computation of Interest. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest
shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.11. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro- Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Bank at a rate per annum determined by such Bank up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered
Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii)
the applicable London Interbank Offered Rate. Any Bank wishing to require
payment of such additional interest (x) shall so notify the Borrower and
the Administrative Agent, in which case such additional interest on the
Euro-Dollar Loans of such Bank shall be payable to such Bank at the place
indicated in such notice with respect to each Interest Period commencing at
least three Euro-Dollar Business Days after the giving of such notice, and
(y) shall notify the Borrower at least five Euro-Dollar Business Days prior
to each date on which interest is payable on the Euro-Dollar Loans of the
amount then due it under this Section.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category
of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents).
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied
(or waived in accordance with Section 9.05):
(a) receipt by the Administrative Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the Agent in
form satisfactory to it of telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent for the account of each Bank
of a duly executed Note dated on or before the Effective Date complying
with the provisions of Section 2.02;
(c) receipt by the Administrative Agent of (i) a letter from Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel for the Borrower,
permitting the Banks to rely on their opinion delivered pursuant to the Pro
Rata Credit Agreement and (ii) an opinion of Elliot S. Gerson, General
Counsel of the Borrower, covering such matters relating to the transactions
contemplated hereby as the Required Banks may be reasonably request;
(d) receipt by the Administrative Agent of an opinion of Davis Polk &
Wardwell, special counsel for the Administrative Agent, covering such
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request; and
(e) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement, the Pledge Agreements and
the Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agent;
On and after the Effective Date, the Demand Note shall be
superseded by the terms of this Agreement and the Notes issued hereunder,
and the indebtedness evidenced and governed by the Demand Note shall on and
after the Effective Date be evidenced and governed by this Agreement and
the Notes.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of
the Loan Documents are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement or instrument evidencing or
governing Debt of the Borrower or any Subsidiary or any other material
agreement, instrument, judgment, injunction, order or decree binding upon
the Borrower or any Subsidiary or result in the creation or imposition of
any Lien on any asset of the Borrower or any Subsidiary pursuant to any
such agreement, instrument, judgment, injunction, order or decree (other
than the Liens created by the Pledge Agreements).
SECTION 4.03. Binding Effect. This Agreement and each Pledge
Agreement constitutes a valid and binding agreement of the Borrower and
each Note, when executed and delivered in accordance with this Agreement,
will constitute a valid and binding obligation of the Borrower, in each
case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. Except as disclosed in the
Information:
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of February 27, 1999 and the related
consolidated statements of income and cash flows for the fiscal year then
ended, reported on by KPMG Peat Marwick LLP and set forth in the Borrower's
1999 Form 10-K, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of May 29, 1999 and the related consolidated
statements of income and cash flows for the fiscal period then ended, set
forth in the Borrower's quarterly report on Form 10-Q for the fiscal
quarter then ended, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements
referred to in subsection (a), the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal period,
subject to normal year-end adjustments.
(c) Since May 29, 1999, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement, including the Information, do not and will not contain any
untrue statement of material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
The Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect the business, operations or condition,
financial or otherwise, of the Borrower and its Subsidiaries or the
Borrower's ability to perform its obligations under this Agreement.
SECTION 4.06. Litigation. Except as disclosed in the Borrower's 1999
Form 10-K, there is no action, suit or proceeding pending against, or to
the knowledge of the Borrower threatened against or affecting, the Borrower
or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect
the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries or which in
any manner draws into question the validity or enforceability of any Loan
Document.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect
of any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns, and the Borrower and its
Significant Subsidiaries have filed all other material tax returns, which
are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Consolidated Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of
the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Significant Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.10. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the
Borrower and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction
in the level of or change in the nature of operations conducted thereat,
any costs or liabilities in connection with off-site disposal of wastes or
hazardous substances, and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the
basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.11. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of
the Borrower and each of its Subsidiaries (including those areas affected
by suppliers and vendors) that could be adversely affected by the "YEAR
2000 PROBLEM") (that is, the risk that computer applications used by it or
any of its Subsidiaries (or their respective supplier and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis and (iii) to date, implemented such plan in accordance with
such timetable. The Borrower reasonably believes that all computer
applications that are material to the business or operations of the
Borrower or any of its Subsidiaries will on a timely basis be able to
perform properly date-sensitive functions for all dates before and from and
after January 1, 2000, except to the extent that a failure to do so could
not reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.12. Pledge Agreements. The representations and warranties
of the Borrower set forth in each Pledge Agreement are true and correct.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any amount payable under any
Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days (or within
such longer period of time, not greater than 120 days, to which the SEC may
extend the filing deadline for the Borrower's Annual Report on Form 10-K)
after the end of each fiscal year of the Borrower, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on without material
qualification by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days (or (x) in
the case of the fiscal quarter most recently ended prior to the date
hereof, within 65 days or (y) in the case of any subsequent fiscal quarter,
within such longer period of time, not greater than 60 days, to which the
SEC may extend the filing deadline for the Borrower's Quarterly Report on
Form 10-Q) after the end of each of the first three quarters of each fiscal
year of the Borrower, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and for
the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.08 to 5.15, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the SEC;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
Information required to be delivered pursuant to Section 5.01(a),
5.01(b), 5.01(f) or 5.01(g) above shall be deemed to have been delivered on
the date on which the Borrower provides notice to the Banks that such
information has been posted on the Borrower's website on the Internet at
the website address listed on the signature pages hereof, at
sec.gov/edaux/searches.htm or at another website identified in such notice
and accessible by the Banks without charge; provided that (i) such notice
may be included in a certificate delivered pursuant to Section 5.01(c) and
(ii) the Borrower shall deliver paper copies of the information referred to
in Section 5.01(a), 5.01(b), 5.01(f) or 5.01(g) to any Bank which requests
such delivery.
SECTION 5.02. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, pay and discharge, as the same shall
become due and payable, (i) all material claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons prior
to the time such claims or demands give rise to a Lien upon any of its
property or assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or assets, except
where any of the items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Borrower or such Subsidiary, as
the case may be, shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves, if any, for
the accrual of any such items.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own
name) with financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute engaged
in the same or a similar business; and will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in this Agreement, the Borrower will
continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Borrower and
its Significant Subsidiaries, and will preserve, renew and keep in full
force and effect, and will cause each Significant Subsidiary (except where
such Significant Subsidiary merges into the Borrower or any other
Subsidiary) to preserve, renew and keep in full force and effect their
respective legal existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a material
adverse effect on the business, financial position or results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and
will permit, and will cause each Subsidiary to permit, representatives of
any Bank at such Bank's expense to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often
as may reasonably be desired.
SECTION 5.07. Restriction on Other Agreements. The Borrower will not,
and will not permit any Subsidiary to, enter into any agreement which
imposes a limitation on incurrence by the Borrower and its Subsidiaries of
Liens that is more restrictive than the limitation on Liens set forth in
this Agreement (other than agreements with respect to Debt secured by Liens
permitted by Section 5.10(a) containing restrictions on the ability to
transfer or grant Liens on the assets securing such Debt and other than
customary restrictions contained in purchase and sale agreements limiting
the transfer of the subject assets pending closing and customary
non-assignment provisions in leases and other contracts entered into in the
ordinary course of business) or which imposes other covenants more
restrictive than those set forth in this Agreement.
SECTION 5.08. Restriction on Debt of Subsidiaries. The Borrower will
not permit any Subsidiary to create, issue, incur, assume, or in any other
way become liable for any unsecured Debt unless immediately prior thereto
the Borrower would be entitled under Section 5.10(e) to create Secured Debt
not specifically permitted under Section 5.10 but for subsection (e)
thereof in an amount equal to such Debt; provided that the foregoing
restriction shall not prevent (i) any Subsidiary from becoming liable to
the Borrower or to a Wholly-Owned Consolidated Subsidiary for Debt or (ii)
the extension, renewal or refunding of any Debt of any Subsidiary so long
as Consolidated Debt is not thereby increased.
SECTION 5.09. Restriction on Sales with Leases Back. Except for a
sale or transfer by a Subsidiary to the Borrower or a Wholly-Owned
Consolidated Subsidiary, the Borrower will not, and will not permit any
Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail
store or equipment now or hereafter owned and operated by the Borrower or a
Subsidiary, with the intention that the Borrower or any Subsidiary take
back a lease thereof, except a lease for a period, including renewals, not
exceeding 24 months, by the end of which period it is intended that the use
of such property or equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "SALE AND LEASEBACK
TRANSACTION"); provided that, notwithstanding the foregoing, the Borrower
or any Subsidiary may enter into a Sale and Leaseback Transaction if the
Borrower or a Subsidiary would be entitled under Section 5.10(e) to create
Secured Debt not specifically permitted under Section 5.10 but for Section
5.10(e) in an amount equal to the Attributable Debt respecting such Sale
and Leaseback Transaction; provided further that, notwithstanding the
foregoing, the Borrower or any Subsidiary may enter into a Sale and
Leaseback Transaction if entered into in respect of property acquired by
the Borrower or a Subsidiary if such Sale and Leaseback Transaction is
entered into within 24 months from the date of such acquisition; and
provided still further that, notwithstanding the foregoing, the Borrower or
any Subsidiary may enter into a Sale and Leaseback Transaction so long as
the Net Cash Proceeds thereof are applied as contemplated by Section 2.06.
SECTION 5.10. Restriction on Liens. The Borrower will not, and will
not permit any Subsidiary to, create, issue, incur, assume or guarantee any
Secured Debt; provided that the foregoing covenant shall not apply to the
following:
(a) (i) Any Lien on any property acquired or constructed by the
Borrower or a Subsidiary and created contemporaneously with, or within 24
months after, such acquisition or the completion of such construction and
commencement of full operation of such property, whichever is later, to
secure or provide for the payment of any part of the purchase or
construction price of such property, or (ii) the acquisition by the
Borrower or a Subsidiary of property subject to any Lien upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Borrower or such Subsidiary, or (iii) any conditional sales agreement or
other title retention agreement with respect to any property hereafter
acquired; provided that the Lien does not spread to other property except
unimproved real property previously owned upon which any new construction
has taken place and subsequent additions to such acquired or constructed
property;
(b) Any Lien created for the sole purpose of extending, renewing or
refunding, in whole or part, any Lien permitted by this Section 5.10 or any
Lien securing the Debt of the Borrower or of any Subsidiary on the date of
this Agreement or of a corporation at the time such corporation becomes a
Subsidiary, or any extensions, renewals or refundings of any such Lien;
provided that the principal amount of Debt secured thereby shall not exceed
the principal amount of Debt so secured at the time of such extension,
renewal or refunding and that such extension, renewal or refunding Lien
shall be limited to all or that part of the same property which secured the
Debt so extended, renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the Borrower or a
Wholly-Owned Consolidated Subsidiary;
(d) Any Lien created by the Loan Documents, the Pro Rata Credit
Agreement or the 1999 Loan Documents; and
(e) Secured Debt of the Borrower and its Subsidiaries which would
otherwise be prohibited by the foregoing restrictions (not including
Secured Debt permitted to be secured under subsections (a) through (d)
above) so long as the sum of any such Secured Debt hereafter incurred and
outstanding at the time plus Attributable Debt of the Borrower and any
Subsidiaries in respect of Sale and Leaseback Transactions hereafter
entered into and outstanding at the time (excluding Attributable Debt
incurred in respect of any Sale and Leaseback Transaction (i) entered into
in respect of property acquired by the Borrower or a Subsidiary not more
than 24 months prior to the date such Sale and Leaseback Transaction is
entered into or (ii) if the Borrower, within 120 days before or after such
Sale and Leaseback Transaction is entered into applies an amount equal to
the greater of (A) the net proceeds of the sale of the property so sold and
leased back or (B) the fair market value of such property at the date such
arrangement is entered into to the retirement of Secured Debt (other than
at maturity or pursuant to any mandatory payment provision) or to reduction
of the Commitments) plus unsecured Debt of any Subsidiary hereafter
incurred and outstanding at the time (excluding unsecured Debt incurred
through the extension, renewal or refunding of Debt of such Subsidiary
where Consolidated Debt was not thereby increased and excluding any Debt
owed to the Borrower or a Wholly-Owned Consolidated Subsidiary) does not at
the time exceed 5% of Consolidated Net Tangible Assets.
SECTION 5.11. Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures for any period set forth below shall not
exceed the amount set forth below opposite such period:
FISCAL YEAR ENDING ON AMOUNT
OR CLOSEST TO
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
SECTION 5.12. Capitalization Leverage Ratio. At no time shall the
ratio of (i) Consolidated Debt at such time to (ii) Total Capital at such
time, exceed 0.695; provided that upon any sale of the capital stock of
PCS, such maximum ratio shall be reset at the level which produces the
result that the amount of additional Debt that the Borrower may incur
within the limits of this ratio immediately after giving effect to such
sale and the repayment of any Debt required in connection therewith is
equal to the amount of additional Debt that the Borrower could incur within
the limits of this ratio immediately before giving effect to such sale and
the repayment of any Debt required in connection therewith.
SECTION 5.13. Limitation on Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except:
(a) Debt under this Agreement, the Pro Rata Credit
Agreement or the 1999 Facility;
(b) Debt outstanding on December 2, 1999;
(c) Debt incurred to refinance Debt referred to in clause
(a) or clause (b) above, provided that the amount thereof that
is at the time outstanding or committed is not increased and
the maturity thereof is not shortened; and
(d) Debt not permitted by clauses (a), (b) and (c) above
in an aggregate principal amount at any time outstanding not to
exceed $25,000,000.
SECTION 5.14. Fixed Charge Coverage. At no time during any period set
forth below shall the Fixed Charge Coverage Ratio be less than the ratio
set forth below opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 2000 and 1.25
thereafter
SECTION 5.15. Limitation on Investments and Acquisitions. (a) Neither
the Borrower nor any Consolidated Subsidiary will make or acquire any
Investment in any Person other than:
(i) Investments in Consolidated Subsidiaries; provided, that
Investments (exclusive of inter-company payables owing to the
Borrower or a Subsidiary arising from cash management transactions in
the ordinary course of business) in PCS, whether existing on the date
hereof or hereafter made, may be made only by the Borrower and only
in the form of a contribution to the capital of PCS and without
issuance of additional shares of capital stock therefor, and provided
further that no such Investment may be made in any Subsidiary of PCS
except by PCS or another Subsidiary of PCS;
(ii) Temporary Cash Investments;
(iii) Investments received as consideration for sale or other
disposition of the capital stock of PCS or drugstore.com permitted by
Section 5.16;
(iv) Investments in drugstore.com existing on the date
hereof; and
(v) Any Investment not otherwise permitted by the foregoing
clauses of this Section if, immediately after such Investment is made
or acquired, the aggregate net book value of all Investments
permitted by this clause (c) does not exceed 10% of Consolidated Net
Worth.
(b) The Borrower will not, and will not permit any Subsidiary to,
consummate any Business Acquisition to the extent that the aggregate
consideration paid or payable by the Borrower or any Subsidiary in
connection with all such Business Acquisitions on or after the Closing Date
would exceed $15,000,000.
SECTION 5.16. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person,
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken
as a whole, to any other Person or (iii) sell, lease or otherwise transfer
any Collateral to any other Person; provided that (x) the Borrower may
merge with another Person if (A) the Borrower is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no
Default shall have occurred and be continuing and (y) the Borrower may sell
or otherwise dispose of the capital stock of PCS or drugstore.com, in whole
but not in part, so long as the consideration therefor is not less than the
fair market value of such capital stock and shall consist solely of a
combination of cash and publicly traded securities payable and deliverable
at the closing of such sale.
SECTION 5.17. Use of Proceeds. The proceeds of the Loans outstanding
under this Agreement were used by the Borrower for its general corporate
purposes. No such use of proceeds was or will be, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying any "MARGIN STOCK" within the meaning of Regulation U.
SECTION 5.18. Restricted Payments. After the date hereof, neither the
Borrower nor any Subsidiary will declare or make any Restricted Payment.
SECTION 5.19. Synthetic Leases. Neither the Borrower nor any
Subsidiary will enter into any Synthetic Lease if, after giving effect
thereto, the aggregate amount financed under all Synthetic Leases entered
into in any period of twelve consecutive calendar months commencing after
the date hereof would exceed $35,000,000.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or shall fail to pay within five days of the due date thereof any
interest, fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform (i) any covenant
contained in Sections 5.08 to 5.19, inclusive or (ii) any covenant
contained in Section 3(b) or 5(b) of the Pledge Agreement;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in the Loan Documents (other than those covered by
clause (a) or (b) above) for 30 days after written notice thereof has been
given to the Borrower by the Administrative Agent at the request of any
Bank;
(d) any material representation, warranty, certification or statement
made (or deemed made) by the Borrower in any Loan Document or in any
certificate, financial statement or other document delivered pursuant to
any Loan Document shall prove to have been incorrect in any material
respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Financial Obligations or
enables (or, if such event or condition does not otherwise give rise to a
Default hereunder, which with the giving of notice or lapse of time or both
would enable) the holder of such Material Financial Obligations or any
Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Significant Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer, any Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a period
of 30 days;
(k) any Lien created by either Pledge Agreement shall at any time
fail to constitute a valid and (to the extent required by such Pledge
Agreement) perfected Lien on all of the Collateral purported to be subject
thereto, securing the obligations purported to be secured thereby, with the
priority required by the Loan Documents, or the Borrower shall so assert in
writing; or
(l) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the SEC under said Act) of 20% or more of the outstanding shares of
common stock of the Borrower; or, during any period of 12 consecutive
calendar months, individuals who were directors of the Borrower on the
first day of such period shall cease to constitute a majority of the board
of directors of the Borrower; then, and in every such event, the
Administrative Agent shall if requested by Banks holding Notes evidencing
more than 50% in aggregate principal amount of the Loans, by notice to the
Borrower declare the Notes (together with accrued interest thereon) to be,
and the Notes (together with accrued interest thereon) shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to
the Borrower or any other act by the Administrative Agent or the Banks, the
Notes (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Administrative Agent by the terms
thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.02. Administrative Agent and Affiliates. Morgan Guaranty
Trust Company of New York shall have the same rights and powers under the
Loan Documents as any other Bank and may exercise or refrain from
exercising the same as though it were not the Administrative Agent, and
Morgan Guaranty Trust Company of New York and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of business
with the Borrower or any Subsidiary or affiliate of the Borrower as if it
were not the Administrative Agent.
SECTION 7.03. Action by Administrative Agent. The obligations of the
Administrative Agent under the Loan Documents are only those expressly set
forth therein. Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6 and in the Pledge
Agreement.
SECTION 7.04. Consultation with Experts. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Administrative Agent. Neither the
Administrative Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action
taken or not taken by it or any of them in connection herewith (i) with the
consent or at the request of the Required Banks (or such other number or
percentage of Banks as may be specified in the Loan Documents for
particular purposes) or (ii) in the absence of its or their own gross
negligence or willful misconduct. Neither the Administrative Agent nor any
of its affiliates nor any of their respective directors, officers, agents
or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made
in connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article 3,
except receipt of items required to be delivered to the Administrative
Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Administrative Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex or similar writing) believed
by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Credit Exposure, indemnify the Administrative Agent, its
affiliates and their respective directors, officers, agents and employees
(to the extent not reimbursed by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any
action under this Agreement.
SECTION 7.08. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall have the
right, with (so long as no Default shall have occurred and be continuing)
the consent of the Borrower, to appoint a successor Administrative Agent.
If no successor Administrative Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent gives notice of resignation, then
the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, which shall be a commercial bank organized
or licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $50,000,000.
Upon the acceptance of its appointment as Administrative Agent by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of
the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under the Loan
Documents. After any retiring Administrative Agent's resignation hereunder
as Administrative Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent.
SECTION 7.09. Administrative Agent's Fees. The Borrower shall pay to
the Administrative Agent for its own account fees in the amounts and at the
times previously agreed upon between the Borrower and the Administrative
Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered
to the Reference Banks in the London interbank market for such
Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the Credit
Exposures advise the Administrative Agent that the London Interbank
Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies
the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligations of the Banks to continue or convert
outstanding Loans as or into Euro-Dollar Loans shall be suspended, and each
outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on
the last day of the then current Interest Period applicable thereto.
SECTION 8.02. Illegality. (a) If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency
shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such
Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative
Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to convert outstanding Loans into
Euro-Dollar Loans or continue outstanding Loans as Euro-Dollar Loans shall
be suspended. Before giving any notice to the Administrative Agent pursuant
to this Section, such Bank shall designate a different Euro-Dollar Lending
Office if such designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank.
(b) If such notice is given, each Euro-Dollar Loan of such Bank then
outstanding shall be converted to a Base Rate Loan either (a) on the last
day of the then current Interest Period applicable to such Euro-Dollar Loan
if such Bank may lawfully continue to maintain and fund such Loan as a
Euro-Dollar Loan to such day or (b) immediately if such Bank shall
determine that it may not lawfully continue to maintain and fund such Loan
as a Euro-Dollar Loan to such day. Interest and principal on any such Base
Rate Loan shall be payable on the same dates as, and on a pro rata basis
with, the interest and principal payable on the related Euro-Dollar Loans
of the other Banks.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
the date hereof, the adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any such requirement with respect to
which such Bank is entitled to compensation for the relevant Interest
Period under Section 2.11), special deposit, insurance assessment or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or on the London
interbank market any other condition affecting its Euro-Dollar Loans or its
Note and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any
Euro-Dollar Loan, or to reduce the amount of any sum received or receivable
by such Bank (or its Applicable Lending Office) under this Agreement or
under its Note with respect thereto, by an amount deemed by such Bank to be
material, then, within 15 days after demand by such Bank (with a copy to
the Administrative Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank
to be material, then from time to time, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation
pursuant to this Section and will designate a different Applicable Lending
Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
clearly demonstrable error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or
for the account of any Bank or the Administrative Agent hereunder or under
any Note shall be made free and clear of and without deduction for any and
all present or future taxes, duties, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Bank and the Administrative Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each
Bank, taxes imposed on its income, and franchise or similar taxes imposed
on it, by the jurisdiction of such Bank's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or
under any Note to any Bank or the Administrative Agent, (i) the sum payable
shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section 8.04) such Bank or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and
(iv) the Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 9.01, the original or a certified copy of a receipt
evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or
charges or similar levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or otherwise with
respect to, any Loan Document (hereinafter referred to as "OTHER TAXES").
(c) The Borrower agrees to indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 8.04) paid by such Bank
or the Administrative Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 15 days from the
date such Bank or the Administrative Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank listed on the signature pages
hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Bank remains lawfully
able to do so), shall provide the Borrower with Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Bank is entitled to benefits
under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying
that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States. If
the form provided by a Bank at the time such Bank first becomes a party to
this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded
from "TAXES" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form pursuant to Section 8.04(d) (unless
such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(a) with respect to Taxes imposed by the United States; provided,
however, that should a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate
or reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless
and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans of such Bank which would otherwise be continued as or
converted into Euro-Dollar Loans shall instead be Base Rate Loans (on
which interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been converted to a Base
Rate Loan, all payments of principal which would otherwise be applied
to repay such Euro-Dollar Loans shall be applied to repay its Base
Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist, the principal
amount of each such Base Rate Loan shall be converted into a Euro-Dollar
Loan on the first day of the next succeeding Interest Period applicable to
the related Euro-Dollar Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Administrative Agent, at its
address or telex number set forth on the signature pages hereof, (y) in the
case of any Bank, at its address or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address or telex number as such party may hereafter specify for the purpose
by notice to the Administrative Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when delivered at the address specified in this Section;
provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Administrative
Agent or any Bank in exercising any right, power or privilege under any
Loan Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies provided in the Loan Documents shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Administrative Agent,
including fees and disbursements of special counsel for the Administrative
Agent, in connection with the preparation and administration of the Loan
Documents, any waiver or consent thereunder or any amendment thereof or any
Default or alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by the Administrative Agent and
each Bank, including fees and disbursements of counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Administrative Agent and
each Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "INDEMNITEE") and
hold each Indemnitee harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by such Indemnitee in connection with any administrative or
judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful misconduct
as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a
participation in a Note acquired pursuant to the foregoing arrangements may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a
direct creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Administrative Agent
are affected thereby, by the Administrative Agent); provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) subject any
Bank to any additional obligation, (ii) reduce the principal of or rate of
interest on any Loan or any fees hereunder, (iii) postpone the date fixed
for any payment of principal of or interest on any Loan or any fees
hereunder, (iv) change Section 9.04 or (v) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or
the number of Banks, which shall be required for the Banks or any of them
to take any action under this Section or any other provision of this
Agreement,
(b) Morgan Guaranty Trust Company of New York agrees that it will not
enter into any amendment or waiver of any Collateral Document except with
the consent of the Required Banks; provided that no such amendment or
waiver shall, unless consented to by all the Banks, (i) alter in a manner
adverse to the Banks the priorities specified in Section 13 of either
Pledge Agreement or (ii) effect or permit a release of all or substantially
all of the Collateral under either Pledge Agreement. Notwithstanding the
foregoing, Collateral shall be released from the Lien of either of the
Pledge Agreement from time to time as necessary to effect any sale of
Collateral permitted by the Loan Documents, and the Administrative Agent
shall execute and deliver all release documents reasonably requested to
evidence such release; provided that arrangements satisfactory to the
Administrative Agent shall have been made for application of the cash
proceeds thereof in accordance with Section 2.06 hereof and for the pledge
of any non-cash proceeds thereof pursuant to the Collateral Documents.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon
notice to the Borrower and the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 9.05(a) without the
consent of the Participant. The Borrower agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled
to the benefits of Article 8 with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) or
(d) below shall be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of
its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit B
hereto executed by such Assignee and such transferor Bank, with (and
subject to) notice to, and the subscribed consent of, the Borrower, so long
as no Default shall have occurred and be continuing, and the Administrative
Agent (such consent of the Borrower and the Administrative Agent not to be
unreasonably withheld); provided that (i) if an Assignee is an affiliate of
such transferor Bank or is a Bank prior to giving effect to such
assignment, such notice shall be given but no such consent shall be
required. Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee, such Assignee
shall be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank as set forth in such instrument of assumption, and
the transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall
be required. Upon the consummation of any assignment pursuant to this
subsection (c), the transferor Bank, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is
not incorporated under the laws of the United States of America or a state
thereof, it shall, prior to the first date on which interest or fees are
payable hereunder for its account, deliver to the Borrower and the
Administrative Agent certification as to exemption from deduction or
withholding of any United States federal income taxes in accordance with
Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise
to such greater payment did not exist.
SECTION 9.07. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 9.08. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 9.09. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
RITE AID CORPORATION
By:___________________________________
Name:
Title:
Address: 30 Hunter Lane
Camp Hill, PA 17011
Attention: Chief Financial Officer
Telephone No.: (717) 975-5750
Facsimile No.: (717) 975-3764
Website: www.riteaid.com
J.P. MORGAN VENTURES CORPORATION
By:___________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Administrative Agent
By:___________________________________
Name:
Title:
Address: 60 Wall Street
New York, New York
10260-0060
Attention: Loan Department
Telex number: 177615
Exhibit 4.7
EXECUTION COPY
WAIVER NO. 1 TO GUARANTY
WAIVER dated as of January 11, 2000 to Guaranty dated as of March 19, 1998,
as amended by Amendment No. 1, dated as of June 22, 1998, and as further
amended by Amendment No. 2, dated as of October 25, 1999, and as further
amended by Amendment No. 3, dated as of December 2, 1999 (as so amended,
the "Guaranty") between RITE AID CORPORATION, a Delaware Corporation (the
"Guarantor") and RAC LEASING LLC.
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. DEFINED TERMS; REFERENCES. (a) Unless otherwise specifically
defined herein, each term used herein which is defined in the Guaranty has
the meaning assigned to such term in the Guaranty. For the purposes of this
Waiver, "Public Debt" means debt securities of the Guarantor issued
pursuant to an indenture qualified under (or in form suitable for
qualification under) the Trust Indenture Act of 1939, as amended.
SECTION 2. LIMITED WAIVER. At the request of the Guarantor, the Required
Participants hereby waive any Default for breaches of covenants under
Section 1.01(a), Section 1.01(b), Section 1.01(c) or Section 1.01(d) of
Annex A to the Guaranty, to the extent that such Default would arise from
failure of the Guarantor to deliver to the Liquidity Providers the
financial statements referred to in Section 1.01(a) or Section 1.01(b) of
Annex A to the Guaranty and the related officer's certificate and statement
of the Guarantor's independent accountants referred to in Sections 1.01(c)
and 1.01(d) of Annex A to the Guaranty, such waivers to be effective solely
for the period commencing on January 11, 2000 and ending on July 11, 2000;
provided, however, that the effectiveness of this Waiver is subject to the
satisfaction of the conditions specified in Section 3 of this Waiver. This
Waiver shall be limited precisely as written, and shall not extend to any
Default under any other provision of the Guaranty or to any Default under
Section 1.01(a), Section 1.01(b), Section 1.01(c) or Section 1.01(d) of
Annex A to the Guaranty during any other period.
SECTION 3. CONDITIONS TO WAIVER. The waivers granted pursuant to
Section 2 above are subject the conditions that:
(a) the Guarantor shall deliver to each of the Liquidity Providers
the following items on or prior to the dates specified below (or, in the
reasonable discretion of the Liquidity Agent, no later than 5 days
thereafter):
(i) a monthly forecast of cash receipts and disbursements,
commencing with February, 2000, no later than the first day of
each month in respect of such forecast ;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant
to clause (i) above, no later than the 25th day of the next
succeeding month;
(iii) a weekly sales report for each week, commencing with the
week ending January 8, 2000, no later than the 4th day
following the last day of the week in respect of which such
sales report is to be delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March
31, 2000; and
(v) a monthly reconciliation of actual operating results for
each month specified in the operating forecast delivered
pursuant to clause (iv) above to the budget for such month, no
later than the 30th day of the next succeeding month; and
(b) the Guarantor shall not directly or indirectly, make or agree to make
any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
SECTION 4. GOVERNING LAW. This Waiver shall be governed by and
construed in
accordance with the laws of the State of New York.
SECTION 5. COUNTERPARTS. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 6. EFFECTIVENESS. This Waiver shall become effective on the
date when the
following conditions are met:
(a) the Liquidity Agent shall have received from each of the
Guarantor and the Required Participants a counterpart hereof signed by such
party or facsimile or other written confirmation (in form satisfactory to
the Liquidity Agent) that such party has signed a counterpart hereof; and
(b) the Agent shall have received evidence satisfactory to it that
substantially identical waivers to any covenant requiring delivery of
financial statements or reports set forth in any other agreement
obligations under which are secured by the Collateral shall have become or
shall simultaneously become effective.
IN WITNESS WHEREOF, each of the parties hereto has caused this Waiver
to be executed by their officers thereunto duly authorized as of the date
first above written.
RITE AID CORPORATION,
as Guarantor
By: __________________________________
Name:
Title:
Acknowledged and Agreed:
RAC LEASING LLC
By: The Diversified Group Incorporated
By:_______________________________
Name:
Title:
Exhibit 4.8
AMENDMENT NO. 3
Dated as of December 23, 1999
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
RAC Leasing LLC
Amendment No. 3, dated as of December 23, 1999 ("Amendment No. 3"),
between RAC Leasing LLC, a Wyoming limited liability company, as lessor
("Lessor"), and Rite Aid Realty Corp., a Delaware corporation, as lessee
("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a Master Lease
and Security Agreement, dated as of March 19, 1998, (as amended by
Amendment No. 1, dated as of June 22, 1998, and Amendment No. 2 dated as of
October 25, 1999, the "Lease"); and
WHEREAS, Lessor and Lessee wish to further amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
Section 1. Amendments to the Lease. (a) The Commitment of the
Lessor set forth on Annex 1 to the Lease is hereby amended in its entirety
to read as set forth on Annex 1 attached hereto.
(b) The Commitment of the Lessor set forth on the signature pages to
Lease Supplement No. 1 to the Lease, dated as of June 22, 1998 is hereby
reduced by $12,050,000 to $35,850,000.
Section 2. Counterparts. This Amendment No. 3 may be executed in
several counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment No. 3.
Section 3. Governing Law THIS AMENDMENT NO. 3 SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Section 4. Continuing Effect Except as herein provided, all
provisions, terms and conditions of the Lease shall remain in full force
and effect. As amended hereby, the Lease is ratified and confirmed in all
respects.
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page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
be duly executed as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By: ____________________________________
Name:
Title:
RAC LEASING LLC, as Lessor
By: The Diversified Group Incorporated,
Manager
By: _______________________________
Name:
Title:
Exhibit 4.9
EXECUTION COPY
AMENDMENT NO. 3 TO GUARANTY
AMENDMENT NO. 3 TO GUARANTY ("Amendment No. 3"), dated as of December
2, 1999, from RITE AID CORPORATION, a Delaware corporation (the
"Guarantor"), to RAC LEASING LLC, a Wyoming limited liability company (the
"Lessor").
WHEREAS, the Lessor and Rite Aid Realty Corp. (the "Lessee") entered
into a Master Lease and Security Agreement dated as of March 19, 1998, as
amended by Amendment No. 1, dated as of June 22, 1998, and as further
amended by Amendment No. 2, dated as of October 25, 1999 (as so amended,
the "Lease"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty, dated
as of March 19, 1998, as amended by Amendment No. 1, dated as of June 22,
1998, and as further amended by Amendment No. 2, dated as of October 25,
1999 (as so amended, the "Guaranty"); and
WHEREAS, the Guarantor and the Lessor now desire to further amend the
Guaranty; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings given to such terms in Appendix I to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendments to Guaranty. Annex A to the Guaranty
is hereby amended as follows:
(a) The following new definition is added to the definition section
of Annex A in its appropriate alphabetical position:
"LIFO Adjustments" means, for any period, the net adjustment to
costs of goods sold for such period required by the Guarantor's
LIFO inventory method, determined in accordance with generally
accepted accounting principles.
(b) The following definitions contained in Annex A are amended to
read in their entirety as follows:
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period, plus (a), to the extent deducted in
determining Consolidated Net Income for such period, the
aggregate amount of (i) Consolidated Interest Charges, (ii)
provision for income taxes, (iii) depreciation and
amortization, (iv) LIFO Adjustments, (v) store closing expenses
and (vi) any other nonrecurring charge to the extent such
nonrecurring charge does not involve any cash expenditure
during such period, less (b), to the extent not deducted in
determining Consolidated Net Income for such period, the
aggregate amount of (i) any cash expenditure during such period
in connection with which a nonrecurring charge was taken in any
prior period and (ii) LIFO Adjustments.
"Consolidated Net Income" means, for any period, the net income
(or loss) of the Guarantor and its Consolidated Subsidiaries
(exclusive of (a) extraordinary items of gain or loss, (b) any
gain or loss in connection with any sale of assets other than
sales of inventory in the ordinary course of business, but in
the case of loss only to the extent that such loss does not
involve any cash expenditure during such period and (c) the
Guarantor's share of the net income (or loss) of
drugstore.com), determined on a consolidated basis for such
period.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated
Subsidiaries determined as of such date; provided that such
consolidated stockholders' equity shall be adjusted to exclude
the effect of items which have been excluded from Consolidated
Net Income for any period commencing after August 28, 1999 by
reason of the parenthetical phrase contained in the definition
of such term. Consolidated Net Worth includes the Guarantor's
8% Convertible Pay-In-Kind Preferred Stock.
"Consolidated Rent" means, for any period, the consolidated
rental expense of the Guarantor and its Consolidated
Subsidiaries for such period, and including in any event rental
costs of closed stores for such period whether or not reflected
as an expense in the determination of Consolidated Net Income
for such period.
"Credit Agreement" means the Amended and Restated Credit
Agreement dated as of October 25, 1999, as amended by Amendment
No. 1, dated as of December 2, 1999, among Rite Aid
Corporation, the banks from time to time parties thereto and
Morgan Guaranty Trust Company of New York, as Agent, without
giving effect to any amendments or waivers thereof made by the
requisite parties thereunder after December 2, 1999 unless
expressly consented to by the Required Participants.
"1999 Facility" means the $1,300,000,000 Term Loan Agreement
dated as of October 25, 1999, as amended by Amendment No. 1,
dated as of December 2, 1999, among Rite Aid Corporation, the
banks listed therein and Morgan Guaranty Trust Company of New
York, as Agent, without giving effect to any amendments or
waivers thereof made by the requisite parties thereunder after
December 2, 1999 unless expressly consented to by the Required
Participants.
(c) Section 1.12 of Annex A is amended to read in its entirety as
follows:
"SECTION 1.12 Capitalization Leverage Ratio. At no time shall
the ratio of (i) Consolidated Debt at such time to (ii) Total
Capital at such time, exceed 0.695; provided that upon any sale
of the capital stock of PCS, such maximum ratio shall be reset
at the level which produces the result that the amount of
additional Debt that the Guarantor may incur within the limits
of this ratio immediately after giving effect to such sale and
the repayment of any Debt required in connection therewith is
equal to the amount of additional Debt that the Guarantor could
incur within the limits of this ratio immediately before giving
effect to such sale and the repayment of any Debt required in
connection therewith."
(d) Section 1.13 of Annex A is amended to read in its entirety as
follows:
"SECTION 1.13. Limitation on Debt. The Guarantor will not, and
will not permit any of its Subsidiaries to, incur or at any
time be liable with respect to any Debt except:
(a) Debt under the Credit Agreement or the 1999 Facility;
(b) Debt outstanding on December 2, 1999;
(c) Debt incurred to refinance Debt referred to in clause (a)
or clause (b) above, provided that the amount thereof that is
at the time outstanding or committed is not increased and the
maturity thereof is not shortened; and
(d) Debt not permitted by clauses (a), (b) and (c) above in an
aggregate principal amount at any time outstanding not to
exceed $25,000,000."
(f) Section 1.14 of Annex A is amended to read in its entirety as
follows (including the table following the end of the quotation marks:
"SECTION 1.14. Fixed Charge Coverage. At no time
during any period set
forth below shall the Fixed Charge Coverage Ratio be
less than the ratio set
forth below opposite such period:"
Fiscal Quarter Ending on or Ratio
Closest to:
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 200 and thereafter 1.25
Section 2. Amendment Fee. In consideration of the Required
Participants' consent to this Amendment No. 3, concurrently with the
execution and delivery of this Amendment No. 3, and as a condition
precedent to the effectiveness of this Amendment No. 3, the Guarantor shall
pay an amendment fee (the "Amendment Fee") to the Liquidity Agent in an
amount equal to 0.25% of $115,000,000 for the ratable benefit of the
Lenders and the Lessor. Such fee is payable in full on the date hereof by
wire transfer of immediately available funds to an account to be designated
by the Liquidity Agent. The Guarantor hereby agrees that the amendment fee
have been fully earned and once paid are nonrefundable.
Section 3. Conditions Precedent. This Amendment No. 3 shall become
effective when the following conditions are met: (i) the Liquidity Agent
shall have received the Amendment Fee in accordance with Section 2 of this
Amendment No. 3; (ii) the Liquidity Agent shall have received from each of
the Guarantor and the Required Participants a duly executed counterpart
hereof; and (iii) the Guarantor shall have satisfied all of the conditions
precedent to each of (x) Amendment No. 1 to the Credit Agreement and (y)
Amendment No. 1 to the 1999 Facility.
Section 4. Representations and Warranties. The Guarantor hereby
represents and warrants that (a) each of the representations and warranties
made in Section 4 of the Guaranty are true and correct with the same force
and effect as though made on and as of the date of this Amendment No. 3,
except (i) to the extent that any such representations or warranties
expressly relate to an earlier date, such representations and warranties
were true and correct on and as of such earlier date, (ii) with respect to
the representation set forth in Section 4(d) and (e) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Information (as defined in Annex A) and (iii) with respect to the
representation set forth in Section 4(f) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999, and (b) no Default or Event of Default has occurred and
is continuing.
Section 5. Continuing Effect. Except as expressly modified and
amended hereby, the Guaranty remains unchanged and in full force and effect
in all respects. As expressly modified and amended hereby, the Guarantor
hereby ratifies and reaffirms the Guaranty.
Section 6. Governing Law. THIS AMENDMENT NO. 3 SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
Section 7. Counterparts. This Amendment No. 3 may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Amendment No. 3.
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on next page.]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 3 to be executed by their officers thereunto duly authorized
as of the date first above written.
RITE AID CORPORATION,
as Guarantor
By:__________________________________
Name:
Title:
Acknowledged and Agreed:
RAC LEASING LLC
By: The Diversified Group Incorporated
By:__________________________________
Name:
Title:
Exhibit 4.10
AMENDMENT NO. 2 TO GUARANTY
AMENDMENT NO. 2 TO GUARANTY ("Amendment No. 2"), dated as of October
25, 1999, from RITE AID CORPORATION, a Delaware corporation (the
"Guarantor"), to RAC LEASING LLC, a Wyoming limited liability company (the
"Lessor").
WHEREAS, the Lessor and Rite Aid Realty Corp. (the "Lessee") entered
into a Master Lease and Security Agreement dated as of March 19, 1998, as
amended by Amendment No. 1, dated as of June 22, 1998, and as further
amended by Amendment No. 2, dated as of the date hereof (as so amended, the
"Lease"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty, dated
as of March 19, 1998, as amended by Amendment No. 1, dated as of June 22,
1998 (as so amended, the "Guaranty"); and
WHEREAS, the Lessor has pledged and assigned its rights in the
Guaranty pursuant to the Amended and Restated Intercreditor and Security
Agreement dated as of March 19, 1998, as amended by Amendment No. 1, dated
as of June 22, 1998, among the Lessor, the Guarantor, the Lessee, The
Sumitomo Bank, Limited, New York Branch, as Collateral Agent and the other
parties thereto; and
WHEREAS, the obligations of the Guarantor under the Guaranty have been
secured under the PCS Pledge Agreement and the drugstore.com Pledge
Agreement (as such terms are defined in the Amended and Restated Credit
Agreement dated as of October 25, 1999 among the Guarantor, the banks
parties thereto and Morgan Guaranty Trust Company of New York, as agent);
and
WHEREAS, the Guarantor and the Lessor now desire to further amend the
Guaranty; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings given to such terms in Appendix I to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendment to Guaranty. Section 11(a) of the Guaranty is
hereby amended to read in its entirety as follows:
"(a) The covenants set forth in Annex A hereto, are
hereby incorporated herein in their entirety with the same
force and effect as if such covenants were set forth
expressly herein. The Guarantor further covenants and
agrees that it shall not cause or permit any increase in
the principal amount secured under the PCS Pledge Agreement
(as defined in Annex A) or the drugstore.com Pledge
Agreement (as defined in Annex A and together with the PCS
Pledge Agreement, the "Pledge Agreements") or cause or
permit any amendment or waiver to either Pledge Agreement
that by its terms materially adversely affects the rights
of the holders of the Synthetic Lease Obligations (as
defined in the Pledge Agreements) in a manner different
from its effect on the rights of holders of any other
Secured Obligations (as defined in the Pledge Agreements)
without the prior written consent of the Required
Participants."
Section 2. Pledge Agreements. The Lessor hereby accepts the benefits
of and agrees to be bound by the terms of the PCS Pledge Agreement and the
drugstore.com Pledge Agreement and confirms its appointment of Morgan
Guaranty Trust Company of New York as its agent thereunder in accordance
with the terms thereof.
Section 3. Secretary's Certificate. The Guarantor hereby agrees to
deliver to the Collateral Agent on the date hereof a certificate dated the
date of this Amendment No. 2, from the Secretary or Assistant Secretary of
the Guarantor certifying (i) as to the incumbency and signature of each
officer of the Guarantor authorized to execute and deliver this Amendment
No. 2, (ii) that attached thereto are true and complete copies of the
Certificate of Incorporation and By-Laws of the Guarantor as in full force
and effect on the date of this Amendment No. 2 and (iii) that attached
thereto is a true and complete copy of the resolutions of the Board of
Directors of the Guarantor authorizing the execution, delivery and
performance of this Amendment No. 2 and the transactions contemplated
hereby, together with a certificate of another officer of the Guarantor as
to the incumbency and signature of such Secretary or Assistant Secretary.
Section 4. Representations and Warranties. The Guarantor hereby
represents and warrants that (a) each of the representations and warranties
made in Section 4 of the Guaranty are true and correct with the same force
and effect as though made on and as of the date of this Amendment No. 2,
except (i) to the extent that any such representations or warranties
expressly relate to an earlier date, such representations and warranties
were true and correct on and as of such earlier date, (ii) with respect to
the representation set forth in Section 4(d) and (e) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Information (as defined in Annex A) and (iii) with respect to the
representation set forth in Section 4(f) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999, and (b) no Default or Event of Default has occurred and
is continuing.
Section 5. Continuing Effect. Except as expressly modified and
amended hereby, the Guaranty remains unchanged and in full force and effect
in all respects. As expressly modified and amended hereby, the Guarantor
hereby ratifies and reaffirms the Guaranty.
Section 6. Governing Law. THIS AMENDMENT NO. 2 SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
Section 7. Counterparts. This Amendment No. 2 may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Amendment No. 2.
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page.]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 2 to be executed by their officers thereunto duly authorized
as of the date first above written.
RITE AID CORPORATION,
as Guarantor
By: ______________________________
Name:
Title:
Acknowledged and Agreed:
RAC LEASING LLC
By: The Diversified Group Incorporated
By: ___________________________________
Name:
Title:
ANNEX A TO GUARANTY
DEFINITIONS
Definitions. Unless otherwise defined in the text of this Annex A,
the following terms, as used in this Annex A, have the following meanings
(capitalized terms used in this Annex A but not otherwise defined in this
Annex A shall have their respective meanings as set forth in the Guaranty;
unless otherwise specified in this Annex A, references to section numbers
in this Annex A refer to the numbered sections of this Annex A):
"ATTRIBUTABLE DEBT" means, as to any particular Sale and Leaseback
Transaction under which the Guarantor or any Subsidiary is at the time
liable, at any date as of which the amount thereof is to be determined (i)
in the case of any such transaction involving a Capital Lease, the amount
on such date of the Capital Lease Obligation thereunder, or (ii) in the
case of any other Sale and Leaseback Transaction, the then present value of
the minimum rental obligations under such Sale and Leaseback Transaction
during the remaining term thereof (after giving effect to any extensions at
the option of the lessor) computed by discounting the respective rental
payments at the actual interest factor included in such payments or, if
such interest factor cannot be readily determined, at the rate of 14% per
annum. The amount of any rental payment required to be made under any such
Sale and Leaseback Transaction not involving a Capital Lease may exclude
amounts required to be paid by the lessee on account of maintenance and
repairs, insurance, taxes, assessments, utilities, operating and labor
costs and similar charges.
"BANK" means each bank listed on the signature pages of the Credit
Agreement, each Assignee (as defined in the Credit Agreement) which becomes
a Bank pursuant to Section 9.06(c) of the Credit Agreement, and their
respective successors.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWING" means the aggregation of Loans of the same Class to be
made to the Guarantor by the Banks pursuant to Article 2 of the Credit
Agreement on a single date and for a single Interest Period.
"BUSINESS ACQUISITION" means (i) an Investment by the Guarantor or any
of its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such
Person shall become a Subsidiary or shall be merged into or consolidated
with the Guarantor or any of its Subsidiaries or (ii) an acquisition by the
Guarantor or any of its Subsidiaries of the property and assets of any
Person (other than the Guarantor or any of its Subsidiaries) that
constitute substantially all the assets of such Person or any division or
other business unit of such Person.
"CAPITAL LEASE" means any lease of property which, in accordance with
generally accepted accounting principles, should be capitalized on the
lessee's balance sheet; and "CAPITAL LEASE OBLIGATION" means the amount of
the liability so capitalized in respect of a Capital Lease.
"CLASS" has the meaning set forth in Section 1.03 of the Credit
Agreement.
"COLLATERAL" means collateral subject to the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, any additional
pledge agreements required to be delivered pursuant to the Loan Documents
and any other instruments or agreements executed pursuant to the foregoing.
"COMMITMENT" means a Tranche A Commitment or a Tranche B Commitment,
and "COMMITMENTS" means any two or more of the foregoing, as the context
may require.
"COMMITMENT SCHEDULE" means the Schedule attached to the Credit
Agreement and identified as such.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of expenditures by the Guarantor and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction permitted by Section 1.08.
"CONSOLIDATED DEBT" means at any date the Debt of the Guarantor and
its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"CONSOLIDATED EBITDA" for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining Consolidated Net Income
for such period, the aggregate amount of (i) Consolidated Interest Charges,
(ii) provision for income taxes, (iii) depreciation and amortization and
(iv) charges incurred in connection with store closings not in excess of
$48,000,000 and $20,000,000 during the fiscal years ending on or closest to
February 28, 2000 and February 28, 2001, respectively; provided that if
there shall have been an acquisition or disposition of operations during
such period, Consolidated EBITDA shall be calculated on a pro forma basis
giving effect thereto as if such acquisition or disposition had occurred on
the first day of such period.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the aggregate
amount of interest charges, whether expensed or capitalized, incurred or
accrued by the Guarantor and its Consolidated Subsidiaries during such
period.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Guarantor and its Consolidated Subsidiaries (exclusive of (a)
any non-cash loss on account of a sale of any drugstore and (b)
extraordinary items of gain or loss and other non-recurring items of gain
or loss, but only to the extent that such non-recurring items of loss do
not (i) involve any cash expenditure by the Guarantor during such period or
any future period or (ii) exceed $50,000,000 in any fiscal year),
determined on a consolidated basis for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
(less applicable reserves and other properly deductible items) which under
generally accepted accounting principles would be included on a
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries after deducting therefrom (i) all liabilities and liability
items, including amounts in respect of obligations or guarantees of
obligations under leases, which under generally accepted accounting
principles would be included on such balance sheet, except Funded Debt,
capital stock and surplus, surplus reserves and provisions for deferred
income taxes, and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included
on such consolidated balance sheet.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated Subsidiaries
determined as of such date.
"CONSOLIDATED RENT" means, for any period, the consolidated rental
expense of the Guarantor and its Consolidated Subsidiaries for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Guarantor in its consolidated financial statements if such statements were
prepared as of such date.
"CREDIT AGREEMENT" means the Amended and Restated Credit Agreement
dated as of October 25, 1999 among Rite Aid Corporation, the banks from
time to time parties thereto and Morgan Guaranty Trust Company of New York,
as Agent, without giving effect to any amendments or waivers thereof made
by the requisite parties thereunder after October 25, 1999 unless expressly
consented to by the Required Participants.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles,
(v) all non-contingent obligations (and, for purposes of Section 1.10 and
the definition of Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in
respect of amounts paid under a letter of credit or similar instrument,
(vi) all Debt secured by a Lien on any asset of such Person, whether or not
such Debt is otherwise an obligation of such Person, and (vii) all Debt of
others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default under the Credit Agreement or which with the giving of notice or
lapse of time or both would, unless cured or waived, become an Event of
Default under the Credit Agreement.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law
to close.
"DRUGSTORE.COM" means drugstore.com, inc., a Delaware corporation, and
its successors.
"DRUGSTORE.COM PLEDGE AGREEMENT" means the drugstore.com Pledge
Agreement dated as of October 25, 1999 between the Guarantor and Morgan
Guaranty Trust Company of New York, as agent thereunder.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Guarantor, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Guarantor
or any Subsidiary, are treated as a single employer under Section 414 of
the Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01 of the
Credit Agreement.
"FIXED CHARGE COVERAGE RATIO" means at any date, the ratio of (i)
Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated Interest
Charges plus Consolidated Rent, in each case for the period of four
consecutive fiscal quarters most recently ended on or prior to such date.
"FUNDED DEBT" means any Debt maturing more than one year after the
date of determination thereof and any Debt, regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include:
(a) any Debt for the payment, redemption or satisfaction of
which money (or evidences of indebtedness, if permitted under the
instrument creating such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or proper depository
either at or before maturity or redemption date thereof; or
(b) guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising, in the ordinary
course of business, out of installment or conditional sales to or by,
or transactions involving title retention with, distributors, dealers
or other customers of merchandise, equipment or services or guarantees
other than guarantees of indebtedness for borrowed money.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDENTURES" means (i) the Indenture dated as of December 21, 1998
between the Guarantor and Harris Trust and Savings Bank, as trustee, (ii)
the Indenture dated as of September 22, 1998 between the Guarantor and
Harris Trust and Savings Bank, as trustee and (iii) the Indenture dated as
of August 1, 1993, between the Guarantor and First Trust of New York,
National Association, as successor trustee.
"INFORMATION" means, collectively, (i) the information provided to the
Banks in connection with the waiver dated as of September 29, 1999 to the
Existing Credit Agreement and (ii) the information presented to the Banks
at meetings in New York City on October 4, 1999 and October 18, 1999 among
the Borrower and certain financial institutions.
"INTEREST PERIOD" shall have the meaning set forth in Section 1.01 of
the Credit Agreement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise. Any
repurchase by the Guarantor of its own capital stock shall not constitute
an Investment for purposes of this Annex A. The amount of any Investment
shall be the original principal or capital amount thereof less all returns
of principal or equity thereon (and without adjustment by reason of the
financial condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal, to the fair market
value of such property at the time of such transfer or exchange.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Annex A, the Guarantor or any Subsidiary
shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease or other title retention agreement relating
to such asset.
"LOAN" means a Tranche A Loan or a Tranche B Loan and "LOANS" means
Tranche A Loans or Tranche B Loans or any combination of the foregoing.
"LOAN DOCUMENTS" means the Credit Agreement, the Notes and the
Collateral Documents.
"MATERIAL FINANCIAL OBLIGATIONS" means (i) a principal or face amount
of Debt (except Debt outstanding hereunder) and/or (ii) payment or
collateralization obligations in respect of Derivatives Obligations and/or
(iii) payment or collateralization obligations in respect of leases (other
than Capital Leases, which are Debt) of the Guarantor and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001 (a) (3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"1999 FACILITY" means the $1,300,000,000 Term Loan Agreement dated as
of the date of this Amended Agreement among Rite Aid Corporation, the banks
listed therein and Morgan Guaranty Trust Company of New York, as
administrative agent thereunder, without giving effect to any amendments or
waivers thereof made by the requisite parties thereunder after October 25,
1999 unless expressly consented to by the Required Participants.
"1999 EXPOSURES" mans the undrawn commitments and/or the outstanding
loans under the 1999 Facility.
"1999 LOAN DOCUMENTS" means the "Loan Documents" as defined in the
1999 Facility.
"NOTES" means promissory notes of the Guarantor, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Guarantor to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PCS" means PCS Holding Corporation, a Delaware corporation, and its
successors.
"PCS PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as October
25, 1999 between the Guarantor and Morgan Guaranty Trust Company of New
York, as agent thereunder.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENTS" means the drugstore.com Pledge Agreement and the
PCS Pledge Agreement.
"REFUNDING BANK" shall have the meaning set forth in Section 1.01 of
the Credit Agreement.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Guarantor's capital stock (except dividends payable
solely in shares of its capital stock) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of
the Guarantor's capital stock or (b) any option, warrant or other right to
acquire shares of the Guarantor's capital stock (other than such payment in
connection with employee benefit plans in the ordinary course of business).
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in
Section 1.09.
"SEC" means the Securities and Exchange Commission, or any Person
succeeding to its functions under the Securities Exchange Act of 1934, as
amended.
"SECURED DEBT" means Debt which is secured by a Lien on property of
the Guarantor or any Subsidiary, but shall not include guarantees arising
in connection with the sale, discount, guarantee or pledge of notes,
chattel mortgages, leases, accounts receivable, trade acceptances and other
papers arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or
services.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any group
of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 8% of the consolidated assets of the
Guarantor and its Consolidated Subsidiaries at such time.
"SUBSIDIARY" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Guarantor.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial
paper rated at least A-I by S&P and P- I by Moody's, (iii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000,
(iv) repurchase agreements with respect to securities described in clause
(i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, provided in each case that
such Investment matures within one year from the date of acquisition
thereof by the Guarantor or a Subsidiary or (v) money market mutual funds
at least 90% the assets of which are held in Investments referred to in
clauses (i) through (iv) above (except that the maturities of certain
Investments held by any such money market funds may exceed one year so long
as the dollar-weighted average life of the Investments of such money market
mutual fund is less than one year).
"TERMINATION DATE" means July 19, 2001, or, if such day is not a Euro-
Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which
case the Termination Date shall be the next preceding Euro-Dollar Business
Day.
"TOTAL CAPITAL" means, at any date, the sum of Consolidated Debt and
Consolidated Net Worth, each determined as of such date.
"TRANCHE A COMMITMENT" means (i) with respect to each Bank listed in
the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche A Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c)
of the Credit Agreement, the amount of the Tranche A Commitment thereby
assumed by it, in each case as such amount may be changed from time to time
pursuant to Sections 2.08, 2.10 and 9.06(c) of the Credit Agreement.
"TRANCHE A EXPOSURE" means, with respect to each Bank, the amount of
its Tranche A Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche A Loans, if its Tranche A
Commitment is no longer in existence.
"TRANCHE A LOAN" means a loan made by a Bank pursuant to Section 2.
01(a) of the Credit Agreement.
"TRANCHE B COMMITMENT" means (i) with respect to each Bank listed in
the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche B Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c)
of the Credit Agreement, the amount of the Tranche B Commitment thereby
assumed by it, in each case as such amount may be changed from time to time
pursuant to Sections 2.08, 2. 10 and 9.06(c) of the Credit Agreement.
"TRANCHE B EXPOSURE" means, with respect to each Bank, the amount of
its Tranche B Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche B Loans, if its Tranche B
Commitment is no longer in existence.
"TRANCHE B LOAN" means a loan made by a Bank pursuant to Section
2.01(b) of the Credit Agreement.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii)
the fair market value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but unpaid contributions),
all determined as of the then most recent valuation date for such Plan, but
only to the extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Guarantor.
Accounting Terms and Determinations. (a) Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred
in by the Guarantor's independent public accountants) with the most recent
audited consolidated financial statements of the Guarantor and its
Consolidated Subsidiaries delivered accordance with such timetable.
COVENANTS
The Guarantor agrees that, until the Commitments (as defined in the
Committed Loan Agreement) of the all of the Lenders have been terminated
and all of the Secured Obligations (as defined in the Intercreditor
Agreement) have been paid or performed in full:
SECTION 1. Information. The Guarantor will deliver to each of
the Liquidity Providers:
(a) as soon as available and in any event within 90 days (or within
such longer period of time, not greater than 120 days, to which the SEC may
extend the filing deadline for the Guarantor's Annual Report on Form 10-K)
after the end of each fiscal year of the Guarantor, a consolidated balance
sheet of the Guarantor and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of income and cash
flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on in a manner
acceptable to the SEC by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days (or (x) in
the case of the fiscal quarter most recently ended prior to October 25,
1999, within 65 days or (y) in the case of any subsequent fiscal quarter,
within such longer period of time, not greater than 60 days, to which the
SEC may extend the filing deadline for the Guarantor's Quarterly Report on
Form 10-Q) after the end of each of the first three quarters of each fiscal
year of the Guarantor, a consolidated balance sheet of the Guarantor and
its Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and for
the portion of the Guarantor's fiscal year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Guarantor's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Guarantor;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Guarantor
(i) setting forth in reasonable detail the calculations required to
establish whether the Guarantor was in compliance with the requirements of
Sections 1.08 to 1.15, inclusive, on the date of such financial statements
and (ii) stating whether any Default exists on the date of such certificate
and, if any Default then exists, setting forth the details thereof and the
action which the Guarantor is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Guarantor obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Guarantor setting forth the details thereof and the action which the
Guarantor is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Guarantor generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Guarantor shall have filed with the SEC;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Guarantor setting forth details as to such
occurrence and action, if any, which the Guarantor or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Guarantor and its Subsidiaries as the
Liquidity Agent, at the request of any Liquidity Provider, may reasonably
request.
Information required to be delivered pursuant to Section 1.01 (a),
1.01 (b), 1.01 (f) or 1.01 (g) above shall be deemed to have been delivered
on the date on which the Guarantor provides notice to the Liquidity
Providers that such information has been posted on the Guarantor's website
on the Internet at the website address listed on the signature pages
hereof, at sec.gov/edaux/searches.htm or at another website identified in
such notice and accessible by the Liquidity Providers without charge;
provided that (i) such notice may be included in a certificate delivered
pursuant to Section 1.01(c) and (ii) the Guarantor shall deliver paper
copies of the information referred to in Section 1.01(a), 1.01(b), 1.01(f)
or 1.01(g) to any Liquidity Provider which requests such delivery.
SECTION 2. Payment of Obligations. The Guarantor will, and will
cause each of its Subsidiaries to, pay and discharge, as the same shall
become due and payable, (i) all material claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons prior
to the time such claims or demands give rise to a Lien upon any of its
property or assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or assets, except
where any of the items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Guarantor or such Subsidiary, as
the case may be, shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves, if any, for
the accrual of any such items.
SECTION 3. Maintenance of Property; Insurance.
(a) The Guarantor will keep, and will cause each Subsidiary to keep,
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Guarantor will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Guarantor or in such Subsidiary's own
name) with financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and against at
least such risks (and with such risk retention) as are usually insured
against in the same general area by companies of established repute engaged
in the same or a similar business; and will furnish to the Liquidity
Providers, upon request from the Liquidity Agent, information presented in
reasonable detail as to the insurance so carried.
SECTION 4. Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in the covenants set forth in this Annex A,
the Guarantor will continue, and will cause each Significant Subsidiary to
continue, to engage in business of the same general type as now conducted
by the Guarantor and its Significant Subsidiaries, and will preserve, renew
and keep in full force and effect, and will cause each Significant
Subsidiary (except where such Significant Subsidiary merges into the
Guarantor or any other Subsidiary) to preserve, renew and keep in full
force and effect their respective legal existences and their respective
rights, privileges and franchises necessary or desirable in the normal
conduct of business.
SECTION 5. Compliance with Laws. The Guarantor will comply, and
cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a material
adverse effect on the business, financial position or results of operations
of the Guarantor and its Consolidated Subsidiaries, considered as a whole.
SECTION 6. Inspection of Property, Books and Records. The
Guarantor will keep, and will cause each Subsidiary to keep, proper books
of record and account in which full, true and correct entries shall be made
of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit,
representatives of any Liquidity Provider at such Liquidity Provider's
expense to visit and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
SECTION 7. Restriction on Other Agreements. The Guarantor will not,
and will not permit any Subsidiary to, enter into any agreement (other
than the Loan Documents and the 1999 Loan Documents) which imposes a
limitation on incurrence by the Guarantor and its Subsidiaries of Liens
that is more restrictive than the limitation on Liens set forth in the
Indentures (other than agreements with respect to Debt secured by Liens
permitted by Section 1.10(a) containing restrictions on the ability to
transfer or grant Liens on the assets securing such Debt and other than
customary restrictions contained in purchase and sale agreements limiting
the transfer of the subject assets pending closing and customary
non-assignment provisions in leases and other contracts entered into in the
ordinary course of business) or which imposes other covenants more
restrictive than those set forth in this Annex A.
SECTION 8. Restriction on Debt of Subsidiaries. The Guarantor will
not permit any Subsidiary to create, issue, incur, assume, or in any
other way become liable for any unsecured Debt unless immediately prior
thereto the Guarantor would be entitled under Section 1.10(e) to create
Secured Debt not specifically permitted under Section 1.10 but for
subsection (e) thereof in an amount equal to such Debt; provided that the
foregoing restriction shall not prevent (i) any Subsidiary from becoming
liable to the Guarantor or to a Wholly-Owned Consolidated Subsidiary for
Debt or (ii) the extension, renewal or refunding of any Debt of any
Subsidiary so long as Consolidated Debt is not thereby increased.
SECTION 9. Restriction on Sales with Leases Back. Except for a
sale or transfer by a Subsidiary to the Guarantor or a Wholly-Owned
Consolidated Subsidiary, the Guarantor will not, and will not permit any
Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail
store or equipment now or hereafter owned and operated by the Guarantor or
a Subsidiary, with the intention that the Guarantor or any Subsidiary take
back a lease thereof, except a lease for a period, including renewals, not
exceeding 24 months, by the end of which period it is intended that the use
of such property or equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "SALE AND LEASEBACK
TRANSACTION"); provided that, notwithstanding the foregoing, the Guarantor
or any Subsidiary may enter into a Sale and Leaseback Transaction if the
Guarantor or a Subsidiary would be entitled under Section 1.10(e) to create
Secured Debt not specifically permitted under Section 1. 10 but for Section
1.10(e) in an amount equal to the Attributable Debt respecting such Sale
and Leaseback Transaction; provided further that, notwithstanding the
foregoing, the Guarantor or any Subsidiary may enter into a Sale and
Leaseback Transaction if entered into in respect of property acquired by
the Guarantor or a Subsidiary if such Sale and Leaseback Transaction is
entered into within 24 months from the date of such acquisition; and
provided still further that, notwithstanding the foregoing, the Guarantor
or any Subsidiary may enter into a Sale and Leaseback Transaction so long
as the Net Cash Proceeds thereof are applied as contemplated by Section
2.10 of the Credit Agreement.
SECTION 10. Restriction on Liens. The Guarantor will not, and
will not permit any Subsidiary to, create, issue, incur, assume or
guarantee any Secured Debt; provided that the foregoing covenant shall not
apply to the following:
(a) (i) Any Lien on any property acquired or constructed by the
Guarantor or a Subsidiary and created contemporaneously with, or within 24
months after, such acquisition or the completion of such construction and
commencement of full operation of such property, whichever is later, to
secure or provide for the payment of any part of the purchase or
construction price of such property, or (ii) the acquisition by the
Guarantor or a Subsidiary of property subject to any Lien upon such
property existing at the time of acquisition thereof, whether or not
assumed by the Guarantor or such Subsidiary, or (iii) any conditional sales
agreement or other title retention agreement with respect to any property
hereafter acquired; provided that the Lien does not spread to other
property except unimproved real property previously owned upon which any
new construction has taken place and subsequent additions to such acquired
or constructed property;
(b) Any Lien created for the sole purpose of extending, renewing or
refunding, in whole or part, any Lien permitted by this Section 1.10 or any
Lien securing the Debt of the Guarantor or of any Subsidiary on October 25,
1999 or of a corporation at the time such corporation becomes a Subsidiary,
or any extensions, renewals or refundings of any such Lien; provided that
the principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
refunding and that such extension, renewal or refunding Lien shall be
limited to all or that part of the same property which secured the Debt so
extended, renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the Guarantor or a
Wholly-Owned Consolidated Subsidiary;
(d) Any Lien created by the Loan Documents or the 1999 Loan
Documents; and
(e) Secured Debt of the Guarantor and its Subsidiaries which would
otherwise be prohibited by the foregoing restrictions (not including
Secured Debt permitted to be secured under subsections (a) through (d)
above) so long as the sum of any such Secured Debt hereafter incurred and
outstanding at the time plus Attributable Debt of the Guarantor and any
Subsidiaries in respect of Sale and Leaseback Transactions hereafter
entered into and outstanding at the time (excluding Attributable Debt
incurred in respect of any Sale and Leaseback Transaction (i) entered into
in respect of property acquired by the Guarantor or a Subsidiary not more
than 24 months prior to the date such Sale and Leaseback Transaction is
entered into or (ii) if the Guarantor, within 120 days before or after such
Sale and Leaseback Transaction is entered into applies an amount equal to
the greater of (A) the net proceeds of the sale of the property so sold and
leased back or (B) the fair market value of such property at the date such
arrangement is entered into to the retirement of Secured Debt (other than
at maturity or pursuant to any mandatory payment provision) or to reduction
of the Commitments) plus unsecured Debt of any Subsidiary hereafter
incurred and outstanding at the time (excluding unsecured Debt incurred
through the extension, renewal or refunding of Debt of such Subsidiary
where Consolidated Debt was not thereby increased and excluding any Debt
owed to the Guarantor or a Wholly-Owned Consolidated Subsidiary) does not
at the time exceed 5% of Consolidated Net Tangible Assets.
SECTION 11. Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures for any period set forth below shall not
exceed the amount set forth below opposite such period:
FISCAL YEAR ENDING ON AMOUNT
OR CLOSEST TO
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
SECTION 12. Capitalization Leverage Ratio. At no time during any
period set forth below shall the ratio of (i) Consolidated Debt at such
time to (ii) Total Capital at such time, exceed the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 0.635
February 29, 2000 0.635
May 31, 2000 and thereafter 0.62
SECTION 13. Cash Flow Leverage Ratio. At no time during any
period set forth below shall the ratio of (i) Consolidated Debt at such
time to (ii) Consolidated EBITDA for the four consecutive fiscal quarters
then most recently ended at or prior to such time, exceed the ratio set
forth below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 6.30
February 29, 2000 6.00
May 31, 2000 5.75
August 31, 2000 4.75
November 30, 2000 4.50
February 28, 2001 and thereafter 4.00
SECTION 14. Fixed Charge Coverage. At no time during any period
set forth below shall the Fixed Charge Coverage Ratio be less than the
ratio set forth below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 1.35
February 29, 2000 1.35
May 31, 2000 1.35
August 31, 2000 1.45
November 30, 2000 1.55
February 28, 2001 and thereafter 1.60
SECTION 15. Limitation on Investments and Acquisitions.
(a) Neither the Guarantor nor any Consolidated Subsidiary will make
or acquire any Investment in any Person other than:
(i) Investments in Consolidated Subsidiaries; provided, that
Investments (exclusive of inter-company payables owing to the
Guarantor or a Subsidiary arising from cash management transactions in
the ordinary course of business) in PCS, whether existing on the date
hereof or hereafter made, may be made only by the Guarantor and only
in the form of a contribution to the capital of PCS and without
issuance of additional shares of capital stock therefor, and provided
further that no such Investment may be made in any Subsidiary of PCS
except by PCS or another Subsidiary of PCS;
(ii) Temporary Cash Investments;
(iii) Investments received as consideration for sale or other
disposition of the capital stock of PCS or drugstore.com permitted by
Section 1.16;
(iv) Investments in drugstore.com existing on the date hereof;
and
(v) Any Investment not otherwise permitted by the foregoing
clauses of this Section if, immediately after such Investment is made
or acquired, the aggregate net book value of all Investments permitted
by this clause (c) does not exceed 10% of Consolidated Net Worth.
(b) The Guarantor will not, and will not permit any Subsidiary to,
consummate any Business Acquisition to the extent that the aggregate
consideration paid or payable by the Guarantor or any Subsidiary in
connection with all such Business Acquisitions on or after the Closing Date
would exceed $15,000,000.
SECTION 16. Consolidations, Mergers and Sales of Assets. The
Guarantor will not (i) consolidate or merge with or into any other Person,
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Guarantor and its Subsidiaries, taken
as a whole, to any other Person or (iii) sell, lease or otherwise transfer
any Collateral to any other Person; provided that (x) the Guarantor may
merge with another Person if (A) the Guarantor is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no
Default shall have occurred and be continuing and (y) the Guarantor may
sell or otherwise dispose of the capital stock of PCS or drugstore.com, in
whole but not in part, so long as the consideration therefor is not less
than the fair market value of such capital stock and shall consist solely
of a combination of cash and publicly traded securities payable and
deliverable at the closing of such sale.
SECTION 17. Use of Proceeds. The proceeds of the Tranche A Loans
made under the Credit Agreement will be used by the Guarantor exclusively
to repay commercial paper (or to refund borrowings the proceeds of which
were used solely to repay commercial paper), which commercial paper
provided funds for the payment of the purchase price of the capital stock
of PCS. The proceeds of the Tranche B Loans made under the Credit Agreement
will be used by the Guarantor for the Guarantor's general corporate
purposes; provided that no Tranche B Loans may be borrowed for a purpose
for which Tranche A Loans may be borrowed unless the Tranche A Commitments
are at the time fully drawn. No such use of the proceeds will be for the
purpose of prepaying commercial paper prior to the maturity thereof and no
such use of proceeds will be, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of buying or carrying any
"MARGIN STOCK" within the meaning of Regulation U, other than publicly
traded securities issued to the Guarantor in connection with the sale of
the capital stock of PCS. The Guarantor will ensure that no such use of
proceeds violates Regulation T, U or X.
SECTION 18. Restricted Payments. After the date hereof, neither
the Guarantor nor any Subsidiary will declare or make any Restricted
Payment.
SECTION 19. Synthetic Leases. Neither the Guarantor nor any
Subsidiary will enter into any Synthetic Lease if, after giving effect
thereof, the aggregate amount financed under all Synthetic Leases entered
into in any period of twelve consecutive calendar months commencing after
October 25, 1999 would exceed $35,000,000.
SECTION 20. Tranche A Limitations.
(a) No Tranche A Loans may be borrowed under the Credit Agreement
unless the commitments under the 1999 Facility are fully drawn.
(b) The Guarantor will not for so long as the Tranche B Commitments
remain in existence use any source of funds other than additional Tranche A
Loans to repay or prepay Tranche A Loans prior to the Termination Date,
except as expressly contemplated by Section 2.10 of the Credit Agreement.
(c) If the capital stock of PCS is sold for consideration consisting
in whole or in part of "margin stock" within the meaning of Regulation U,
then for so long as such margin stock is held as substitute collateral
under the PCS Pledge Agreement, the Guarantor may not make any Tranche A
Borrowing other than a from a Refunding Bank unless it shall have delivered
to the Liquidity Agent an opinion of Skadden, Arps, Slate, Meagher & Flom,
LLP, satisfactory in form and substance to the Liquidity Agent, to the
effect that such Borrowing does not result in a violation of Regulation T,
U or X.
SECTION 21. Mandatory Payments. The Guarantor agrees to use all
Net Cash Proceeds, if any, from the sale of the Collateral (or any part
thereof) that are remaining after the application of such Net Cash Proceeds
in accordance with all mandatory prepayment provisions set forth in each
Debt agreement to which the Guarantor is a party on October 25, 1999, and
any refinancings, renewals or extensions thereof, and which is in effect at
the time of such sale, to reduce the Lease Balance under the Lease.
Exhibit 4.11
AMENDMENT NO. 1 TO GUARANTY
AMENDMENT NO. 1 TO GUARANTY ("Amendment No. 1"), dated as of June 22,
1998, from RITE AID CORPORATION, a Delaware corporation (the "Guarantor"),
to RAC LEASING, a Wyoming limited liability company (the "Lessor").
WHEREAS, the Lessor and Rite Aid Realty Corp. (the "Lessee") entered
into a Master Lease and Security Agreement dated as of March 19, 1998 (the
"Master Lease"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty, dated
as of March 19, 1998 (the "Guaranty"); and
WHEREAS, the Lessor has pledged and assigned its rights in the
Guaranty pursuant to the Amended and Restated Intercreditor and Security
Agreement dated as of March 19, 1998 among the Lessor, the Guarantor, the
Lessee, the Sumitomo Bank, Limited, New York Branch, as Collateral Agent
and the other parties thereto (the "Intercreditor Agreement"); and
WHEREAS, the Guarantor and the Lessor now desire to amend the
Guaranty; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings given to such terms in Appendix I to the Master Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Section 3(b) of the Guaranty is hereby amended by inserting at the
end thereof the following:
"The Guarantor hereby waives, to the fullest extent
permitted by law, all rights and benefits under
section 2809 of the California Civil Code purporting
to reduce a guarantor's obligations in proportion to
the principal obligation, all rights and benefits
under section 580a of the California Code of Civil
Procedure governing determination of fair market value
following the exercise of power of sale, all rights
and benefits under section 580b of the California Code
of Civil Procedure stating that no deficiency may be
recovered on a real property purchase money obligation
and all rights and benefits under section 580d of the
California Code of Civil Procedure stating that no
deficiency may be recovered on a note secured by a
deed of trust on real property in case such real
property is sold under the power of sale contained in
such deed of trust, and all rights and benefits under
section 726 of the California Code of Civil Procedure
and any and all similar laws now in effect or
hereafter enacted in the State of California regarding
the procedures to be followed by a creditor with real
property security and/or limiting the right of such a
creditor to a deficiency judgment, including, without
limitation, the California law now in effect stating
that the Lessor must first proceed against any real
property collateral before commencing an action to
collect the Obligations, if such sections, or any of
them, have any application hereto or any application
to the Guarantor. The Guarantor expressly waives any
and all benefits under the California Civil Code
sections 2808, 2810, 2819, 2821, 2825, 2839, 2845
through 2850, 2854 and 2855."
2. Section 11(a) of the Guaranty is hereby amended by deleting such
Section in its entirety and substituting in lieu thereof the following:
"(a)The covenants contained in Article V of the Credit
Agreement, a copy of which is attached hereto as Annex A, are
hereby incorporated herein by reference with the same force and
effect as if such covenants were set forth expressly herein.
Notwithstanding the foregoing, any amendments or waivers of such
covenants approved by the requisite parties under the Credit
Agreement shall likewise be effective hereunder; provided, that
the Lessor and the Liquidity Providers shall have received a pro
rata share (based on the respective commitments of the Lessor,
Liquidity Providers and parties to the Credit Agreement) of any
consideration given by the Guarantor or any Affiliate of the
Guarantor in connection with such amendment or waiver; provided,
further, that if at any time there are loans outstanding under
the Committed Loan Agreement for a period of three consecutive
months or longer, then during the period (the "Voting Period")
commencing on the last day of such three-consecutive- month
period and ending on the date on which all outstanding loans
under the Committed Loan Agreement have been repaid in full, the
covenants from the Credit Agreement incorporated herein by
reference shall be effective without regard to any amendments or
waivers thereof made by the requisite parties under the Credit
Agreement during such Voting Period and not specifically
consented to by the Required Lenders."
3. The Guarantor hereby agrees to deliver to the Lessor (with
sufficient copies for the Collateral Agent and the other Secured Parties)
on the date hereof a certificate dated the date of this Amendment No. 1,
from the Secretary or Assistant Secretary of the Guarantor certifying (i)
as to the incumbency and signature of each officer of the Guarantor
authorized to execute and deliver this Amendment No. 1, (ii) that attached
thereto are true and complete copies of the Certificate of Incorporation
and By-Laws of the Guarantor as in full force and effect on the date of
this Amendment No. 1 and (iii) that attached thereto is a true and complete
copy of the resolutions of the Board of Directors of the Guarantor
authorizing the execution, delivery and performance of this Amendment No. 1
and the transactions contemplated hereby, together with a certificate of
another officer of the Guarantor as to the incumbency and signature of such
Secretary or Assistant Secretary.
4. The Guarantor hereby represents and warrants that each of the
representations and warranties made in Section 4 of the Guaranty are true
and correct with the same force and effect as though made on and as of the
date of this Amendment No. 1, except to the extent that any such
representations or warranties expressly relate to an earlier date, in which
case, such representations and warranties were true and correct on and as
of such earlier date.
5. Except as expressly modified and amended hereby, the Guaranty
remains unchanged and in full force and effect in all respects. As
expressly modified and amended hereby, the Guarantor hereby ratifies and
affirms the Guaranty.
6. THIS AMENDMENT NO. 1 SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7. This Amendment No. 1 may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute
but one and the same Amendment No. 1
[signatures begin on next page]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 1 to be executed by their officers thereunto duly authorized
as of the date first above written.
RITE AID CORPORATION,
as Guarantor
By:_____________________________________
Name:
Title:
Acknowledged and Agreed:
RAC LEASING LLC
By: The Diversified Group Incorporated
By:_________________________
Name:
Title:
Exhibit 4.12
AMENDMENT NO. 2
Dated as of October 25, 1999
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
RAC Leasing LLC
Amendment No. 2, dated as of October 25, 1999 ("Amendment No. 2"),
between RAC Leasing LLC, a Wyoming limited liability company, as lessor
("Lessor"), and Rite Aid Realty Corp., a Delaware corporation, as lessee
("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a Master
Lease and Security Agreement, dated as of March 19, 1998, (as amended by
Amendment No. 1, dated as of June 22, 1998, the "Lease"); and
WHEREAS, Lessor and Lessee wish to further amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
Section 1. Amendments to the Lease.
(a) Appendix 2 to the Lease is hereby amended by deleting the
reference to 0.125% in Paragraph (i) of Section (A) thereof and inserting
in lieu thereof "0.450%".
(b) Appendix 2 to the Lease is hereby further amended by deleting the
tables set forth under the headings "Determination of Lessor Applicable
Margin and Liquidity Applicable Margin" and "Determination of Lessor
Commitment Fee and Liquidity Commitment Fee", respectively, and inserting
in lieu thereof the following:
[TABLES OMITTED]
Section 3. Representations and Warranties. The Lessee
represents and warrants to the Liquidity Agent that:
(a) The execution, delivery and performance of this Amendment
No. 2 and any related documents executed in connection with this Amendment
No. 2, including, without limitation, Amendment No. 2 to the Guaranty,
dated as of the date hereof, from the Guarantor to the Lessor (the
"Amendment to Guaranty") and any documents and certificates furnished
pursuant hereto (collectively, the "Amendment Documents") and the
performance of the Lease, as amended by the Amendment Documents, have been
duly authorized by all necessary action of the Lessee. The Amendment
Documents have been duly executed and delivered by the Lessee and each
Amendment Document and the Lease, as amended by the Amendment
Documents, constitutes a legal, valid and binding obligation of the Lessee,
enforceable according to its terms, subject, as to enforceability, to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(b) The representations and warranties made under Section 6.2
of the Lease are true and correct with the same force and effect as though
made on and as of the date hereof and after giving effect to the Amendment
Documents, except (i) to the extent that such representations and
warranties expressly relate to an earlier date such representations and
warranties were true and correct on and as of such earlier date and (ii)
with respect to the representation set forth in Section 6.2(d) of the
Lease, such representation is true and correct on and as of the date hereof
as if made on and as of the date hereof except to the extent set forth in
the Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999; and
(c) No Default or Event of Default has occurred and is
continuing, or will result from the execution, delivery or performance of
the Amendment Documents, the performance of the Lease, as amended by the
Amendment Documents, or the consummation of the transactions contemplated
hereby.
Section 4. Conditions Precedent. As a condition precedent to the
effectiveness of this Amendment No. 2, the Liquidity Agent shall have
received the following items in form and substance satisfactory to it:
(a) fully executed counterparts of (i) this Amendment No. 2;
(ii) Amendment to Guaranty and (iii) the Fee Agreement, dated as of the
date hereof, between the Lessee and the Liquidity Agent (the "Fee
Agreement");
(b) a fully executed counterpart of the PCS Pledge Agreement
and the drugstore.com Pledge Agreement (as such terms are defined in the
Credit Agreement) showing a lien for the benefit of the Collateral Agent
and the Secured Parties under the Intercreditor Agreement.
(c) any and all fees payable to the Lessor, the Liquidity
Providers and the Liquidity Agent in connection with this Amendment No. 2,
including, without limitation, the fees payable under the Fee Agreement,
together with all costs and expenses incurred by the Liquidity Agent in
connection with the preparation, execution and delivery of the Amendment
Documents;
(d) certificates from the Secretary of State of the State of
Delaware evidencing the good standing each of the Lessee and the Guarantor;
(e) a certificate from the Secretary or an Assistant Secretary of
the Lessee certifying (i) as to the incumbency and signature of the officer of
the Lessee to execute and deliver the Amendment Documents to which it is a
party, (ii) that the charter and by-laws of the Lessee are in full force
and effect and have not been amended or modified since the date last
delivered to the Liquidity Agent, and (iii) that attached thereto is a true
and complete copy of the resolutions of the Boards of Directors of the
Lessee authorizing the execution, delivery and performance of the Amendment
Documents, the performance of the Lease, as amended by the Amendment
Documents, and the transactions contemplated thereby, together with a
certification by another officer of the Lessee as to the incumbency and
signature of such Secretary or Assistant Secretary;
(f) a certificate from a Responsible Officer of the Lessee,
certifying that, to the best knowledge of such officer, the representations
and warranties contained in Section 6.2 of the Lease are true and correct
on and as of the date of such certificate and after giving effect to the
Amendment Documents and that no Default or Event of Default has occurred or
is continuing or would result from the execution, delivery and performance
of the Amendment Documents or the performance of the Lease, as amended by
the Amendment Documents;
(g) a legal opinion addressed to the Liquidity Agent from the
outside or General Counsel to the Lessee and the Guarantor as to the due
authorization, execution and binding effect of the Amendment Documents, and
the Lease and the Guaranty, as amended by the Amendment Documents, in form
and substance satisfactory to the Liquidity Agent and its counsel; and
(h) Such other documents, instruments certificates and
information as the Liquidity Agent on behalf of itself and/or the other
Required Participants may request.
Section 5. Counterparts. This Amendment No. 2 may be executed
in several counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment No. 2.
Section 6. Governing LaTHIS AMENDMENT NO. 2 SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
Section 7. Continuing EExcept as herein provided, all provisions,
terms and conditions of the Lease shall remain in full force and effect. As
amended hereby, the Lease is ratified and confirmed in all respects.
[Remainder of this page left intentionally blank. Signatures begin
on next page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By:__________________________________
Name:
Title:
RAC LEASING LLC, as Lessor
By: The Diversified Group
Incorporated,
Manager
By:__________________________________
Name:
Title:
Exhibit 4.13
AMENDMENT NO. 1
Dated as of June 22, 1998
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
RAC Leasing LLC
Amendment No. 1, dated as of June 22, 1998 ("Amendment No.
1"), between RAC Leasing LLC, a Wyoming limited liability
company, as lessor ("Lessor"), and Rite Aid Realty Corp., a
Delaware corporation, as lessee ("Lessee"), amending the Lease
referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a
Master Lease and Security Agreement, dated as of March 19, 1998
(the "Lease"); and
WHEREAS, Lessor and Lessee wish to amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
1. Section 7.4 of the Lease is hereby amended by adding a
new subsection (b) thereto as follows:
"(b) Surety Fee. The Lessee shall pay to the
Lessor for the period (including any portion
thereof when the Lessor's obligations pursuant
to Section 3.1 are suspended by reason of the
Lessee's inability to satisfy any condition of
Article IV), commencing on July 15, 1998 and
ending on the Final Payment Date, a surety fee
(the "Surety Fee") as set forth in Appendix 2
hereof."
2. Section 31.1(b) of the Lease is hereby amended by
deleting clause (iv) of subsection (b) thereof and inserting in
its place the following:
"(iv) all Transaction Expenses incurred by the
Lessor, the Receivable Purchaser, the Collateral
Agent, the Conduits, the Liquidity Agent, the
Liquidity Providers and the Surety Providers in
respect of enforcement of any of their rights or
remedies against the Lessee or the Guarantor in
respect of the Operative Documents."
3. Annex 1 to the Lease, consisting of the Description of
Initial Leased Assets, is amended to read in its entirety as set
forth in Annex 1 to this Amendment No.
1.
4. Appendix 1 to the Lease, Definitions and Interpretations
is hereby amended as follows:
(a a new defined term "Eligible Assignee" is
added in the appropriate alphabetical order as
follows:
""Eligible Assignee" means any bank or financial
institution that, at the time it becomes a party to
the Liquidity Asset Purchase Agreement and the
Committed Loan Agreement, has a short-term debt
rating of at least A-1 by S&P and at least P-1 by
Moody's."
(b) the definition of the term "Indemnitee" is
hereby deleted in its entirety and the
following is inserted in its place:
""Indemnitee" means the Lessor, the Liquidity Agent,
each Liquidity Provider, each Conduit, the Receivable
Purchaser, each Lender, the Collateral Agent, each
Surety Provider and each of their respective
successors, assigns, directors, shareholders,
partners, members, officers, employees and agents."
(c) the definition of the term "Operative
Documents" is hereby amended by deleting the
word "and" after item (p) thereof, and
inserting the following: "(r) each Surety Bond;
(s) Assignment of Ground Lease, dated as of
June 22, 1998 between Thrifty Payless, Inc. and
Lessor; (t) Memorandum of Lease, Leasehold Deed
of Trust and Security Agreement, dated as of
June 22, 1998 between Lessor and Rite Aid
Realty Corp; and (u) Assignment of Lease, made
as of June 22, 1998 by Lessor, as Assignor to
the Collateral Agent." (d) a new defined term
"Surety Bond" is added in the appropriate
alphabetical order as follows:
""Surety Bond" means each surety bond issued by a
Surety Provider for the benefit of a Conduit."
(e) a new defined term "Surety Provider" is
added in the appropriate alphabetical order as
follows:
""Surety Provider" means each of Ambac Assurance
Corporation and any other provider of a Surety Bond for
the benefit of a Conduit."
(f) the definition of the term "Transaction
Expenses" is hereby amended by deleting
subsections (b) and (c) thereof in their
entirety and inserting in their place the
following:
"(b) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external
counsel, and (without duplication) the reasonable
allocated cost of internal legal services and all
disbursements of internal counsel of the Lessor, the
Receivable Purchaser, the Collateral Agent, the
Conduits, the Liquidity Agent, the Lenders, the
Liquidity Providers and the Surety Providers in
connection with (1) any amendment, supplement, waiver
or consent with respect to any Operative Documents
requested or approved by the Lessee and (2) any
enforcement of any rights or remedies against the
Lessee or the Guarantor or any Affiliate thereof in
respect of the Operative Documents;
(c) any other reasonable fees, out-of-pocket expenses,
disbursements or cost of the Lessor, the Receivable
Purchaser, the Collateral Agent, the Conduits, the
Liquidity Agent, the Lenders, the Liquidity Providers
and the Surety Providers related to the Operative
Documents or any of the other transaction documents;"
5. Appendix 2 to the Lease is hereby amended by adding a
new section as follows:
"Surety Fee
The Lessee shall pay on each Scheduled Payment Date,
beginning on July 15, 1998 and ending on the Final
Payment Date, the Surety Fee, for the benefit of
Ambac Assurance Corporation, at the rate of 0.125% of
the aggregate of all Liquidity Commitments (as
defined in the Liquidity Asset Purchase Agreement) of
all Liquidity Providers."
6. In connection with the execution and delivery of this
Amendment No. 1, the parties hereby acknowledge and agree that
(a) the Maryland Equipment and Systems currently leased under the
Lease pursuant to Lease Supplement No. 1 thereto shall be
purchased from the Lessor by Sumitomo Bank Leasing and Finance,
Inc. and leased to the Lessee pursuant to a Master Lease and
Security Agreement between Sumitomo Bank Leasing and Finance,
Inc., as lessor and Lessee, dated as of May 30, 1997 and (b)
Lease Supplement No. 1 is hereby terminated and of no further
force or effect.
7. Lessee hereby represents and warrants that each of the
representations and warranties made in Section 6.2 of the Lease
is true and correct on the date hereof with the same force and
effect as though made on and as of such date, except to the
extent that such representations and warranties expressly relate
to an earlier date, and that no Default or Event of Default has
occurred and is continuing.
8. This Amendment No. 1 may be executed in several
counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together,
shall constitute but one and the same Amendment No. 1.
9. THIS AMENDMENT NO. 1 SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
10. Except as herein provided, all provisions, terms and
conditions of the Lease shall remain in full force and effect. As
amended hereby, the Lease is ratified and confirmed in all
respects.
[signatures begin on next page]
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment No. 1 to be duly executed as of the date first
above written.
RITE AID REALTY CORP.,
as Lessee
By:__________________________________
Name:
Title:
RAC LEASING LLC, as Lessor
By: The Diversified Group Incorporated,
as manager
By:__________________________________
Name:
Title:
Exhibit 4.14
GUARANTY
GUARANTY, dated as of March 19, 1998 (the "Guaranty"), from
RITE AID CORPORATION, a Delaware corporation (the "Guarantor"), to RAC
LEASING LLC, a Wyoming limited liability company (the "Lessor").
W I T N E S S E T H:
WHEREAS, the Guarantor wishes to induce the Lessor to enter
into (i) a certain Master Lease and Security Agreement (the "Master Lease")
dated as of the date hereof and with Rite Aid Realty Corp., a Delaware
corporation and a wholly-owned subsidiary of the Guarantor (the "Lessee")
and (ii) certain other Operative Documents (as defined in the Master Lease)
with the Lessee on or after the date hereof (the Master Lease and such
Operative Documents, as each of them may be amended, modified,
supplemented, or extended from time to time, are collectively referred to
hereinafter as the "Guaranteed Agreements"); and
WHEREAS, the Lessor is unwilling to enter into the Guaranteed
Agreements with the Lessee unless the Guarantor enters into this Guaranty;
and
WHEREAS, capitalized terms used but not otherwise defined in
this Guaranty have the respective meanings specified in Appendix I of the
Master Lease; and the rules of interpretation set forth in Appendix I of
the Master Lease shall apply to this Guaranty;
NOW, THEREFORE, in order to induce the Lessor to enter into the
Guaranteed Agreements and to consummate the transactions contemplated
thereby, the Guarantor hereby agrees as follows:
1. Guaranty. (a) The Guarantor unconditionally and irrevocably
guarantees to the Lessor the due and punctual performance of and compliance
by the Lessee with all obligations, covenants, warranties, undertakings and
conditions agreed by the Lessee to be performed, observed or complied with
by the Lessee and contained in or arising under the Guaranteed Agreements
including but not limited to, the full and punctual payment by the Lessee,
when due, whether at the stated due date, by acceleration or otherwise, of
any and all rent, obligations, liabilities, indebtedness and other amounts
of every kind arising out of the Guaranteed Agreements, all amounts in
respect to indemnities provided for in the Guaranteed Agreements, and all
damages (whether provided for in the Guaranteed Agreements or otherwise
permitted by law) in respect of a failure or refusal by the Lessee to make
any such payment, howsoever created, arising or evidenced, voluntary or
involuntary, whether direct or indirect, absolute or contingent, now or
hereafter existing or owing to the Lessor (all the foregoing obligations
and undertakings are collectively referred to hereinafter as the
"Obligations").
(b) This Guaranty is an absolute and unconditional guaranty of
performance and payment when due under the Guaranteed Agreements and not of
collection of any indebtedness contained in or arising under the Guaranteed
Agreements. This Guaranty is in no way conditioned upon any attempt to
collect from the Lessee or upon any other event or contingency, and shall
be binding upon and enforceable against the Guarantor without regard to the
validity or enforceability of the Guaranteed Agreements, or of any term
thereof. If for any reason the Lessee shall fail or be unable duly and
punctually to pay any such amount when due under the Guaranteed Agreements,
the Guarantor will forthwith pay, if not already paid by the Lessee, the
same immediately upon written demand.
(c) In case any of the Guaranteed Agreements shall be terminated as a
result of the rejection thereof by any trustee, receiver or liquidating
agent of the Lessee or any of its properties in any bankruptcy, insolvency,
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar proceeding, the Guarantor's obligations hereunder
shall continue to the same extent as if such agreement had not been so
rejected. The Guarantor agrees that this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time payment to
the Lessor of the Obligations or any part thereof is rescinded or must
otherwise be returned by the Lessor upon the insolvency, bankruptcy or
reorganization of the Lessee, or otherwise, as though such payment to the
Lessor had not been made.
(d) The Guarantor shall pay on demand all reasonable costs, expenses
and damages incurred (including, without limitation, attorneys' fees and
disbursements) in connection with the enforcement of the obligations of the
Guarantor under this Guaranty.
2. Guaranty Continuing and Unlimited. The obligations of the Guarantor
hereunder shall be continuing and unlimited, shall not be subject to any
non-compulsory counterclaim, set-off, deduction or defense (other than
payment or performance) based upon any claim the Guarantor may have against
the Lessor or the Lessee or any other Person, and shall remain in full
force and effect without regard to, and shall not be released, discharged
or in any way affected by any circumstance or condition (whether or not the
Guarantor shall have any knowledge or notice thereof) whatsoever which
might constitute a legal or equitable discharge or defense including, but
not limited to, (a) any express or implied amendment or modification of or
supplement to the Guaranteed Agreements or any other agreement referred to
in either thereof, or any other instrument applicable to the Lessee or to
the Obligations, or any part thereof, or any assignment or transfer of any
thereof; (b) any failure on the part of the Lessee to perform or comply
with the Guaranteed Agreements or any failure of any other Person to
perform or comply with any term of the Guaranteed Agreements, or any other
agreement as aforesaid; (c) any waiver, consent, change, extension,
indulgence or other action or any action or inaction under or in respect of
the Guaranteed Agreements, or any other agreement as aforesaid, or this
Guaranty, whether or not the Lessor, the Lessee or the Guarantor has notice
or knowledge of any of the foregoing; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceeding with respect to the Guarantor or the Lessee, or their
respective properties or their creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding; (e) any
furnishing or acceptance of additional security or any release of any
security (and the Guarantor authorizes the Lessor to obtain, accept or
release said security); (f) any limitation on the liability or Obligations
of the Lessee under the Guaranteed Agreements (other than any limitation
expressly provided for therein) or any termination, cancellation,
frustration, invalidity or unenforceability, in whole or in part, of the
Guaranteed Agreements, or any term of any thereof; (g) any lien, charge or
encumbrance on or affecting the Guarantor's or any of the Lessee's
respective assets and properties; (h) any act, omission or breach on the
part of the Lessor or any other Person under the Guaranteed Agreements, or
any other agreement at any time existing between the Lessor and the Lessee
or any other law, governmental regulation or other agreement applicable to
the Lessor or any Obligation; (i) any claim as a result of any other
dealings among the Lessor, the Guarantor or the Lessee or any of them; (j)
the assignment of the Guaranteed Agreements by the Lessor to any other
Person, or the assignment of this Guaranty by the Lessor to any Person; or
(k) any change in the name or ownership of the Lessor, the Lessee or any
other person referred to herein.
3. Waiver. (a) The Guarantor unconditionally waives: (i) notice of any of
the matters referred to in Section 2 hereof; (ii) all notices which may be
required by statute, rule of law or otherwise to preserve any rights
against the Guarantor hereunder, including, without limitation, notice of
the acceptance of this Guaranty, or the creation, renewal, extension,
modification or accrual of the Obligations or notice of any other matters
relating thereto, any presentment, demand, notice of dishonor, protest,
nonpayment of any damages or other amounts payable under the Guaranteed
Agreements; (iii) any requirement for the enforcement, assertion or
exercise of any right, remedy, power or privilege under or in respect of
the Guaranteed Agreements, including, without limitation, diligence in
collection or protection of or realization upon the Obligations or any part
thereof or any collateral therefor; (iv) any requirement of diligence; (v)
any requirement to mitigate the damages resulting from a default by the
Lessee under the Guaranteed Agreements; (vi) the occurrence of every other
condition precedent to which the Guarantor or the Lessee may otherwise be
entitled; (vii) the right to require the Lessor to proceed against the
Lessee or any other Person liable on the Obligations, to proceed against or
exhaust any security held from the Lessee or any other Person, or to pursue
any other remedy in the Lessor's power whatsoever; (viii) the right to have
the property of the Lessee first applied to the discharge of the
Obligations; and any defense arising by reason of any disability or other
defense of the Lessee or by reason of the cessation from any cause
whatsoever of the liability, either in whole or in part, of the Lessee to
the Lessor for the Obligations, provided that nothing contained herein
shall be deemed to be a waiver by Guarantor of the benefit to Guarantor of
any notice or grace period to which the Lessee is entitled pursuant to the
express terms of the Operative Documents.
(b) The Lessor may, at its election, exercise any right or remedy it
may have against the Lessee or any security held by the Lessor, including,
without limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale, without affecting or impairing in any way the
liability of the Guarantor hereunder, except to the extent the Obligations
have been paid, and the Guarantor waives any defense arising out of the
absence, impairment or loss of any right of reimbursement, contribution or
subrogation or any other right or remedy of the Guarantor against the
Lessee or any such security, whether resulting from such election by the
Lessor or otherwise. The Guarantor understands that the liability of the
Lessee to the Lessor for the Obligations may be secured by real property
and that the Guarantor shall be liable for the full amount of its liability
hereunder notwithstanding foreclosure on such real property by trustee sale
or any other reason impairing the Guarantor's right to proceed against the
Lessee.
(c) The Guarantor understands that the Lessor's exercise of certain
rights and remedies contained in the Guaranteed Agreements may affect or
eliminate the Guarantor's rights of subrogation against the Lessee and that
the Guarantor may therefore incur partially or totally nonreimbursable
liability hereunder; nevertheless, the Guarantor hereby authorizes and
empowers the Lessor, its successors, endorsees and/or assignees, to
exercise in its or their sole discretion, any rights and remedies, or any
combination thereof, which may then be available, it being the purpose and
intent of the Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
(d) The Guarantor assumes the responsibility for being and keeping
informed of the financial condition of the Lessee and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and
agrees that the Lessor shall not have any duty to advise the Guarantor of
information regarding any condition or circumstance or any change in such
condition or circumstance. The Guarantor acknowledges that the Lessor has
not made any representation to the Guarantor concerning the financial
condition of the Lessee.
4. Representations and Warranties of the Guarantor. The Guarantor
represents and warrants to the Lessor that:
(a) Corporate Existence and Power. The Guarantor is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted.
(b) Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the
Guarantor of this Guaranty are within the Guarantor's corporate
powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with,
any governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of
the Guarantor or of any agreement or instrument evidencing or
governing debt of the Guarantor or any Subsidiary or any other
material agreement, instrument, judgment, injunction, order or
decree binding upon the Guarantor or any Subsidiary or result in
the creation or imposition of any Lien on any asset of the
Guarantor or any Subsidiary pursuant to any such agreement,
instrument, judgment, injunction, order or decree.
(c) Binding Effect. This Guaranty constitutes a valid and binding
agreement of the Guarantor enforceable in accordance with its terms.
(d) Financial Information.
(i) The consolidated balance sheet of the Guarantor
and its Consolidated Subsidiaries as of March 1, 1997 and the
related consolidated statements of income and cash flows for the
fiscal year then ended, reported on by KPMG Peat Marwick LLP,
fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Guarantor
and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal
year.
(ii) Since March 1, 1997, there has been no material
adverse change in the business, financial position, results of
operations or prospects of the Guarantor and its Consolidated
Subsidiaries, considered as a whole.
(e) Full Disclosure. All financial statements and other documents
furnished by the Guarantor to the Lessor in connection with this Guaranty
and the transactions contemplated hereby do not and will not contain any
untrue statement of material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
The Guarantor has disclosed to the Lessor in writing any and all facts
which materially and adversely affect the business, operations or
condition, financial or otherwise, of the Guarantor and its Subsidiaries or
the Guarantor's ability to perform its obligations under this Guaranty.
(f) Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Guarantor threatened against or
affecting, the Guarantor or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or
consolidated results of operations of the Guarantor and its Consolidated
Subsidiaries or which in any manner draws into question the validity or
enforceability of this Guaranty.
(g) Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code
with respect to each Plan. No member of the ERISA Group has (i) sought a
waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or
made any amendment to any Plan or Benefit Arrangement, which has resulted
or could result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA.
(h) Taxes. The Guarantor and its Subsidiaries have filed all United
States Federal income tax returns, and the Guarantor and its Significant
Subsidiaries have filed all other material tax returns, which are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Guarantor or any Significant
Subsidiary except where the payment of any such taxes is being contested in
good faith by appropriate proceedings. The charges, accruals and reserves
on the books of the Guarantor and its Consolidated Subsidiaries in respect
of taxes or other governmental charges are, in the opinion of the
Guarantor, adequate.
(i) Subsidiaries. Each of the Guarantor's Significant Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all corporate or similar entity
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
(j) Environmental Matters. In the ordinary course of its business,
the Guarantor conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Guarantor and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures
required to achieve or maintain compliance with environmental protection
standards imposed by law or as a condition of any license, permit or
contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of
or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or hazardous
substances, and any actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of
this review, the Guarantor has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental
Laws, are unlikely to have a material adverse effect on the business,
financial condition, results of operations or prospects of the Guarantor
and its Consolidated Subsidiaries, considered as a whole.
(k) Lessee. On the date hereof, the Guarantor owns 100% of the issued
and outstanding shares of capital stock of the Lessee. All such shares have
been validly issued, are fully paid and non-assessable and are free and
clear of any liens or encumbrances. The Guarantor will continue to own,
directly or indirectly, a sufficient number of the issued and outstanding
shares of capital stock of the Lessee, so that the Lessee will remain a
Subsidiary.
(l) Defaults. The Guarantor is not in default under (and no event has
occurred which with the giving of notice or lapse of time would result in a
default under) any instrument evidencing any debt in excess of $10,000,000
or any agreement relating thereto or any material mortgage, deed of trust,
security agreement, lease, franchise or other agreement to which the
Guarantor is a party or by which the Guarantor or any of its properties or
assets is bound or to which it may be subject.
5. Payments. Each payment by the Guarantor to the Lessor under this
Guaranty shall be made by transferring the amount thereof in immediately
available funds without set-off or counterclaim; provided that no such
payment shall be deemed a waiver of any rights the Guarantor may have.
6. Parties. This Guaranty shall inure to the benefit of the Lessor
and its successors, assigns or transferees, and shall be binding upon the
Guarantor and its successors and assigns. The Guarantor may not delegate
any of its duties under this Guaranty without the prior written consent of
the Lessor or any Person to whom the Lessor has assigned this Guaranty.
7. Notices. All notices, demands and other communications between the
Lessor and the Guarantor under this Guaranty shall be in writing and shall
be delivered or sent to the address or telecopier number shown below, or to
such other address or telecopier number as either of us may by written
notice to the other have designated for such purpose. Any such notice,
demand or other communication shall not be effective until actually
received.
If to the Lessor:
RAC Leasing LLC
American National Bank Building
1912 Capitol Avenue, Suite 406
Cheyenne, WY 82003
Attention: Thomas N. Long
Telecopier: (307) 635-0413
Telephone: (307) 635-0710
With a copy to:
The Diversified Group Incorporated
950 Third Avenue
New York, NY 10022
Attention: James Haber
Telecopier: (212) 688-7908
Telephone: (212) 688-2700
If to the Guarantor:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011-2404
Attention: Chief Financial Officer
Telecopier: 717-975-3764
8. Remedies. The Guarantor stipulates that the remedies at law in
respect of any default or threatened default by the Guarantor in the
performance of or compliance with any of the terms of this Guaranty are not
and will not be adequate, and that any of such terms may be specifically
enforced by a decree for specific performance or by an injunction against
violation of any such terms or otherwise.
9. Rights to Deal with the Lessee. At any time and from time to time,
without terminating, affecting or impairing the validity of this Guaranty
of the obligations of the Guarantor hereunder, the Lessor may deal with the
Lessee in the same manner and as fully and as if this Guaranty did not
exist and shall be entitled, among other things, to grant the Lessee,
without notice or demand and without affecting the Guarantor's liability
hereunder, such extension or extensions of time to perform, renew,
compromise, accelerate or otherwise change the time for payment of or
otherwise change the terms of payment or any part thereof contained in or
arising under the Guaranteed Agreements, or to waive any Obligation of the
Lessee to perform, any act or acts as the Lessor may deem advisable.
10. Subrogation. Until such time as the Obligations (except for any
indemnification not then due and payable) shall have been paid or performed
in full by the Guarantor, no payment by or for the account of the Guarantor
shall entitle the Guarantor by subrogation or otherwise to any payment by
the Lessee or from or out of any property of the Lessee, and the Guarantor
shall not exercise any right or remedy against the Lessee or any property
of the Lessee by reason of any performance by the Guarantor.
11. Guarantor's Covenants. The Guarantor hereby covenants and agrees
that until the Obligations and all obligations of the Guarantor under this
Guaranty have been paid or discharged in full:
(a) The covenants contained in Article V of the Credit
Agreement are hereby incorporated herein by reference with the
same force and effect as if such covenants were set forth
expressly herein. Notwithstanding the foregoing, any amendments
or waivers of such covenants approved by the requisite parties
under the Credit Agreement shall likewise be effective hereunder
provided that the Lessor and the Liquidity Providers shall have
received a pro rata share (based on the respective commitments of
the Lessor, Liquidity Providers and parties to the Credit
Agreement) of any consideration given by the Guarantor or any
Affiliate of the Guarantor in connection with such amendment or
waiver.
(b) The Guarantor will ensure that its obligations under
this Guaranty, and the obligations of the Lessee under the
Guaranteed Agreements, constitute senior debt for all purposes of
all subordinated debt for money borrowed issued, incurred or
assumed by the Guarantor or the Lessee, as the case may be, after
the date hereof.
12. Survival of Representations, Warranties, etc. All
representations, warranties, covenants and agreements made herein and in
statements or certificates delivered pursuant hereto shall survive any
investigation or inspection made by or on behalf of the Lessor and shall
continue in full force and effect until all of the obligations of the
Guarantor under this Guaranty shall be fully performed in accordance with
the terms hereof, and until the payment in full of all sums payable by the
Lessee under the Guaranteed Agreements, and until performance in full of
all obligations of the Lessee in accordance with the terms and provisions
of such agreements.
13. Third Party Beneficiaries. The Guarantor expressly acknowledges
and agrees that each Indemnitee (as such term is defined in the Master
Lease) shall be a third party beneficiary of this Guaranty.
14. GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO HEREBY EXPRESSLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE GUARANTOR HEREBY
IRREVOCABLY AGREES THAT ANY JUDICIAL PROCEEDINGS BROUGHT AGAINST THE
GUARANTOR WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND, BY
THE EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR ACCEPTS THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. SERVICE OF PROCESS MAY
BE MADE BY ANY MEANS AUTHORIZED BY FEDERAL LAW OR THE LAW OF NEW YORK, AS
THE CASE MAY BE. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE GUARANTOR AT THE ADDRESS SET FORTH IN SECTION 7
HEREOF, OR AT SUCH OTHER ADDRESS AS MAY BE DESIGNATED BY THE GUARANTOR IN A
NOTICE TO THE LESSOR. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE LESSOR OR
ITS ASSIGNEE TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.
15. Miscellaneous. If any term of this Guaranty or any application
thereof shall be invalid or unenforceable, the remainder of this Guaranty
and any other application of such term shall not be affected thereby. Any
term of this Guaranty may be amended, waived, discharged or terminated only
by an instrument in writing signed by the Guarantor and the Lessor. The
headings in this Guaranty are for purposes of reference only and shall not
limit or define the meaning hereof. This Guaranty may be executed in any
number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have caused this
Guaranty to be executed and delivered as of the day and year
first above
written.
RITE AID CORPORATION,
as Guarantor
By:_____________________________________
Name:
Title:
Acknowledged and Agreed:
RAC LEASING LLC
By: The Diversified Group Incorporated
By:___________________________________
Name:
Title:
Exhibit 4.15
MASTER LEASE AND SECURITY AGREEMENT
THIS MASTER LEASE AND SECURITY AGREEMENT (this "Lease"), dated as of
March 19, 1998, is entered into between RAC LEASING LLC, a Wyoming limited
liability Company, as the Lessor, and RITE AID REALTY CORP., a Delaware
corporation, as the Lessee.
W I T N E S S E T H:
WHEREAS, the Lessor wishes to finance the acquisition of the assets
described on Annex 1;
WHEREAS, the Lessor may in the future agree with the Lessee to
finance (i) the development of certain real property and construction of
improvements to be used by the Lessee and (ii) the acquisition of certain
equipment and systems related to such real property and improvements and
(iii) the acquisition of certain other assets to be used by the Lessee;
WHEREAS, the Lessee, as Construction Agent, will construct any such
improvements which, as constructed, will be the property of the Lessor and
will become part of the Leased Assets subject to the terms of this Lease;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee
desires to lease from the Lessor, the Leased Assets from time to time
subject to this Lease; and
WHEREAS, the Lessee is a wholly-owned direct subsidiary of Rite Aid
Corporation, and Rite Aid Corporation is willing to guarantee the payment
and performance of all of the Lessee's obligations hereunder and under the
other documents entered into by the Lessee in connection herewith;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
Appendix 1 to this Lease; and the rules of interpretation set forth in
Appendix 1 to this Lease shall apply to this Lease.
ARTICLE II
PURCHASE AND LEASE
2.1 Acceptance and Lease of Assets. (a) Properties. Subject to the
terms and conditions of this Lease, on each Acquisition Date for a parcel
of Land (i) the Lessor shall purchase a fee interest in such parcel of
Land, or the Lessee shall convey a leasehold interest in such parcel of
Land to the Lessor pursuant to a Ground Lease, and the Lessor shall accept
delivery of, such Land pursuant to the terms hereof (and subject to the
conditions set forth herein) and (ii) the Lessor shall demise and lease to
the Lessee hereunder for the Base Term applicable thereto the Lessor's
interest in such Land together with any Improvements which then may be
located thereon or thereafter may be constructed thereon pursuant to the
Construction Agency Agreement or this Lease, and the Lessee hereby agrees,
expressly for the direct benefit of the Lessor, to lease from the Lessor
for such Base Term, the Lessor's interest in such Land together with the
Lessor's interest in such Improvements.
(b) Equipment and Systems. Subject to the terms and
conditions of this Lease, from time to time after the Acquisition Date for
any Property and on or before the Base Date therefor, (i) the Lessor shall
purchase Equipment and Systems relating to such Property pursuant to the
terms hereof (and subject to the conditions set forth herein) and (ii) the
Lessor shall demise and lease to the Lessee hereunder for the Base Term
applicable thereto the Lessor's interest in such Equipment and Systems, and
the Lessee hereby agrees, expressly for the direct benefit of the Lessor,
to lease from the Lessor for such Base Term, the Lessor's interest in such
Equipment and Systems.
(c) Additional Assets. Subject to the terms and
conditions of this Lease, on each Acquisition Date for any Other Asset not
constituting Equipment and Systems (i) the Lessor shall purchase such Other
Asset pursuant to the terms hereof (and subject to the conditions set forth
herein) and (ii) the Lessor shall demise and lease to the Lessee hereunder
for the Base Term applicable thereto the Lessor's interest in such Other
Asset, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease from the Lessor for such Base Term, the Lessor's
interest in such Other Asset.
2.2 Acceptance Procedure. The Lessee hereby agrees that the execution
and delivery by the Lessee on each Acquisition Date of an appropriately
completed Lease Supplement shall, without further act, constitute the
unconditional and irrevocable acceptance by the Lessee of all of the Leased
Asset which is the subject of such Lease Supplement for all purposes of
this Lease and the other Operative Documents on the terms set forth therein
and herein, and that all of such Leased Assets shall be deemed to be
included in the leasehold estate of this Lease and shall be subject to the
terms and conditions of this Lease as of the applicable Acquisition Date
(or, in the case of any asset constituting Equipment and Systems, as of
such later date on which such asset is acquired by the Lessor).
2.3 Lease Term. This Lease shall be in full force and effect on the
Closing Date. The Base Date and the Base Term for each Leased Asset shall
be set forth in the applicable Lease Supplement therefor.
2.4 Title. Each Leased Asset is leased to the Lessee without, except
as expressly set forth herein, any representation or warranty, express or
implied, by the Lessor and subject to the rights of parties in possession,
the existing state of title (including, without limitation, Permitted Liens
other than Lessor Liens) and all applicable Requirements of Law. The Lessee
shall in no event have any recourse against the Lessor for any defect in or
exception to title to any Leased Asset other than to the extent resulting
from Lessor Liens.
ARTICLE III
FUNDING OF ADVANCES
3.1 Lessor Commitment. Subject to the conditions and terms hereof,
the Lessor shall, upon the written request of the Lessee from time to time,
make Advances on Funding Dates for the purpose of (i) in the case of any
Property, financing the acquisition, ownership, insurance, renovation and
improvement of such Property during the Construction Period applicable
thereto, (ii) in the case of any Equipment and Systems, financing the
acquisition, ownership and insurance of any asset constituting Equipment
and Systems during the Construction Period for the related Property and
(iii) in the case of any Other Asset not constituting Equipment and
Systems, financing the acquisition of such Other Asset. Notwithstanding any
other provision hereof, the Lessor shall not be obligated to make any
Advance if, after giving effect thereto, the aggregate original amounts of
Advances (x) with respect to the Leased Asset to be funded thereby would
exceed the Lessor's Commitment relating thereto or (y) with respect to all
Leased Assets would exceed the Lessor's Total Commitment. Notwithstanding
anything herein to the contrary, until the Lessee shall have executed and
delivered to the Lessor and to Sumitomo Bank Leasing and Finance, Inc., in
its capacity as lessor under the Existing Master Lease, amendments to this
Lease and the Existing Master Lease necessary to effect the Leased Asset
Transfer, the Lessor's Total Commitment shall be $100,000,000.
3.2 Procedures for Advances. (a) With respect to each funding of an
Advance, the Lessee shall give the Lessor and the Paying Agent prior
written notice not later than 3:00 p.m., New York City time, five (5)
Business Days prior to the date of the proposed funding, pursuant to a
Funding Request substantially in the form of Exhibit A (a "Funding
Request"), specifying: (i) the proposed Funding Date (the "Funding Date"),
(ii) the amount of Advance requested, (iii) whether such proposed Funding
Date will also be an Acquisition Date, (iv) the Leased Asset to which such
Advance is being allocated and the allocation of such Advance among the
various categories of costs and expenses listed in clause (c) below, (v)
the allocation of the Debt Contribution between CP Tranches and Eurodollar
Tranches and (vi) the requested Interest Periods for such CP Tranches. With
respect to any Funding Request related to the acquisition of a Property, in
addition to the foregoing, the Lessee shall also specify: (i) the Property
to be acquired, (ii) whether the Land component thereof is to be acquired
through a fee interest or Ground Lease, (iii) the seller and/or ground
lessor of the Property, and (iv) the Estimated Improvement Costs for such
Property.
(b) Except as the parties may otherwise agree in writing,
and except for the initial Funding Date for any Leased Asset and Funding
Dates caused by the maturity of a CP Tranche on a date other than a
Scheduled Payment Date, each Funding Date shall occur on a Scheduled
Payment Date.
(c) Advances shall be made solely to pay or reimburse the
Construction Agent or the Lessee for (i) Land Acquisition Costs and
Property Improvement Costs (including Capitalized Interest and Capitalized
Commitment Fees relating to any Property), (ii) Other Asset Acquisition
Costs (including Capitalized Interest and Capitalized Commitment Fees
relating to Equipment and Systems) and (iii) Transaction Expenses paid or
payable by the Lessee in connection with the preparation, execution and
delivery of the Operative Documents and all fees paid or payable by the
Lessee to the Paying Agent and the Lessor in connection with the Operative
Documents.
(d) All remittances made by the Lessor for the funding of
any Advance shall be made through the Paying Agent on the applicable
Funding Date in immediately available federal funds by wire transfer to the
account designated by the Lessee except that a portion of the initial
Advance shall be made (in accordance with instructions to be included in
the initial Funding Request) by wire transfer directly to the appropriate
Persons for Transaction Expenses.
(e) Notwithstanding anything in this Lease or any other
Operative Document to the contrary, with respect to the Aircraft listed on
Annex 1 hereto, the Lessee may, until the Base Date for such Aircraft,
request Advances to pay the cost of outfitting such Aircraft to the
Lessee's specifications, and to pay Capitalized Interest and Capitalized
Commitment Fees relating thereto, as if such Aircraft constituted Equipment
and Systems under this Lease. Any such Advance shall constitute an Advance
for all purposes of this Lease and the other Operative Documents.
(f) Notwithstanding anything to the contrary in this
Lease and the Operative Documents, the Lessee may request up to two
Advances, one on the date hereof and another on the immediately succeeding
day, solely for the purpose of paying agreed fees and expenses and to make
one or more deposits on Aircraft not to exceed $2,500,000. Any such Advance
shall constitute an Advance for all purposes under this Lease and the
Operative Documents. Such fees and expenses may be allocated for inclusion
in the Lease Balance for one or more Leased Assets.
ARTICLE IV
CONDITIONS PRECEDENT TO
CLOSING DATE, ACQUISITION DATES AND ADVANCES
4.1 Closing Date. The closing date (the "Closing Date") shall occur
on the earliest date on which the following conditions precedent shall have
been satisfied or waived in the reasonable discretion of the parties
hereto:
(a) Master Lease. This Lease shall have been duly
authorized, executed and delivered by the parties hereto.
(b) Master Construction Agency Agreement. The
Construction Agency Agreement shall have been duly authorized, executed and
delivered by the parties hereto.
(c) Guaranty. The Guaranty shall have been duly
authorized, executed and delivered by the Guarantor.
(d) Responsible Employee's Certificate of Lessee. The
Lessor shall have received a Responsible Employee's Certificate of the
Lessee, in substantially the form of Exhibit E, stating that (i) each and
every representation and warranty of the Lessee contained in each Operative
Document to which it is a party is true and correct on and as of the
Closing Date; (ii) no Default or Event of Default has occurred and is
continuing under any Operative Document to which it is a party; (iii) each
Operative Document to which the Lessee is a party is in full force and
effect with respect to it; and (iv) the Lessee has duly performed and
complied with all covenants, agreements and conditions contained herein or
in any Operative Document required to be performed or complied with by it.
(e) Resolutions and Incumbency Certificate, etc. of
Lessee. The Lessee shall have delivered to the Lessor (i) a certificate of
its Secretary or an Assistant Secretary attaching and certifying as to (A)
the resolutions of its Board of Directors duly authorizing the execution,
delivery and performance by it of each Operative Document to which it is or
will be a party, (B) its certificate of incorporation and by-laws, and (C)
the incumbency and signature of persons authorized to execute and deliver
on its behalf the Operative Documents to which it is a party and (ii) a
certificate of good standing with respect to it issued by the Secretary of
State of the State of its incorporation.
(f) Responsible Employee's Certificate of Guarantor. The
Lessor shall have received a Responsible Employee's Certificate of the
Guarantor, in substantially the form of Exhibit F, stating that (i) each
and every representation and warranty of the Guarantor contained in each
Operative Document to which it is a party is true and correct on and as of
the Closing Date; (ii) each Operative Document to which the Guarantor is a
party is in full force and effect with respect to it; and (iii) the
Guarantor has duly performed and complied with all covenants, agreements
and conditions contained herein or in any Operative Document required to be
performed or complied with by it.
(g) Resolutions and Incumbency Certificate, etc. of
Guarantor. The Guarantor shall have delivered to the Lessor (i) a
certificate of its Secretary or an Assistant Secretary attaching and
certifying as to (A) the resolutions of its Board of Directors duly
authorizing the execution, delivery and performance by it of each Operative
Document to which it is or will be a party, (B) its certificate of
incorporation and by-laws, and (C) the incumbency and signature of persons
authorized to execute and deliver on its behalf the Operative Documents to
which it is a party and (ii) a certificate of good standing with respect to
it issued by the Secretary of State of the State of its incorporation.
(h) Opinions of Counsel. Wolf, Block, Schorr and Solis-
Cohen, special counsel to the Lessee, internal counsel for the Company,
Wolf, Block, Schorr and Solis-Cohen, special counsel to the Guarantor, and
internal counsel for the Guarantor shall each have issued to the Lessor and
the Receivable Purchaser an opinion in form and scope satisfactory to the
Lessor.
(i) Lessor Fee Letter. The Lessor Fee Letter shall have
been duly authorized, executed and delivered by the Lessor, the Lessee and
the Guarantor, and the Lessor shall have received that portion of the fees
payable thereunder on the date hereof.
4.2 Acquisition Date Conditions. (a) All Assets. The occurrence of
each Acquisition Date with respect to any Leased Asset is subject to the
following conditions precedent:
(i) Lease Supplement. The Lease Supplement relating
to such Leased Asset shall have been duly executed and delivered by
the parties hereto.
(ii) Appraisal. The Lessor shall have received an
Appraisal of such Leased Asset, which Appraisal shall show, in the
case of a Leased Asset consisting of Property, that as of Substantial
Completion and the Expiration Date the Fair Market Sales Value of
such Property shall not be less than 100% of the sum of the Land
Acquisition Cost, Estimated Improvements Cost, Capitalized Interest
and Transaction Expenses expected to be funded with respect to such
Property.
(iii) Filings. The Operative Documents (or memoranda
thereof), any supplements thereto and any UCC Financing Statements
shall have been recorded, registered and filed, if necessary, in such
manner as to perfect and protect the Lessor's interest in such Leased
Asset.
(iv) Taxes. All taxes, assessments, fees and other
charges in connection with the execution, delivery, recording, filing
and registration of the Operative Documents shall have been paid or
provisions for such payment shall have been made to the satisfaction
of the Lessor.
(v) Governmental Approvals. All necessary (or, in
the reasonable opinion of the Lessor, advisable) Governmental
Actions, in each case required by any Requirement of Law, shall have
been obtained or made and be in full force and effect.
(vi) Requirements of Law. In the reasonable opinion
of the Lessor and its counsel, the acquisition and ownership of such
Leased Assets as contemplated by the Operative Documents do not and
will not violate in any material respect any material Requirement of
Law and do not and will not subject the Lessor to any material
adverse regulatory prohibitions or constraints.
(vii) Responsible Employee's Certificates. The Lessor
shall have received a Responsible Employee's Certificate of the
Lessee, in substantially the form of Exhibit E, and a Responsible
Employee's Certificate of the Guarantor, in substantially the form of
Exhibit F.
(viii) Insurance. The Lessor shall have received
evidence of insurance with respect to each Leased Asset required to
be maintained pursuant to this Lease, setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage.
(a) Properties. In addition to the conditions specified
in (a) above, the occurrence of each Acquisition Date with respect to any
Leased Asset consisting of Property is subject to the following conditions
precedent:
(i) Deed or Ground Lease. The Lessor shall have
received a Deed or Ground Lease with respect to the Land constituting
a part of such Property.
(ii) Mortgage. Except as the Lessor may otherwise
agree, the Lessor shall have received a Mortgage relating to such
Property duly executed and delivered by the Lessee.
(iii) Construction Agency Agreement Supplement. The
Construction Agency Agreement Supplement relating to such Property
shall have been duly executed and delivered by the parties hereto.
(iv) Opinion of Counsel. Counsel to the Lessee in the
jurisdiction where such Property is located shall have delivered an
opinion as to local law matters in form and scope satisfactory to the
Lessor.
(v) Environmental Audit. The Lessor shall have
received an Environmental Audit for such Property in form and
substance acceptable to the Lessor.
(vi) Survey and Title Insurance. The Lessee shall
have delivered to the Lessor an ALTA/1992 (Urban) Survey of the Land
included in such Property prepared by an independent, licensed
registered public land surveyor and meeting the Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys as adopted by
the American Land Title Association/American Society and American
Congress on Surveying and Mapping in 1992, certified to the Lessor
and the title company and otherwise in form reasonably acceptable to
the Lessor, and an ALTA owners or leasehold title insurance policy
covering such Property in favor of the Lessor, such policy to be
dated as of the Acquisition Date and in an amount not less than the
aggregate Commitment of the Lessor with respect to such Property and
to be reasonably satisfactory to the Lessor with an owner's
comprehensive (ALTA 9) endorsement and a 3.0 zoning endorsement and
such other endorsements requested by the Lessor to the extent
available in the State where such Property is located.
(vii) Property Insurance. The Lessor shall have
received evidence of insurance with respect to such Property required
to be maintained pursuant to this Lease, setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage.
(viii) Architect's Certificate. The Lessor shall
have received a certificate from the Architect, in form and scope
satisfactory to the Lessor, certifying that (i) such Property as
improved in accordance with the Plans and Specifications and the
contemplated use thereof by the Lessee will comply in all material
respects with all Requirements of Law (including, without limitation,
all zoning and land use laws) and Insurance Requirements and (ii) the
Plans and Specifications have been prepared in accordance with
applicable Requirements of Law (including, without limitation,
building, planning, zoning and fire codes) and upon completion of the
Improvements in accordance with the Plans and Specifications, such
Improvements on the Property will not encroach in any manner onto any
adjoining land (except as permitted by express written easements or
as insured by appropriate title insurance).
(b) Aircraft.In addition to the conditions specified in
(a) above, the occurrence of each Acquisition Date with respect to any
Leased Asset consisting of Aircraft is subject to the following conditions
precedent:
(i) Bill of Sale. The Lessor shall have received an
AC Form 8050-2 Bill of Sale (or such other form of bill of sale as
may be approved by the FAA on the Acquisition Date for the Aircraft)
covering the Aircraft, executed by the owner thereof in favor of the
Lessor.
(ii) Registration, Etc. The Lessor shall have
received evidence satisfactory to it that application for
registration of the Aircraft in the name of the Lessee has been duly
made with the FAA.
(iii) Airworthiness. The Lessor shall have received
evidence satisfactory to it that the Aircraft has been certified by
the FAA with an appropriate airworthiness certificate and that such
certificate is in full force and effect.
(iv) Opinion of Counsel. FAA counsel shall have
delivered an opinion in form and scope satisfactory to the Lessor.
(v) Aircraft Insurance. The Lessor shall have
received evidence of insurance with respect to such Aircraft required
to be maintained pursuant to this Lease, setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage.
4.3 Conditions Precedent to Each Advance. The obligations of the
Lessor to make an Advance on a Funding Date, including the initial Advance
occurring on any Acquisition Date, is subject to satisfaction or waiver of
the following conditions precedent:
(a) Funding Request. The Lessor shall have received a
fully executed counterpart of the applicable Funding Request, executed by
the Lessee.
(b) Accuracy of Representations and Warranties. On the
applicable Funding Date the representations and warranties of the Lessee
contained herein and in each of the other Operative Documents to which it
is a party and of the Guarantor contained in the Guaranty shall each be
true and correct in all material respects as though made on and as of such
date, except to the extent such representations or warranties relate solely
to an earlier date, in which case such representations and warranties shall
have been true and correct on and as of such earlier date.
(c) No Default. There shall not have occurred and be
continuing any Default or Event of Default and no Default or Event of
Default will have occurred after giving effect to the making of the Advance
requested by such Funding Request.
(d) Permits. In the case of an Advance relating to a
Property, all permits and approvals required by any Governmental Authority
in connection with the Construction for which such Advance is being made
shall have been issued or obtained and shall be in full force and effect.
(e) Title Policy Endorsement. In the case of an Advance
relating to a Property, the Lessor shall have received an endorsement to
the title policy delivered pursuant to this Lease, dated on or one Business
Day before the date of such Advance, (i) indicating that since the date of
the preceding Advance relating to such Property there has been no change in
the state of title and no additional survey exceptions not theretofore
approved by the Lessor and (ii) updating the title policy to the date of
such endorsement.
(f) Deposit. If the Guarantor has established the
Liquidity Collateral Account in accordance with Section 19.1(b)(ii) of this
Lease, the Collateral Agent shall have received from the Guarantor, for
deposit in the Liquidity Collateral Account in immediately available
Dollars, an amount such that immediately after giving effect to such
deposit and the Advance to be made on such date, the aggregate account
balance of all cash and investments then maintained in the Liquidity
Collateral Account shall be an amount at least equal to the Debt
Contribution of all outstanding Advances for all Leased Assets then subject
to this Lease.
ARTICLE V
CONDITIONS TO SUBSTANTIAL COMPLETION
5.1 Conditions to Substantial Completion of a Property. Substantial
Completion with respect to a Property shall be deemed to have occurred for
purposes of the Operative Documents at such time as the Construction shall
have been substantially completed in accordance with the Plans and
Specifications and all Applicable Law and the Lessee shall have delivered
to the Lessor a 3.1 zoning endorsement reasonably satisfactory to the
Lessor, and such Property shall be ready for occupancy and operation, as
evidenced by certificates of the Architect and the Construction Agent, the
Prime Contractor's application for the payment to be made upon substantial
completion and the issuance by the appropriate Governmental Authority of
certificates of occupancy for all of the Improvements contemplated by the
Plans and Specifications, all in form and substance reasonably satisfactory
to the Lessor.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations of the Lessor. The Lessor represents and warrants
to the Lessee that:
(a) ERISA. The Lessor is not and will not be funding its
Advances hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or
a "plan" (as defined in Section 4975(e)(1) of the Code).
(b) Status. The Lessor is a single member limited
liability company.
(c) Company Power and Authority. The Lessor has the power
and authority to execute, deliver and perform the terms and provisions of
the Operative Documents to which it is or will be a party and has taken all
necessary company action to authorize the execution, delivery and
performance of the Operative Documents to which it is a party and has duly
executed and delivered each Operative Document required to be executed and
delivered by it and, assuming the due authorization, execution and delivery
thereof on the part of each other party thereto, each such Operative
Document constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms, except as the same may be limited
by insolvency, bankruptcy, reorganization or other similar laws relating to
or affecting the enforcement of creditors' rights or by general equitable
principles and except as the same may be limited by certain circumstances
under law or court decisions in respect of provisions providing for
indemnification of a party with respect to liability where such
indemnification is contrary to public policy.
(d) Investment Company Act. The Lessor is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
6.2 Representations of Lessee. The Lessee represents and warrants to
the Lessor that:
(a) Corporate Status. The Lessee (i) is a duly organized
and validly existing corporation in good standing under the laws of the
State of Delaware and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where the failure to
do so might have a material adverse effect on it or its properties.
(b) Corporate Power and Authority. The Lessee has the
corporate power and authority to execute, deliver and perform the terms and
provisions of the Operative Documents to which it is or will be a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance of the Operative Documents to which it is a party
and has duly executed and delivered each Operative Document required to be
executed and delivered by it and, assuming the due authorization, execution
and delivery thereof on the part of each other party thereto, each such
Operative Document constitutes a legal, valid and binding obligation
enforceable against it in accordance with its terms, except as the same may
be limited by insolvency, bankruptcy, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights or by general
equitable principles and except as the same may be limited by certain
circumstances under law or court decisions in respect of provisions
providing for indemnification of a party with respect to liability where
such indemnification is contrary to public policy.
(c) No Violation. Neither the execution, delivery and
performance by the Lessee of the Operative Documents to which it is or will
be a party nor compliance with the terms and provisions thereof, nor the
consummation by the Lessee of the transactions contemplated therein (i)
will result in a violation by the Lessee of any applicable provision of any
law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality having jurisdiction over the Lessee
or any Leased Asset that would materially adversely affect (x) the validity
or enforceability of the Operative Documents to which the Lessee is a
party, or the title to, or value or condition of, any Leased Asset, or (y)
the business, financial position, or results of operations of the Lessee
and its subsidiaries taken as a whole or the ability of the Lessee to
perform its obligations under the Operative Documents, (ii) will result in
any breach which would constitute a default under, or (other than pursuant
to the Operative Documents) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of the Lessee pursuant to the terms of, any indenture, loan agreement or
other agreement for borrowed money to which the Lessee is a party or by
which it or any of its property or assets is bound or to which it may be
subject (other than Permitted Liens), or (iii) will violate any provision
of the certificate of incorporation or by-laws of the Lessee.
(d) Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Lessee, threatened (i) that
are reasonably likely to have a material adverse effect on any Leased Asset
or on the business, financial position or results of operations of the
Lessee and its subsidiaries taken as a whole or (ii) that question the
validity of the Operative Documents or the rights or remedies of the Lessor
with respect to the Lessee or any Leased Asset under the Operative
Documents.
(e) Governmental Approvals. No Governmental Action by any
Governmental Authority having jurisdiction over the Lessee or any Leased
Asset is required to authorize or is required in connection with (i) the
execution, delivery and performance by the Lessee of any Operative Document
to which it is a party or (ii) the Construction, except for any such
Governmental Action which is not yet required to be obtained and will be
duly obtained at and when required by Applicable Law.
(f) Investment Company Act. The Lessee is not an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(g) Public Utility Holding Company Act. The Lessee is not
a "holding company" or a "subsidiary company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Company Act of 1935, as amended.
(h) Provided Information. The information and materials
which have been provided by the Lessee or any Affiliate of the Lessee to
the Lessor in writing prior to the Closing Date are true and accurate in
all material respects on the date as of which such information and
materials are dated or certified and are not incomplete by omitting to
state any fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
(i) Taxes. All United States Federal income tax returns
and all other tax returns which are required to have been filed have been
or will be filed by or on behalf of the Lessee by the respective due dates,
including extensions, and all taxes due with respect to the Lessee shown on
such returns or pursuant to any assessment received by the Lessee have been
or will be paid or are being contested in good faith by the Lessee by
appropriate procedures. The charges, accruals and reserves on the books of
the Lessee in respect of taxes or other governmental charges are, in the
opinion of the Lessee, adequate.
(j) Environmental Laws. The Lessee is in compliance with
all Environmental Laws relating to pollution and environmental control in
all domestic jurisdictions in which all real property of the Lessee,
including all Land, is located, other than those the non-compliance with
which would not have a material adverse effect on any Land or the business,
financial position or results of operations of the Lessee and its
subsidiaries taken as a whole.
(k) Offer of Securities, etc. Neither the Lessee nor any
Person authorized to act on the Lessee's behalf has, directly or
indirectly, offered any interest in any Leased Asset or any other interest
similar thereto (the sale or offer of which would be integrated with the
sale or offer of such interest in any Leased Asset), for sale to, or
solicited any offer to acquire any of the same from, any Person other than
the Lessor and other "accredited investors" (as defined in Regulation D of
the Securities and Exchange Commission).
(l) Properties. Each Prime Construction Contract for a
Property will provide for construction of the Improvements thereto for a
fixed price or a guaranteed maximum price on or before a date certain, will
contain customary retainage provisions and otherwise be in form and
substance reasonably satisfactory to the Lessor. Each Property as improved
in accordance with the Plans and Specifications for such Property and the
contemplated use thereof by the Lessee and its agents, assignees,
employees, lessees, licensees and tenants will comply in all material
respects with all Requirements of Law (including, without limitation, all
zoning and land use laws) and Insurance Requirements, except for such
Requirements of Law as the Lessee shall be contesting in good faith by
appropriate proceedings. Upon Substantial Completion of the Construction of
the Improvements to each Property, all water, sewer, electric, gas,
telephone and drainage facilities and all other utilities required to
adequately service such Improvements for its intended use will be available
pursuant to adequate permits (including any that may be required under
applicable Environmental Laws). There is no action, suit or proceeding
(including any proceeding in condemnation or eminent domain or under any
Environmental Law) pending or, to the best of the Lessee's knowledge,
threatened with respect to the Lessee, its Affiliates or such Property
which materially adversely affects the title to, or the use, operation or
value of, such Property. No fire or other casualty with respect to such
Property has occurred which fire or other casualty has had a material
adverse effect on the value or condition of such Property. All utilities
serving such Property, or proposed to serve such Property in accordance
with the related Plans and Specifications, are located in, and vehicular
access to the Improvements on such Property is provided by, either public
rights-of-way abutting such Property or Appurtenant Rights. All material
licenses, approvals, authorizations, consents, permits (including, without
limitation, building, demolition and environmental permits, licenses,
approvals, authorizations and consents), easements and rights-of-way,
including proof and dedication, required for (x) the use, treatment,
storage, transport, disposal or disposition of any Hazardous Substance on,
at, under or from such Property, and (y) construction of the Improvements
in accordance with the Plans and Specification and the Construction Agency
Agreement have either been obtained from the appropriate Governmental
Authorities having jurisdiction or from private parties, as the case may
be, or will be obtained from the appropriate Governmental Authorities
having jurisdiction or from private parties, as the case may be, prior to
commencing any such construction or use and operation, as applicable.
(m) Aircraft. Neither the execution and delivery of a
Lease Supplement relating to Aircraft nor any of the transactions relative
to Aircraft contemplated by this Lease, require the consent or approval of
the FAA, except for notice pursuant to FAA Regulation ss.91.23 (14 C.F.R.
ss.91.23).
(n) Title; Ground Lease. The Lessor will at all times
during the Base Term have good title to all Improvements, subject only to
Permitted Liens. Each Ground Lease, if any, is in form and substance
sufficient to convey a valid leasehold interest in the applicable Land.
Each Deed is in form and substance sufficient to convey to the Lessor good
and marketable title to the applicable Property subject only to Permitted
Liens.
(o) Insurance. The Lessee carries insurance with
reputable insurers in respect of its material assets, in such manner, in
such amounts and against such risks as is customarily maintained by other
Persons of similar size engaged in similar business.
(p) Flood Hazard Areas. Except as otherwise identified on
the survey delivered pursuant to Section 4.2(b), no portion of any Property
is located in an area identified as a special flood hazard area by the
Federal Emergency Management Agency or other applicable agency. If any
Property is located in such an area, then flood insurance has been obtained
for such Property in accordance with Section 17.2 and in accordance with
the National Flood Insurance Act of 1968, as amended.
(q) Defaults. The Lessee is not in default under (and no
event has occurred which with the giving of notice or lapse of time would
result in a default under) any instrument evidencing any debt or any
agreement relating thereto or any mortgage, deed of trust, security
agreement, lease, franchise or other agreement to which the Lessee is a
party or by which the Lessee or any of its properties or assets is bound or
to which it may be subject.
(r) Use of Advances. No part of any Advance will be used
directly or indirectly for the purpose of purchasing or carrying, or for
payment in full or in part of debt that was incurred for the purposes of
purchasing or carrying, any margin security as such term is defined in
Section 207.2 of Regulation G of the Board of Governors of the Federal
Reserve System (12 C.F.R., Chapter II, Part 207).
(s) Solvency. The Lessee is Solvent.
6.3 Representations of the Lessee with Respect to Each Advance. The
Lessee represents and warrants to the Lessor as of each Funding Date
as follows:
(a) Representations. The representations and warranties
of the Lessee and of the Guarantor set forth in the Operative Documents
(including the representations and warranties set forth in Section 6.2) are
true and correct in all material respects on and as of such Funding Date,
except to the extent such representations or warranties relate solely to an
earlier date, in which case such representations and warranties shall have
been true and correct on and as of such earlier date. There exists no
Default or Event of Default, and no Default or Event of Default will occur
as a result of, or after giving effect to, the Advance requested by the
Funding Request on such date.
(b) Improvements. In the case of a Funding Date for any
Property, the Construction of the Improvements to such Property to date, if
any, has been performed in a good and workmanlike manner, substantially in
accordance with the Plans and Specifications for such Property and in
compliance with all material Insurance Requirements and Requirements of
Law.
(c) Liens. The Lessee has not permitted Liens to be
placed against any Leased Asset other than Permitted Liens.
(d) Advance. The conditions precedent to such Advance set
forth in Article IV have been satisfied. The amount of the Advance
requested represents amounts owed to third parties in respect of Land
Acquisition Costs or to the Lessee or third parties in respect of Other
Asset Acquisition Costs or owed or paid by the Construction Agent to third
parties in respect of Property Improvements Costs and Transaction Expenses,
in each case incurred prior to the date of such Advance and for which
neither the Lessee nor the Construction Agent has previously been
reimbursed by an Advance, provided that this representation shall not apply
to any portion of an Advance made on Substantial Completion which is to be
used to pay for open punch list items or other holdbacks. With respect to
any portion of an Advance made on Substantial Completion which is to be
used to pay for open punch list items or other holdbacks, the Lessee
represents that such portion will be used for such purpose to the extent
that a contractor is entitled thereto and that neither the Lessee nor the
Construction Agent has previously been reimbursed therefor by an Advance.
ARTICLE VII
PAYMENT OF RENT; FEES
7.1 Rent. The Lessee shall pay Base Rent in arrears on each Leased
Asset on each Payment Date during the Base Term for such Leased Asset, on
the date required under Section 24.1(i) in connection with the Lessee's
exercise of the Remarketing Option and on any date on which this Lease
shall terminate. In addition, Lessee shall pay Base Rent in arrears on each
Payment Date in respect of the Advance made by Lessor pursuant to Section
3.2(f) hereof. Base Rent shall be calculated as provided in Appendix 2
hereto.
7.2 Payment of Rent. Rent shall be paid absolutely net to the Lessor,
so that this Lease shall yield to the Lessor the full amount thereof,
without setoff, deduction or reduction. Neither the Lessee's inability or
failure to take possession of all or any portion of any Leased Asset when
delivered by the Lessor, whether or not attributable to any act or omission
of the Lessee or any act or omission of the Lessor, or for any
other reason whatsoever, shall delay or otherwise affect the Lessee's
obligation to pay Rent for such Leased Asset in accordance with the terms
of this Lease.
7.3 Supplemental Rent. The Lessee shall pay to the Lessor any and all
Supplemental Rent promptly after receipt of an invoice therefor as the same
shall become due and payable, and if the Lessee fails to pay any
Supplemental Rent, the Lessor shall have all rights, powers and remedies
provided for herein or by law or equity or otherwise in the case of
nonpayment of Base Rent. The Lessee shall pay to the Lessor, as
Supplemental Rent, among other things, on demand, interest at the
applicable Overdue Rate on any installment of Base Rent not paid when due
for the period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due or demanded by the Lessor for the
period from the due date or the date of any such demand, as the case may
be, until the same shall be paid. The expiration or other termination of
the Lessee's obligations to pay Base Rent hereunder shall not limit or
modify the obligations of the Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease, in the event of any
failure on the part of the Lessee to pay and discharge any Supplemental
Rent as and when due, the Lessee shall also promptly pay and discharge any
fine, penalty, interest or cost which may be assessed or added under any
agreement with a third party for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.
7.4 Fees. The Lessee hereby agrees to pay to the Lessor the fees set
forth in this Section 7.4. All such fees shall be non-refundable, except as
may otherwise be provided in the Lessor Fee Letter.
(a) Commitment Fee. The Lessee shall pay to the Lessor
for each Leased Asset, for the period (including any portion thereof when
the Lessor's obligations pursuant to Section 3.1 are suspended by reason of
the Lessee's inability to satisfy any condition of Article IV) commencing
on (and including) the Closing Date and continuing to (but excluding), in
the case of the Lessor Commitment Fee, the Base Date for such Leased Asset,
and, in the case of the Liquidity Commitment Fee, the Expiration Date for
such Leased Asset, a Commitment Fee (the "Commitment Fee") as set forth in
Appendix 2.
7.5 Capitalized Interest. If and to the extent that the Lessee does
not request an Advance to pay any Capitalized Interest, then the Lessee
will pay the amount thereof to the Lessor on the last day of the Interest
Period during which such Capitalized Interest has accrued.
7.6 Method of Payment. Each payment of Rent or any other amount due
hereunder shall be made by the Lessee to the Lessor prior to 1:00 p.m., New
York City time, at the place of payment designated in writing by the Lessor
in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such
payment shall be due, unless such scheduled date shall not be a Business
Day, in which case such payment shall be made on the next succeeding
Business Day. Payments received after 1:00 p.m., New York City time, on any
day shall be deemed received on the next succeeding Business Day. If
requested by the Lessee, the Lessor shall make arrangements to permit
payments hereunder to be made by the automated clearing house payments
system.
ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
8.1 Quiet Enjoyment. Subject to Sections 2.4 and 8.2, and subject to
the rights of the Lessor contained herein and the other terms of the
Operative Documents to which the Lessee is a party, the Lessee shall
peaceably and quietly have, hold and enjoy each Leased Asset for the Base
Term applicable thereto, free of any claim or other action by the Lessor or
anyone claiming by, through or under the Lessor (other than the Lessee)
with respect to any matters arising from and after the Acquisition Date.
Such right of quiet enjoyment is independent of, and shall not affect the
Lessor's rights otherwise to initiate legal action to enforce, the
obligations of the Lessee under this Lease.
8.2 Right to Inspect. During the Lease Term, the Lessee shall, upon
reasonable notice from the Lessor (except that no notice shall be required
if an Event of Default under this Lease has occurred and is continuing),
permit the Lessor and its authorized representatives to inspect any Leased
Asset during normal business hours. Lessor and its authorized
representatives shall maintain the confidentiality of any confidential
information obtained during the course of any inspection and, at the
request and expense of the Lessee, shall execute and deliver non-disclosure
agreements to such effect as may be reasonably appropriate.
ARTICLE IX
NET LEASE, ETC.
9.1 Net Lease. This Lease shall constitute a net lease. Any present
or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall the Lessee be entitled to any abatement, suspension,
deferment, reduction, setoff, counterclaim, or defense with respect to the
Rent, nor shall the obligations of the Lessee hereunder be affected (except
as expressly herein permitted and by performance of the obligations in
connection therewith) by reason of: (i) any defect in the condition,
merchantability, design, construction, quality or fitness for use of any
Leased Asset or any part thereof, or the failure of any Leased Asset to
comply with all Requirements of Law, including any inability to occupy or
use any Leased Asset by reason of such non-compliance; (ii) any damage to,
removal, abandonment, salvage, loss, contamination of or Release from,
scrapping or destruction of or any requisition or taking of any Leased
Asset or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Leased Asset or any part thereof
including eviction; (iv) any defect in title to or rights to any Leased
Asset or any Lien on such title or rights or on any Leased Asset (other
than Lessor Liens); (v) any change, waiver, extension, indulgence or other
action or omission or breach in respect of any obligation or liability of
or by the Lessor; (vi) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceedings
relating to the Lessee or any other Person, or any action taken with
respect to this Lease by any trustee or receiver of the Lessee or any other
Person, or by any court, in any such proceeding; (vii) any claim that the
Lessee has or might have against any Person, including without limitation
the Lessor and any vendor, manufacturer, contractor of or for any portion
of any Leased Asset; (viii) any failure on the part of the Lessor to
perform or comply with any of the terms of this Lease (other than
performance by Lessor of its obligations set forth in Section 2.1 hereof),
of any other Operative Document or of any other agreement; (ix) any
invalidity or unenforceability or illegality or disaffirmance of this Lease
against or by the Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof; (x) any restriction,
prevention or curtailment of or interference with the construction on or
any use of any Leased Asset or any part thereof; or (xi) any other cause or
circumstances, similar to the foregoing and whether or not the Lessee shall
have notice or knowledge of any of the foregoing. The agreement of the
Lessee in the preceding sentence shall not affect any claim, action or
right that the Lessee may have against the Lessor or any other Person. The
parties intend that the obligations of the Lessee hereunder shall be
covenants and agreements that are separate and independent from any
obligations of the Lessor hereunder or under any other Operative Documents
and the obligations of the Lessee shall continue unaffected unless such
obligations shall have been modified or terminated in accordance with an
express provision of this Lease.
9.2 No Termination or Abatement. The Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action
to terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Lessor, or any action with respect to this Lease
which may be taken by any trustee, receiver or liquidator of the Lessor or
by any court with respect to the Lessor. The Lessee hereby waives all right
(i) to terminate or surrender this Lease (except as provided herein) or
(ii) to avail itself of any abatement, suspension, deferment, reduction,
setoff, counterclaim or defense with respect to any Rent. The Lessee shall
remain obligated under this Lease in accordance with its terms and the
Lessee hereby waives any and all rights now or hereafter conferred by
statute or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. Notwithstanding any such statute or
otherwise, the Lessee shall be bound by all of the terms and conditions
contained in this Lease.
ARTICLE X
SUBLEASES
10.1 Subletting. The Lessee may, without the consent of the Lessor,
sublease any Leased Asset or any portion thereof to any Person who, to the
best of Lessee's knowledge, has not filed, or had filed against it,
insolvency proceedings or a petition under the bankruptcy laws of the
United States. No sublease or other relinquishment of possession of such
Leased Asset shall in any way discharge or diminish any of the Lessee's
obligations to the Lessor hereunder and the Lessee shall remain directly
and primarily liable under this Lease as to such Leased Asset, or portion
thereof, so sublet. Any sublease of such Leased Asset shall expressly be
made subject to and subordinated to this Lease and to the rights of the
Lessor hereunder. No such sublease may provide for use of such Leased Asset
by the sublessee in a manner materially different than that of the Lessee
prior to the sublease. In connection with any sublease, the Lessee may
request the Lessor to enter into a customary non-disturbance agreement with
the sublessee. The Lessor will act in a commercially reasonable manner in
determining whether or not to enter into such non-disturbance agreement.
ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1 Condition of the Properties. THE LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE
CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND
CONSTRUCTION OF THE IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE
LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH LEASED ASSET
"AS IS" WITHOUT, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN,
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND
SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES
IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR
PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW
WHICH MAY EXIST ON THE DATE HEREOF OR AT ANY TIME HEREAFTER. THE LESSOR HAS
NOT MADE, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN, AND SHALL NOT BE
DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) AND SHALL NOT BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE
TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, OR FITNESS FOR USE OF ANY LEASED ASSET (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY LEASED ASSET (OR ANY PART THEREOF)
AND THE LESSOR SHALL NOT BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY LEASED ASSET,
OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW.
11.2 Risk of Loss. During the Construction Period and the Base Term
for any Leased Asset, the risk of loss of or decrease in the enjoyment and
beneficial use of such Leased Asset as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars
or otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE XII
POSSESSION AND USE, ETC.
12.1 Possession and Use. Each Leased Asset shall be used as described
in the applicable Lease Supplement therefor and in a manner consistent with
the standards applicable to properties of a similar nature in the
geographic area in which such Leased Asset is located or operated and in
any event not less than the standards applied by the Lessee and its
Affiliates for other comparable properties owned or leased by the Lessee
and its Affiliates.
12.2 Charges. The Lessee shall pay, or cause to be paid, all charges
and costs required in connection with the use of such Leased Asset as
contemplated by this Lease. The Lessee shall not commit or permit any waste
of such Leased Asset or any part thereof. The Lessee shall pay or cause to
be paid all charges for electricity, power, gas, oil, water, telephone,
sanitary sewer service and all other rents and utilities used in or on each
Property through the Expiration Date. The Lessee shall be entitled to
receive any credit or refund with respect to any utility charge paid by the
Lessee and the amount of any credit or refund received by the Lessor on
account of any utility charges paid by the Lessee, net of the costs and
expenses reasonably incurred by the Lessor in obtaining such credit or
refund, shall be promptly paid over to the Lessee.
12.3 Compliance with Requirements of Law and Insurance Requirements.
Subject to the terms hereof relating to permitted contests, the Lessee, at
its sole cost and expense, shall (i) comply in all material respects with
all Requirements of Law and Insurance Requirements relating to each Leased
Asset, including the construction, use, operation, maintenance, repair and
restoration thereof and the remarketing thereof pursuant to Article XXIV,
whether or not compliance therewith shall require structural or
extraordinary changes in any Improvements or interfere with the use and
enjoyment of such Leased Asset, and (ii) procure, maintain and comply in
all material respects with all material licenses, permits, orders,
approvals, consents and other authorizations required for the construction,
use, operation, maintenance, repair and restoration of the Leased Assets.
ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1 Maintenance and Repair. (a) The Lessee, at its sole cost and
expense, shall maintain each Leased Asset in good condition (ordinary wear
and tear excepted) and make all necessary repairs thereto, of every kind
and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural or foreseen or unforeseen, in
each case as required by all Requirements of Law and Insurance Requirements
and on a basis consistent with the operation and maintenance of properties
comparable in type and location to such Leased Asset and in no event less
than the standards applied by the Lessee and its Affiliates in the
operation and maintenance of other comparable properties owned or leased by
the Lessee and its Affiliates.
(b) The Lessor shall under no circumstances be required
to build any improvements on any Property, make any replacements,
alterations or renewals of any nature or description to any Leased Asset or
make any expenditure whatsoever in connection with this Lease (other than
for Advances made in accordance with and pursuant to the terms of this
Lease and the Construction Agency Agreement). The Lessor shall not be
required to maintain, repair or rebuild all or any part of any Leased
Asset, and the Lessee waives any right to (i) require the Lessor to
maintain, repair, or rebuild all or any part of any Leased Assets, or (ii)
make repairs at the expense of the Lessor pursuant to any Requirement of
Law, Insurance Requirement, contract, agreement, or covenant, condition or
restriction in effect at any time during the Base Term applicable to any
Leased Asset.
(c) With respect to Aircraft, without limiting the
generality of Section 13.1(a), the Lessee, at its sole cost and expense,
shall: (i) maintain, service, repair, overhaul and test such Aircraft (A)
so as to keep such Aircraft in operating condition as good as when
delivered to the Lessee hereunder, ordinary wear and tear excepted, and (B)
so as to keep such Aircraft in such operating condition as may be necessary
to enable the airworthiness certification of such Aircraft to be maintained
in good standing at all times under the Federal Aviation Act of 1958, as
amended, except during such period or periods as such Aircraft is being
overhauled, maintained, serviced, repaired or tested; (ii) maintain all
records, logs and other materials required by the FAA to be maintained in
respect of such Aircraft; and (iii) promptly furnish to the Lessor such
notification and take such other action on the Lessor's behalf as may be
required to be filed by the Lessor with any governmental authority because
of the Lessor's interest in such Aircraft. The Lessee shall forthwith upon
the Acquisition Date with respect to any Aircraft, cause such Aircraft to
be fully registered and at all times thereafter to remain duly registered
in the name of the Lessee. The Lessee shall affix or cause to be affixed to
each Aircraft in the place designated by the Lessor (or, if no such place
shall have been designated, in a prominent place), labels, plates or other
markings stating that such Aircraft is owned by the Lessor. The Lessee
shall not without the prior permission of the Lessor change or remove (or
permit to be changed or removed or otherwise permit a decrease in the
visibility of) any insignia or lettering which is on any Aircraft at the
time of delivery thereof or which is thereafter placed thereon indicating
the Lessor's ownership thereof.
13.2 Return. (a) The Lessee shall, upon the expiration or earlier
termination of this Lease, vacate and surrender each Leased Asset to the
Lessor in its then-current, "AS IS" condition, subject to the Lessee's
obligations under Sections 12.3, 13.1, 14.1, 15.1, 18.1(d), 18.2 and 24.1,
unless the Lessee has purchased such Leased Asset from the Lessor as
provided herein.
(b) Upon termination of the lease of any Aircraft, the
Lessee shall have the option of having the aircraft engines installed on
such Aircraft be engines of the same model as the original Engines or
substitute engines suitable and approved by the FAA for such Aircraft, free
and clear of all Liens, encumbrances or rights of others whatsoever and
having a value and utility at least equal to, and being in as good
operation and condition, ordinary wear and tear excepted, as such original
Engines. "Ordinary wear and tear" as used herein is intended to reflect the
FAA regulations pertaining to the requirement of a periodic overhauling of
aircraft engines. Thus, in returning the Engines, the Lessee, under normal
circumstances, shall be required to overhaul them only if the total flying
hours of such Engines would require an overhaul under the FAA regulations.
Upon the return of any Aircraft, the Lessee shall (i) deliver to the Lessor
or its designee, all logs, manuals, inspection data, modification and
overhaul records or copies thereof which are applicable to such Aircraft
and are of the type that the Lessee customarily retains or is required by
law to retain with respect to its own aircraft and (ii) at its own expense,
will cause such Aircraft, if not then registered in the name of the Lessor,
to be registered in the name of the Lessor or its designee. At the time of
such return such Aircraft shall be duly certified as airworthy by the FAA.
ARTICLE XIV
MODIFICATIONS, ETC.
14.1 Modifications, Substitutions and Replacements. After the date of
Substantial Completion for any Leased Asset consisting of Property and
after the Acquisition Date for any Other Asset, the Lessee, at its sole
cost and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to such Leased Asset or any part
thereof and substitutions and replacements therefor (collectively,
"Modifications"); provided, however, that: (i) except for any Modification
required to be made pursuant to a Requirement of Law (a "Required
Modification"), no Modification shall impair the value, utility or useful
life of such Leased Asset or any part thereof from that which existed
immediately prior to such Modification; (ii) the Modification shall be done
expeditiously and in a good and workmanlike manner; (iii) the Lessee shall
comply with all Requirements of Law and Insurance Requirements applicable
to the Modification, including the obtaining of all permits and
certificates of occupancy, and the structural integrity of such Leased
Asset shall not be adversely affected; (iv) subject to the terms of Article
XVI relating to permitted contests, the Lessee shall pay all costs and
expenses and shall discharge (or cause to be insured or bonded over) within
sixty (60) days after the same shall be filed (or otherwise become
effective) any Liens arising with respect to the Modification; (v) such
Modifications shall comply with Section 13.1(a); and (vi) the Lessee shall
be required to obtain the prior written approval of the Lessor, which
approval shall not be unreasonably withheld, with respect to any
alterations (other than Required Modifications and/or alterations
authorized by the Construction Agency Agreement) that shall (A) materially
affect any structural element of the Improvements to any Property or major
building system therein, or (B) cost in excess of the Threshold Amount or
(C) materially change the nature of the Improvements to any Property or the
amount of usable area therein or the utility thereof for the purposes
contemplated by the Lessor and the Lessee as of the date hereof and the
date of the Lease Supplement therefor. All Modifications shall remain part
of such Leased Asset and shall be subject to this Lease and title thereto
shall immediately vest in the Lessor; provided, however, that Modifications
that meet each of the following conditions shall not be subject to this
Lease: (x) such Modifications are not Required Modifications, (y) such
Modifications were not financed by the Lessor and (z) such Modifications
are readily removable without impairing the value, utility or remaining
useful life of the related Leased Asset. So long as no Event of Default has
occurred and is continuing, the Lessee may place upon each Leased Asset any
trade fixtures, machinery, equipment or other property belonging to the
Lessee or third parties and may remove the same at any time during the
Lease Term, subject, however, to the terms of Section 13.1; provided that
such trade fixtures, machinery, equipment or other property do not
materially impair the value, utility or remaining useful life of such
Leased Asset; and provided, further, that the Lessee shall keep and
maintain at each Property and shall not remove from such Property any
Equipment financed or otherwise paid for (directly or indirectly) by the
Lessor pursuant to this Lease. Notwithstanding the foregoing proviso, the
Lessee may substitute other equipment for such Equipment, which substituted
equipment shall have a Fair Market Sales Value and remaining useful life at
least equivalent to the Equipment for which it was substituted and, without
further act, such substituted equipment shall be Equipment hereunder and be
part of the applicable Property.
ARTICLE XV
WARRANT OF TITLE; EASEMENTS
15.1 Warrant of Title. (a) The Lessee agrees that except as otherwise
provided herein and subject to the terms of Article XVI relating to
permitted contests, the Lessee shall not directly or indirectly create or
allow to remain, and shall promptly discharge at its sole cost and expense,
any Lien, defect, attachment, levy, title retention agreement or claim upon
any Leased Asset or any Modifications or any Lien, attachment, levy or
claim with respect to the Rent, other than Permitted Liens.
15.2 Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition
of or to any Leased Asset or any part thereof. NOTICE IS HEREBY GIVEN THAT
THE LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING
ANY LEASED ASSET OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT
NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR, IN AND TO ANY LEASED
ASSET.
15.3 Grants and Releases of Easements; Lessor's Waivers. Provided
that no Default or Event of Default shall have occurred and be continuing
and subject to the provisions of Articles XII, XIII and XIV, the Lessor
hereby consents in each instance to the following actions by the Lessee,
but at the Lessee's sole cost and expense: (a) the granting of easements,
licenses, rights-of-way and other rights and privileges in the nature of
easements reasonably necessary or desirable for the use, repair, or
maintenance of any Property as herein provided and to give effect to the
state of title in effect for such Property as set forth in the title policy
therefor; (b) the release of existing easements or other rights in the
nature of easements which are for the benefit of any Property; (c) if
required by applicable Governmental Authority in connection with the
Construction, the dedication or transfer of unimproved portions of any Land
for road, highway or other public purposes; and (d) the execution of
amendments to any covenants and restrictions affecting any Property;
provided, however, that in each case (i) such grant, release, dedication,
transfer or amendment does not materially impair the value, utility or
remaining useful life of any Property, (ii) such grant, release,
dedication, transfer or amendment is reasonably necessary in connection
with the use, maintenance, alteration or improvement of any Property, (iii)
such grant, release, dedication, transfer or amendment will not cause any
Property or any portion thereof to fail to comply in any material respect
with the provisions of this Lease or any other Operative Documents and all
Requirements of Law (including, without limitation, all applicable zoning,
planning, building and subdivision ordinances, all applicable restrictive
covenants and all applicable architectural approval requirements); (iv) all
governmental consents or approvals required prior to such grant, release,
dedication, transfer or amendment have been obtained, and all filings
required prior to such action have been made; (v) such grant, release,
dedication, transfer or amendment will not result in any down-zoning of any
Property or any portion thereof or a material reduction in the maximum
density or development rights available to any Property under all
Requirements of Law; (vi) the Lessee shall remain obligated under this
Lease and under any Operative Document executed by the Lessee consenting to
the assignment of the Lessor's interest in this Lease as security for
Advances made by it to the Lessor, in each such case in accordance with
their terms, as though such grant, release, dedication, transfer or
amendment had not been effected; and (vii) the Lessee shall pay and perform
any obligations of the Lessor under such grant, release, dedication,
transfer or amendment. The Lessor acknowledges the Lessee's right to
finance and to secure under the Uniform Commercial Code, inventory,
furnishings, furniture, equipment, machinery, leasehold improvements and
other personal property located at any Property other than Equipment, and
Lessor agrees to execute Lessor waiver forms in favor of any purchase money
seller, lessor or lender which has financed or provided or may finance or
provide in the future such items. Without limiting the effectiveness of the
foregoing, provided that no Default or Event of Default shall have occurred
and be continuing, the Lessor shall, upon the request of the Lessee, and at
the Lessee's sole cost and expense, execute and deliver any instruments
necessary or appropriate to confirm any such grant, release, dedication,
transfer or amendment to any Person permitted under this Section 15.2,
including landlord waivers with respect to any of the foregoing.
ARTICLE XVI
PERMITTED CONTESTS
16.1 Permitted Contests in Respect of Applicable Law. If, to the
extent and for so long as (a) a test, challenge, appeal or proceeding for
review of any Applicable Law relating to any Leased Asset shall be
prosecuted diligently and in good faith in appropriate proceedings by the
Lessee or (b) compliance with such Applicable Law shall have been excused
or exempted by a valid nonconforming use, variance permit, waiver,
extension or forbearance, the Lessee shall not be required to comply with
such Applicable Law but only if and so long as any such test, challenge,
appeal, proceeding, waiver, extension, forbearance or noncompliance shall
not, in the reasonable opinion of the Lessor, involve (A) any risk of
criminal liability being imposed on the Lessor, or (B) any material risk of
(1) foreclosure, forfeiture or loss of any Leased Asset or any material
part thereof, or (2) the nonpayment of Rent or (C) any substantial danger
of (1) the sale of, or the creation of any Lien (other than a Permitted
Lien) on, any part of any Leased Asset, (2) civil liability being imposed
on the Lessor, or (3) enjoinment of, or interference with, the use,
possession or disposition of any Leased Asset in any material respect. The
Lessor will not be required to join in any proceedings pursuant to this
Section 16.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event
the Lessor will join in the proceedings or permit them or any part thereof
to be brought in its name if and so long as (i) no Default or Event of
Default has occurred and is continuing, (ii) the Lessee has not elected the
Remarketing Option, and (iii) the Lessee pays all related expenses and
indemnifies the Lessor to its reasonable satisfaction.
ARTICLE XVII
INSURANCE
17.1 Public Liability and Workers' Compensation Insurance. (a)
Property. With respect to each Property, the Lessee shall procure and carry
commercial general liability insurance for claims for bodily injury or
death sustained by persons or damage to property while on such Property and
such other public liability coverages as are ordinarily procured by the
Lessee or its Affiliates who own or operate similar properties. Such
insurance shall be on terms and in amounts that are materially no less
favorable than insurance maintained by the Lessee or its Affiliates with
respect to similar properties that they own and that are in accordance with
normal industry practice in the state in which such Property is located.
The Lessee shall, in the construction of the Improvements (including in
connection with any Modifications thereof) and the operation of any
Property, comply with, or cause the applicable contractor to comply with,
all applicable workers' compensation laws. The insurance required by this
clause (a) may be subject to such deductibles and the Lessee may
self-insure with respect to the required coverage to the extent approved in
writing by the Lessor.
(b) Aircraft. With respect to each Aircraft, the Lessee
shall procure or cause to be procured and maintain or cause to be
maintained public liability insurance with respect to such Aircraft,
covering both bodily personal injury and damage to property (as to all
Persons, including employees of the Lessee or the Lessor). Policies
covering bodily injury and property damage shall provide for coverage in an
amount which is not less than the public liability and property damage
insurance usually carried with respect to aircraft similar to such Aircraft
by corporations of a similar size engaged in the same or similar business
and similarly situated with the Lessee and its Affiliates; provided, that
such insurance shall at all times be in an amount not less than $30,000,000
per occurrence.
(c) Other Assets. With respect to any Other Asset other
than Aircraft, the Lessee will carry public liability insurance and
property damage insurance with respect to such Other Asset (i) in amounts
which are not less than the public liability and property damage insurance
applicable to similar assets owned, leased or held by the Lessee and its
Affiliates and (ii) of the types usually carried by corporations engaged in
the same or a similar business, similarly situated with the Lessee and its
Affiliates, and owning or operating similar assets in the state in which
such Other Asset is located and which cover risk of the kind customarily
insured against by such corporations. The insurance required by this clause
(c) may be subject to such deductibles and the Lessee may self-insure with
respect to the required coverage to the extent approved in writing by the
Lessor.
17.2 Hazard and Other Insurance. (a) Property. With respect to each
Property, the Lessee shall keep, or cause to be kept, such Property insured
against loss or damage by fire, earthquake, flood and other risks on terms
and in amounts that are no less favorable than insurance covering other
similar properties owned by the Lessee or its Affiliates and that are in
accordance with normal industry practice, provided that such insurance
shall at all times be in an amount not less than the greater of the Lease
Balance of such Property or the replacement cost thereof. During the
construction of any Improvements the Lessee shall also maintain or cause to
be maintained builders' risk insurance or equivalent coverages. The
insurance required by this clause (a) may be subject to such deductibles
and the Lessee may self-insure with respect to the required coverage to the
extent approved in writing by the Lessor.
(b) Aircraft. With respect to each Aircraft, the Lessee
shall procure or cause to be procured and maintain or cause to be
maintained all risk aircraft hull insurance with respect to such Aircraft,
of the type and in substantially the amounts usually carried by
corporations engaged in the same or similar business and similarly situated
with the Lessee and its Affiliates; provided that such insurance shall at
all times be in an amount not less than the Lease Balance of such Aircraft
at such time.
(c) Other Assets.With respect to any Other Asset other
than Aircraft, the Lessee will maintain in effect physical damage insurance
with respect to such Other Asset which is of the type usually carried by
corporations engaged in the same or similar business, similarly situated
with the Lessee and its Affiliates, and owning or operating similar
equipment and which covers risk of the kind customarily insured against by
such corporations, and in substantially the amount applicable to similar
assets owned, leased or held by the Lessee and its Affiliates; provided
that such insurance shall at all times be in an amount not less than the
aggregate Lease Balance of all such Other Assets. The insurance required by
this clause (c) may be subject to such deductibles and the Lessee may
self-insure with respect to the required coverage to the extent approved in
writing by the Lessor.
17.3 Insurance Coverage. (a) Upon request the Lessee shall furnish
the Lessor and the Collateral Agent with certificates showing the insurance
required under Sections 17.1 and 17.2 to be in effect and naming the
Lessor, the Receivable Purchaser, the Conduits and the Liquidity Providers
as additional insureds with respect to liability coverage (excluding
worker's compensation insurance), and naming the Collateral Agent as loss
payee with respect to property coverage and showing the mortgagee
endorsement required by Section 17.3(c) with respect to such coverage. All
such insurance shall be at the sole cost and expense of the Lessee and
shall be maintained with respect to each Leased Asset from the Acquisition
Date thereof through the Expiration Date therefor. Such certificates shall
include a provision for no less than ten (10) days' advance written notice
by the insurer to the Lessor in the event of cancellation or reduction of
such insurance. In addition, the Lessee shall cause the Lessor, the
Receivable Purchaser, the Conduits and the Liquidity Providers to be named
as additional insureds under the liability policies maintained with respect
to the Construction for each Property.
(b) The Lessee agrees that the insurance policy or
policies required by Sections 17.1 and 17.2, shall include an appropriate
clause pursuant to which such policy shall provide that it will not be
invalidated should the Lessee waive, in writing, prior to a loss, any or
all rights of recovery against any party for losses covered by such policy,
and that the insurance in favor of the Lessor and the other additional
insureds and their rights under and interests in said policies shall not be
invalidated or reduced by any act or omission or negligence of the Lessee
or any other Person having any interest in any Leased Asset. The Lessee and
the Lessor each hereby waives any and all rights against the other for loss
or damage to or loss of use of its property to the extent of payments made
under its property insurance so long as such waiver shall not affect its
rights to recover under such insurance.
(c) Except as otherwise permitted by clause (d), all such
insurance shall be written by reputable insurance companies that are
financially sound and solvent and otherwise reasonably appropriate
considering the amount and type of insurance being provided by such
companies. Any insurance company selected by the Lessee which is rated in
Best's Insurance Guide or any successor thereto (or if there be none, an
organization having a similar national reputation) shall have a general
policyholder rating of "A" and a financial rating of at least "VIII" or be
otherwise acceptable to the Lessor. All insurance policies required by
Section 17.2 shall include a standard form mortgagee endorsement in favor
of the Lessor.
(d) The Lessor shall not carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Article XVII except that the Lessor may carry
separate liability insurance so long as (i) the Lessee's insurance is
designated as primary and in no event excess or contributory to any
insurance the Lessor may have in force which would apply to a loss covered
under the Lessee's policy and (ii) each such insurance policy will not
cause the Lessee's insurance required under this Article XVII to be subject
to a coinsurance exception of any kind. Each policy maintained by the
Lessee shall specifically provide that the policy shall be considered
primary insurance which shall apply to any loss or claim before any
contribution by any insurance which the Lessor may have in force.
(e) The Lessee shall pay as they become due all premiums
for the insurance required by Section 17.1 and Section 17.2, and shall
renew or replace each policy prior to the expiration date thereof.
Throughout the Base Term for any Leased Asset, at the time each of the
Lessee's insurance policies is renewed (but in no event less
frequently than once each year), the Lessee shall deliver to the Lessor and
the Collateral Agent certificates of insurance evidencing that all
insurance required by this Article XVII with respect to such Leased Asset
is being maintained by the Lessee and is in effect.
(f) All insurance proceeds in respect of any property
damage loss or occurrence for which the proceeds related thereto are (i)
less than or equal to the Threshold Amount, in the absence of the
occurrence and continuance of a Default or Event of Default, shall be
adjusted by and paid to the Lessee for application toward the
reconstruction, repair or refurbishment of the applicable Leased Asset and
(ii) greater than the Threshold Amount, shall be adjusted jointly by the
Lessee, the Lessor and the Collateral Agent (unless a Default or Event of
Default has occurred and is continuing, in which case such proceeds shall
be adjusted solely by the Collateral Agent) and held by the Collateral
Agent for application in accordance with Article XVIII hereof.
ARTICLE XVIII
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
18.1 Casualty and Condemnation. (a) Subject to the provisions of this
Article XVIII, if all or a portion of any Leased Asset is damaged or
destroyed in whole or in part by a Casualty or is the subject of a
Condemnation, then (i) in the case of a Casualty where the cost of
restoration of the affected Leased Asset in the reasonable judgment of the
Lessor and the Collateral Agent is (x) less than or equal to the Threshold
Amount, any insurance proceeds payable with respect to such Casualty shall
be paid directly to the Lessee, or if received by the Lessor or Collateral
Agent, shall be paid over to the Lessee for the reconstruction,
refurbishment and repair of such Leased Asset, (y) greater than the
Threshold Amount, any insurance proceeds payable with respect to such
Casualty shall be paid to the Lessor but may be obtained by the Lessee and
used for the purpose of reconstructing, refurbishing and repairing the
affected Leased Asset upon submission to the Lessor and the Collateral
Agent of a Responsible Employee's Certificate to the effect that such
Leased Asset can be fully restored to the condition required under this
Lease prior to the end of the Base Term for such Leased Asset (after giving
effect to any extensions of such Base Term) and as to the cost of such
restoration (accompanied by, in the case of a Leased Asset consisting of
Property, an Architect's certificate as to the foregoing matters) plus a
statement as to the Lessee's affirmative ability to finance such
restoration, and upon receipt of such certificate(s) in form reasonably
satisfactory to the Lessor and the Collateral Agent such amounts shall be
made available to the Lessee in the manner contemplated by the Construction
Agency Agreement with respect to Construction and if the foregoing
certificate(s) are not delivered to the Lessor and the Collateral Agent
such proceeds shall be applied toward the payment of the Lease Balance for
such Leased Asset and (ii) in the case of a Condemnation such award or
compensation shall be paid to the and the Collateral Agent to be applied in
the reasonable discretion of the Collateral Agent, after consultation with
the Required Participants to the restoration of the affected Leased Asset
or toward the payment of the Lease Balance; provided, however, that if a
Default or Event of Default shall have occurred and be continuing, such
award, compensation or insurance proceeds shall be paid directly to the
Collateral Agent or, if received by the Lessee, shall be held in trust for
the Collateral Agent and shall be paid over by the Lessee to the Collateral
Agent. All amounts held by the Lessor when a Default or Event of Default
exists hereunder on account of any award, compensation or insurance
proceeds either paid directly to the Collateral Agent or turned over to the
Collateral Agent shall at the request of the Required Participants either
be (i) paid to the Lessee for the repair of damage caused by such Casualty
or Condemnation in accordance with clause (d) of this Section 18.1, or (ii)
(A) if a Default exits, held by the Lessor until such Default is cured or
becomes an Event of Default or (B) if an Event of Default exists, applied
toward the payment of the Lease Balance of the affected Leased Asset.
(b) The Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At the Lessee's reasonable
request, and at the Lessee's sole cost and expense, the Lessor shall
participate in any such proceeding, action, negotiation, prosecution or
adjustment. The Lessor and the Lessee agree that this Lease shall control
the rights of the Lessor and the Lessee in and to any such award,
compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a
Casualty or of an actual, pending or threatened Condemnation of any Leased
Asset or any interest therein, the Lessor or the Lessee, as the case may
be, shall give notice thereof to the other and to the Collateral Agent
promptly after the receipt of such notice.
(d) If pursuant to this Section 18.1 and Section 19.1
this Lease shall continue in fullforce and effect following a Casualty or
Condemnation with respect to any Leased Asset, the Lessee shall, at its
sole cost and expense (and, without limitation, if any award, compensation
or insurance payment is not sufficient to restore such Leased Asset in
accordance with this paragraph, the Lessee shall pay the shortfall),
promptly and diligently repair any damage to such Leased Asset caused by
such Casualty or Condemnation in conformity with the requirements of
Sections 13.1 and 14.1 using, in the case of any Property, the as-built
plans and specifications for such Property (as modified to give effect to
any subsequent Modifications, any Condemnation affecting such Property and
all applicable Requirements of Law) so as to restore such Leased Asset to
at least the same condition, operation, function and value as existed
immediately prior to such Casualty or Condemnation with such Modification
as the Lessee may elect in accordance with Section 14.1. Upon completion of
such restoration, the Lessee shall furnish the Lessor a Responsible
Employee's Certificate and, in the case of any Property, an Architect's
certificate confirming that such restoration has been completed pursuant to
this Lease.
(e) In no event shall a Casualty or Condemnation affect
the Lessee's obligations to pay Rent pursuant to Section 7.1 or to perform
its obligations and pay any amounts due on any Expiration Date or pursuant
to Articles XXII and XXV.
(f) Any Excess Proceeds received by the Lessor and held
by the Collateral Agent in respect of a Casualty or Condemnation affecting
any Leased Asset shall be turned over to the Lessee upon the full payment
of the Lease Balance for such Leased Asset and all other amounts then due
and payable hereunder.
18.2 Environmental Matters. Promptly upon the Lessee's knowledge of
the existence of an Environmental Violation that could materially affect
the value of any Property, the Lessee shall notify the Lessor and the
Collateral Agent in writing of such Environmental Violation. If the cost of
remediation of such Environmental Violation would not exceed the limits set
forth in Section 19.1, the Lessee will promptly and diligently undertake
any response, cleanup, remedial or other action required by Applicable Law
of the Lessor or the Lessee to remove, cleanup or mediate such
Environmental Violation of the Lessee's sole cost and expense. If the cost
of such remediation would exceed the limits set forth in Section 19.1, the
Lessor may elect to terminate the Lease with respect to such Property
pursuant to Section 19.1 or, alternatively, the Lessor may request that the
Lessee undertake any response, cleanup, remedial or other action required
by Applicable Law of the Lessor or Lessee to remove, clean up or remediate
the Environmental Violation in accordance with the terms of Section 12.3,
at the Lessee's sole cost and expense. If the Lessor does not deliver a
Termination Notice with respect to such Property pursuant to Section 19.1,
then the Lessee shall undertake such response, cleanup, remedial or other
action, and the Lessee shall, upon completion of remedial action by the
Lessee, cause to be prepared by an environmental consultant reasonably
acceptable to the Lessor a report describing the Environmental Violation
and the actions taken by the Lessee (or its agents) in response to such
Environmental Violation, along with a statement by the Lessee that the
Environmental Violation has been remedied to the satisfaction of the
Government Authority exercising jurisdiction, or in compliance in all
material respects with applicable Environmental Law. Nothing in this
Section shall reduce or limit the Lessee's obligations under the indemnity
provisions hereof.
18.3 Notice of Environmental Matters. Promptly, but in any event
within thirty (30) days from the date the Lessee has actual knowledge
thereof, the Lessee shall provide to the Lessor and the Collateral Agent
written notice of any pending or threatened claim, action or proceeding
involving any Environmental Law or any Release on or in connection with any
Property. All such notices shall describe in reasonable detail the nature
of the claim, action or proceeding and the Lessee's proposed response
thereto. In addition, the Lessee shall provide to the Lessor and the
Collateral Agent, within thirty (30) days of receipt, copies of all written
communications with any Governmental Authority relating to any
Environmental Violation in connection with any Property. The Lessee shall
also promptly provide such detailed reports of any such environmental
claims as may reasonably be requested by the Lessor. In the event that the
Lessor receives written notice of any pending or threatened claim, action
or proceeding involving any Environmental Law or any Release on or in
connection with any Property, the Lessor shall promptly give notice thereof
to the Lessee and the Collateral Agent.
ARTICLE XIX
TERMINATION OF LEASE
19.1 Mandatory Termination upon Certain Events. (a) If, with respect
to any Property, any of:
(i) a Significant Condemnation occurs; or
(ii)an Environmental Violation occurs or is
discovered the cost of remediation of which for the affected Property
would exceed 20% of the then effective Lease Balance for such
Property, but in no event less than $5,000,000;
and the Lessor shall have given written notice to the Lessee that this
Lease as to the affected Property is to be terminated as a consequence of
the occurrence of such an event (a "Termination Notice"), then, the Lessee
shall be obligated to purchase the Lessor's interest in such Property on or
prior to the date occurring one hundred eighty (180) days after the date of
the Lessee's receipt of the Termination Notice by paying the Lessor an
amount equal to the Lease Balance therefor on such date of payment;
provided, however, that the Lessor shall not give such notice with respect
to any Environmental Violation if the Lessee (x) promptly submits an
approved corrective action plan for the remediation of such Environmental
Violation to the Lessor, (y) provides reasonable security to the Lessor for
the cost of the such remediation and (z) diligently pursues such
remediation in accordance with such plan.
(b) If on May 19, 1998, (i) the entire Commitment under
the Committed Loan Agreement of the Lender existing on the date of this
Agreement has not been assigned to, and assumed by, one or more banks or
other financial institutions, having a short-term credit rating of A-1 by
Standard and Poor's Rating Group and P-1 by Moody's Investor Services,
Inc., pursuant to the terms of the Committed Loan Agreement and (ii) such
banks or other financial institutions have simultaneously executed and
delivered a Liquidity Asset Purchase Agreement (the events in (i) and (ii)
hereof being collectively referred to as the "Liquidity Assignment"), then
Lessee shall be deemed to have delivered a Purchase Notice pursuant to
Section 22.1 of this Lease for all Leased Assets then subject to this
Lease, and shall be obligated to purchase all such Leased Assets on June
19, 1998, for an amount equal to the Lease Balance for all such Leased
Assets or, if, on May 19, 1998, the Lessee shall have delivered no Lease
Supplements under this Lease or if there are no Leased Assets then subject
to this Lease, Lessee shall be obligated to pay the Lease Balance
outstanding on June 19, 1998 (plus, in either case, the outstanding amount
of any Advances made pursuant to Section 3.2(f) hereof); provided that
Lessee shall have no such obligation to purchase such Leased Assets or make
such payments if:
(i) on or before June 19, 1998, the Liquidity
Assignment has been completed; or
(ii)on or before June 19, 1998, the Lessee shall
have (A) caused to be established with the Collateral Agent a
segregated account, under the sole dominion and control of the
Collateral Agent, for the benefit of the Lender (the "Liquidity
Collateral Account"), (B) deposited in such Liquidity Collateral
Account in immediately available Dollars an amount equal to the Debt
Contribution of all outstanding Advances made under this Lease on or
before June 19, 1998 and (C) shall have executed and delivered to the
Collateral Agent a security agreement, in form and substance
satisfactory to the Collateral Agent and its counsel, in respect of
the Liquidity Collateral Account, which security agreement shall
grant to the Collateral Agent for the benefit of the Lenders and the
Conduits a security interest in any amounts in the Liquidity
Collateral Account as security for the performance of the Lessee's
obligations under this Lease.
(c) If any event or condition described in Section
20.1(f) or (g) of this Lease shall occur or exist in respect of RX Choice,
Inc., then the Lessee shall be deemed to have delivered a Purchase Notice
pursuant to Section 22.1 of this Lease for all Leased Assets then subject
to this Lease, and shall be obligated to purchase all such Leased Assets on
or before the day (the "Purchase Date") which occurs 60 days after the
occurrence of such event or existence of such condition for an amount equal
to the entire Lease Balance for all Leased Assets or, if on such Purchase
Date, the Lessee shall have delivered no Lease Supplements under, or there
are no Leased Assets then subject to, this Lease, then the Lessee shall be
obligated to pay the entire Lease Balance outstanding on the Purchase Date
(together with, in either case, the outstanding amount of any Advances made
pursuant to Section 3.2(f) hereof); provided, however, that the provisions
of this Section 19.1(c) shall be of no further force and effect beginning
on the date that is 91 days after the loan provided for under the Senior
Loan Agreement (as such term is defined in the Intercreditor Agreement) is
repaid in full.
19.2 Termination Procedures. (a) On the date of the payment by the
Lessee of the Lease Balance for the affected Property in accordance with
the Termination Notice in accordance with Section 19.1(a) of this Lease,
this Lease and the Lessor's Commitment shall terminate with respect to such
affected Property and, the provisions of Section 25.1 shall be applicable.
(b) On the date of payment by the Lessee of the Lease
Balance in accordance with Section 19.1(b) or (c) above, this Lease, and
the Lessor's Commitment, shall terminate and, with respect to any Leased
Assets, the provisions of Section 25.1 shall be applicable.
ARTICLE XX
EVENTS OF DEFAULT; REMEDIES
20.1 Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) shall
constitute an "Event of Default":
(a) the Lessee shall fail to make payment of any Base
Rent, Supplemental Rent, Purchase Option Price, Lease Balance or any other
amount payable hereunder within three (3) Business Days after the due date
therefor, including, without limitation, amounts due pursuant to Section
19.1, 22.1 or 22.2 or Article XXIV;
(b) the Lessee shall fail to maintain insurance as
required by Article XVII of this Lease;
(c) the Lessee shall fail to observe or perform any term,
covenant or condition of the Lessee under this Lease or the other Operative
Documents to which it is party other than those described in Section
20.1(a) or (b) hereof, and, in each such case, such failure shall have
continued for thirty (30) days after the earlier of (i) delivery to the
Lessee of written notice thereof from the Lessor or (ii) a Responsible
Employee of the Lessee shall have knowledge that such failure, if not
cured, will constitute an Event of Default;
(d) any representation or warranty made by the Lessee in
any of the Operative Documents to which it is a party shall prove to have
been inaccurate in any material respect at the time made;
(e) any representation or warranty made by the Guarantor
in any of the Operative Documents to which it is a party shall prove to
have been inaccurate in any material respect at the time made;
(f) the Guarantor or any Significant Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be
commenced against the Guarantor or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief
shall be entered against the Guarantor or any Significant Subsidiary under
the federal bankruptcy laws as now or hereafter in effect;
(h) an event of default (as defined therein) under the
Credit Agreement occurs, unless (i) such event of default has been waived
by the requisite parties to the Credit Agreement and (ii) the Lessor and
the Liquidity Providers shall have received a pro rata share (based on the
respective commitments of the Lessor, Liquidity Providers and parties to
the Credit Agreement) of any consideration given by the Guarantor or its
Affiliates in connection with obtaining any such waiver;
(i) an event of default (as defined therein) under the
Existing Master Lease shall occur;
(j) a Construction Agency Agreement Event of Default
shall occur, or an Event of Default (as defined therein) shall occur under
any other Operative Document;
(k) the Lessee or the Guarantor shall directly or
indirectly contest the validity of any Operative Document in any manner in
any court of competent jurisdiction or any lien granted by any Operative
Document, or shall repudiate, or purport to discontinue or terminate, the
Construction Agency Agreement, this Lease or the Guaranty or the
Construction Agency Agreement, this Lease or the Guaranty shall cease to be
a legal, valid and binding obligation or shall cease to be in full force
and effect for any reason; or
(l) the Guarantor shall fail to observe or perform any
term, covenant or condition of, or incorporated by reference in, the
Guaranty beyond any grace period applicable thereto (it being agreed that
the Guarantor's failure to perform any obligation of the Lessee or any
covenant incorporated in the Guaranty shall not constitute an Event of
Default until any grace period applicable to the Lessee under the Operative
Documents or to the Guarantor under the Credit Agreement, as the case may
be, shall have expired).
20.2 Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, the Lessor may, so long as such Event of Default is
continuing, do one or more of the following as the Lessor in its sole
discretion shall determine, without limiting any other right or remedy the
Lessor may have on account of such Event of Default (including, without
limitation, the obligation of the Lessee to purchase the Leased Assets as
set forth in Section 22.3):
(a) The Lessor may, by notice to the Lessee terminate
this Lease as of the date specified in such notice; provided, however, (i)
no reletting, reentry or taking of possession of any Leased Asset or all of
the Leased Assets (or any portion thereof) by the Lessor will be construed
as an election on the Lessor's part to terminate this Lease unless a
written notice of such intention is given to the Lessee, (ii)
notwithstanding any reletting, reentry or taking of possession, the Lessor
may at any time thereafter elect to terminate this Lease for a continuing
Event of Default and (iii) no act or thing done by the Lessor or any of its
agents, representatives or employees and no agreement accepting a surrender
of the Leased Asset shall be valid unless the same be made in writing and
executed by the Lessor;
(b) The Lessor may (i) demand that the Lessee, and the
Lessee shall upon the written demand of the Lessor, return any Leased Asset
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of Section 13.2 hereof
as if the Leased Asset were being returned at the end of the Base Term, and
the Lessor shall not be liable for the reimbursement of the Lessee for any
costs and expenses incurred by the Lessee in connection therewith and (ii)
without prejudice to any other remedy which the Lessor may have for
possession of any Leased Asset, and to the extent and in the manner
permitted by Applicable Law, enter upon such Leased Asset and take
immediate possession of (to the exclusion of the Lessee) such Leased Asset
or any part thereof and expel or remove the Lessee and any other Person who
may be occupying such Leased Asset, by summary proceedings or otherwise,
all without liability to the Lessee for or by reason of such entry or
taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise and, in addition to the Lessor's other
damages, the Lessee shall be responsible for all costs and expenses
incurred by the Lessor in connection with any reletting, including, without
limitation, reasonable brokers' fees and all reasonable costs of any
alterations or repairs made by the Lessor;
(c) The Lessor may (i) sell all or any part of one or
more Leased Assets at public sale free and clear of any rights of the
Lessee and without any duty to account to the Lessee with respect to such
action or inaction or any proceeds in which event the Lessee's obligation
to pay Capitalized Interest or Base Rent hereunder for periods commencing
after the date of such sale shall be terminated or proportionately reduced,
as the case may be; and (ii) if the Lessor shall so elect, demand that the
Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, on the
date of such sale, as liquidated damages for loss of a bargain and not as a
penalty (the parties agreeing that the Lessor's actual damages would be
difficult to predict, but the aforementioned liquidated damages represent a
reasonable approximation of such amount), an amount equal to (A) the
excess, if any, of (1) the Lease Balance calculated as of the date of such
sale (including all Rent due and unpaid to and including such date), over
(2) the net proceeds of such sale (that is, after deducting all costs and
expenses incurred by the Lessor incident to such conveyance, including,
without limitation, repossession costs, brokerage commissions, prorations,
transfer taxes, reasonable fees and expenses for counsel, title insurance
fees, survey costs, recording fees, and any repair costs); plus (B)
interest at the Overdue Rate on the foregoing amount from such date until
the date of payment;
(d) The Lessor may, at its option, elect not to terminate
this Lease and continue to collect all Base Rent, Supplemental Rent, and
all other amounts due the Lessor (together with all costs of collection)
and enforce the Lessee's obligations under this Lease as and when the same
become due, or are to be performed, and at the option of the Lessor, upon
any abandonment of any Leased Asset by the Lessee or re-entry of same by
the Lessor, the Lessor may, in its sole and absolute discretion, elect not
to terminate this Lease and may make the necessary repairs in order to
relet any Leased Asset, and relet any Leased Asset or any part thereof for
such term or terms (which may be for a term extending beyond the Base Term
of this Lease) and at such rental or rentals and upon such other terms and
conditions as the Lessor in its reasonable discretion may deem advisable;
and upon each such reletting all rentals actually received by the Lessor
from such reletting shall be applied to the Lessee's obligations hereunder
and the other Operative Documents in such order, proportion and priority as
the Lessor may elect in the Lessor's sole and absolute discretion. If such
rentals received from such reletting during any period are less than the
Rent with respect to such Leased Asset to be paid during that period by the
Lessee hereunder, the Lessee shall pay any deficiency, as calculated by the
Lessor, to the Lessor on the next Payment Date;
(e) Unless all of the Leased Assets have been sold in
their entirety, the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights under
paragraph (b), (c) or (d) of this Section 20.2 with respect to the Leased
Assets or portions thereof, demand, by written notice to the Lessee
specifying a date not earlier than ten (10) days after the date of such
notice, that the Lessee purchase, on such date, all unsold Leased Assets
(or the remaining portion thereof) in accordance with the provisions of
Article XXII; provided, however, that no such written notice shall be
required upon the occurrence of any Event of Default in clause (f) or (g)
of Section 20.1;
(f) The Lessor may exercise any other right or remedy
that may be available to it under Applicable Law, or proceed by appropriate
court action (legal or equitable) to enforce the terms hereof or to recover
damages for the breach hereof. Separate suits may be brought to collect any
such damages for any period(s), and such suits shall not in any manner
prejudice the Lessor's right to collect any such damages for any subsequent
period(s), or the Lessor may defer any such right to suit until after the
expiration of the Base Term, in which event such right to suit shall be
deemed not to have accrued until the expiration of the Base Term;
(g) To the maximum extent permitted by Applicable Law,
the Lessee hereby waives the benefit of any appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and
all rights of marshalling in the event of any sale of any Leased Asset or
any interest therein;
(h) The Lessor shall be entitled to enforce payment of
the indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of the
other Operative Documents or other agreement or any laws now or hereafter
in force, notwithstanding some or all of the obligations secured hereby may
now or hereafter be otherwise secured, whether by mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of
this instrument nor its enforcement, shall prejudice or in any manner
affect the Lessor's right to realize upon or enforce any other security now
or hereafter held by the Lessor, it being agreed that the Lessor shall be
entitled to enforce this instrument and any other security now or hereafter
held by the Lessor in such order and manner as the Lessor may determine in
its absolute discretion. No remedy herein conferred upon or reserved to the
Lessor is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute. Every power or remedy given by any of
the Operative Documents to the Lessor or to which it may otherwise be
entitled, may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by the Lessor. In no event
shall the Lessor, in the exercise of the remedies provided in this
instrument (including, without limitation, in connection with the
assignment of rents to Lessor, or the appointment of a receiver and the
entry of such receiver on to all or any part of the Leased Assets), be
deemed a "mortgagee in possession," and the Lessor shall not in any way be
made liable for any act, either of commission or omission, in connection
with the exercise of such remedies; or
(i) An action of mortgage foreclosure as now provided or
hereafter prescribed by law, may forthwith be commenced and prosecuted to
judgment, execution and sale, for the collection of the whole amount of
such Lease Balance, together with all fees, costs and expenses of such
proceedings, including a reasonable attorney's fees. And all errors in such
proceedings, together with any stays of or exemptions from execution, or
extensions of time of payment, which may be given by any Applicable Law now
in force, or which may be enacted hereafter, are hereby forever waived and
released.
If, pursuant to the exercise by the Lessor of its remedies pursuant
to this Section 20.2, the Lease Balance, all other amounts due and owing
from the Lessee under this Lease and the other Operative Documents have
been paid in full, the Lessor shall remit to the Lessee any excess amounts
received by the Lessor.
20.3 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 20.2, the Lessee waives, to the fullest extent
permitted by law, (a) any notice of re-entry or the institution of legal
proceedings to obtain re-entry or possession; (b) any right of redemption,
re-entry or repossession; (c) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt or limiting
the Lessor with respect to the election of remedies; and (d) any other
rights which might otherwise limit or modify any of the Lessor's rights or
remedies under this Article XX.
20.4 Power of Sale and Foreclosure. In addition to any other rights
herein, Lessor shall upon the occurrence of any Event of Default have the
option to exercise its rights under each Mortgage executed in connection
herewith, pursuant to which the trustee thereunder has the POWER OF SALE.
ARTICLE XXI
ASSIGNMENT
21.1 Assignment by Lessor. The Lessor may not assign, sell or
transfer all or any part of its rights and obligations hereunder or under
the other Operative Documents or the Leased Assets; provided, however, that
(i) the Lessor may sell Purchaser Interests to the Receivable Purchaser and
(ii) with the consent of the Lessee, the Conduits and the Liquidity
Providers, which consent shall not be unreasonably withheld, the Lessor may
assign, sell or transfer all or any part of such rights and obligations or
the Leased Assets to any financial institution, provided that the Lessor is
not thereby released from its obligations hereunder.
21.2 Assignment by Lessee. The Lessee may not assign this Lease or
any of its rights or obligations hereunder in whole or in part to any
Person without the consent of the Lessor; provided, however, that the
Lessee may assign all (and not less than all) of its rights hereunder
without such consent to one or more of its Affiliates so long as the Lessee
remains fully liable for all of the obligations of the "Lessee" hereunder
and under the other Operative Documents.
ARTICLE XXII
PURCHASE PROVISIONS
22.1 Purchase Option. Provided that the Lessee shall not have given
notice of its intention to exercise the Remarketing Option, the Lessee
shall have the option (exercisable by giving the Lessor irrevocable written
notice (the "Purchase Notice") of the Lessee's election to exercise such
option) to purchase all of the Leased Assets under any Lease Supplement
(unless provisions with respect to joinder of purchase options for the
Leased Assets under more than one Lease Supplement are set forth in a Lease
Supplement, in which case such exercise must comply with such provisions)
on any Scheduled Payment Date specified in such Purchase Notice at a price
equal to the Lease Balance for such Leased Assets (the "Purchase Option
Price"). The Lessee shall deliver the Purchase Notice to the Lessor not
less than thirty (30) days prior to such purchase. If the Lessee exercises
its option to purchase one or more Leased Assets pursuant to this Section
22.1 (the "Purchase Option"), the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
applicable Leased Assets as of the date specified in the Purchase Notice
upon receipt of the Purchase Option Price in accordance with Section
25.1(a). The Lessee may designate, in a notice given to the Lessor not less
than ten (10) Business Days prior to the closing of such purchases (time
being of the essence), the transferee or transferees to whom the conveyance
shall be made (if other than to the Lessee), in which case such conveyance
shall (subject to the terms and conditions set forth herein) be made to
such designee; provided, however, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially,
from any of its obligations under this Lease, including, without
limitation, the obligation to pay the Lessor the Lease Balance on the
applicable Expiration Date.
22.2 Acceleration of Purchase Obligation. (a) The Lessee shall be
obligated to purchase for an amount equal to the Lease Balance the Lessor's
interest in the Leased Assets (notwithstanding any prior election to
exercise its Purchase Option pursuant to Section 22.1) (i) automatically
and without notice upon the occurrence of any Event of Default specified in
clause (f) or (g) of Section 20.1 and (ii) as provided for at Section
20.2(e) immediately upon written demand of the Lessor upon the occurrence
of any other Event of Default.
(b) The Lessee shall be obligated to purchase the
Lessor's interest in the Leased Assets for an amount equal to the Lease
Balance immediately upon written demand of the Lessor at any time during
the term when (i) subject to Section 21.1, the Lessor ceases to have title
as contemplated by Section 15.1 or (ii) any related Security Document
(other than this Lease) to which the Lessee is a party shall cease to be in
full force and effect, or shall cease to give the Lessor the Liens, rights,
powers and privileges purported to be created thereby.
(c) Any purchase under Section 22.1 or this Section 22.2
shall be in accordance with Section 25.1(a).
22.3 Purchase of Unimproved Land. Provided that no Default or Event
of Default has occurred and is continuing, the Lessee shall have the option
(exercisable by giving the Lessor irrevocable written notice of the
Lessee's exercise of such option) to purchase any unimproved portion of any
Land (and any related easements for utilities and access to be specified at
such time) not necessary or desirable for operations of the Improvements
constructed or to be constructed on such Land on any Scheduled Payment Date
specified in such notice at a price equal to the Fair Market Sales Value,
as determined by an Appraisal, of such unimproved portion and such
easements. The Lessee shall give such notice to the Lessor not less than
thirty (30) days prior to such purchase. If the Lessee exercises its option
pursuant to this Section 22.3, the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
applicable unimproved portion of Land and grant the related easements as of
the date specified in the Lessee's notice under procedures analogous to
those set forth in Section 25.1(a). The purchase price paid by the Lessee
shall be applied to reduce the Lease Balance for the related Property.
ARTICLE XXIII
RENEWAL TERMS
23.1 Renewal. (a) Subject to the conditions set forth herein, and
unless otherwise specified in the Lease Supplement applicable to any Leased
Assets, the Lessee shall have the option (the "Renewal Option"), to extend
the Base Term for such Leased Assets for up to three (3) additional
one-year periods (each, a "Renewal Term"), with each such Renewal Term to
commence on the first day following the Expiration Date then in effect. The
Renewal Option with respect to each Renewal Term shall automatically be
effective upon satisfaction of each of the following conditions:
(A) the Lessor and each Liquidity Provider
shall have consented to the renewal of the Lease after receipt
of Lessee's request therefor delivered to the Lessor and the
Liquidity Agent not later than ninety (90) days prior to each
of the fourth, fifth and sixth anniversaries of the Closing
Date,
(B) (i) no Event of Default under this
Lease shall have occurred and be continuing, and (ii) by
exercise of such Renewal Option, the Lessee shall be deemed to
represent to the Lessor as to the matters set forth in clause
(i) of this condition (B), and
(C) the Lessee shall not have exercised the
Remarketing Option or the Purchase Option for such Leased
Assets under this Lease.
(b) Each extension of this Lease for a Renewal Term shall
be subject to this Lease. Each Renewal Term shall cause the remaining Base
Term of relevant Leased Assets to be extended by one additional year from
the Expiration Date in effect immediately prior to such extension; thus, if
this Lease is extended on each of the anniversaries referred to above, the
term of this Lease shall be for ten (10) years; provided, however, that in
no event shall the Base Term as extended by any Renewal Term extend beyond
the date identified in the applicable Lease Supplement.
(c) In the event that the Lessor and each Liquidity
Provider have not agreed to extend this Lease at least fifteen (15) days
prior to each applicable anniversary date, the Lessee's request for
extension shall be deemed to have been rejected.
ARTICLE XXIV
REMARKETING OPTION
24.1 Option to Remarket. Subject to the fulfillment of each of the
conditions set forth in this Section 24.1, the Lessee shall have the option
(the "Remarketing Option") from and after June 19, 1998, to market and
complete the sale of Lessor's interest in one or more Leased Assets for the
Lessor.
The Lessee's effective exercise and consummation of the Remarketing
Option as to one or more Leased Assets shall be subject to the due and
timely fulfillment of each of the following provisions as to such Leased
Assets as of the dates set forth below.
(a) Not later than six (6) months prior to the Expiration
Date, the Lessee shall give to the Lessor written notice of the Lessee's
exercise of the Remarketing Option under this Lease, which exercise shall
be irrevocable.
(b) Not later than one hundred twenty (120) days prior to
the Expiration Date, the Lessee shall deliver to the Lessor an
Environmental Audit for each Property included in such Leased Assets. Such
Environmental Audit shall be prepared by an environmental consultant
selected by the Lessee and approved in advance by the Lessor and shall
contain conclusions reasonably satisfactory to the Lessor as to the
environmental status of such Property. If any such Environmental Audit
indicates any exceptions, the Lessee shall have also delivered a Phase Two
environmental assessment by such environmental consultant prior to the
Expiration Date showing the completion of the remedying of such exceptions
in compliance with Applicable Law.
(c) On the date of the Lessee's notice to the Lessor of
the Lessee's exercise of the Remarketing Option, no Event of Default shall
exist, and on the Expiration Date, no Event of Default or Default shall
exist. Any Permitted Liens (other than Lessor Liens) on each Leased Asset
that were contested by the Lessee shall have been removed on or before the
Expiration Date.
(d) The Improvements on each Property included in such
Leased Assets shall have been constructed in accordance with the Plans and
Specifications and shall have achieved Substantial Completion on or before
the date of the Lessee's notice to the Lessor of the Lessee's exercise of
the Remarketing Option. The Lessee shall have completed in all material
respects all Modifications, restoration and rebuilding of such Leased
Assets pursuant to Section 14.1 and 18.1 (as the case may be) and shall
have fulfilled in all material respects all of the conditions and
requirements in connection therewith pursuant to said Sections, in each
case by the date of the Lessee's notice to the Lessor of the Lessee's
exercise of the Remarketing Option (time being of the essence), regardless
of whether the same shall be within the Lessee's control. The Lessee shall
have also paid the cost of all Modifications commenced prior to the
Expiration Date. The Lessee shall not have been excused pursuant to Section
16.1 from complying with any Applicable Law that involved the extension of
the ultimate imposition of such Applicable Law beyond the last day of the
Base Term.
(e) During the Marketing Period, the Lessee shall use
best efforts, in such manner as the Lessee shall reasonably determine, to
sell the Lessor's interest in the Leased Assets and will attempt to obtain
the highest purchase price therefor and for not less than the Fair Market
Sales Value of all of the Leased Assets. The Lessee will be responsible for
hiring brokers and making the Leased Assets available for inspection by
prospective purchasers. The Lessee shall promptly upon request permit
inspection of the Leased Assets and any maintenance records relating to the
Leased Assets by the Lessor and any potential purchasers, and shall
otherwise do all things necessary to sell and deliver possession of the
Leased Assets to any purchaser. All such marketing of the Leased Assets
shall be at the Lessee's sole expense. The Lessee's agency under this
clause shall, for the first three (3) months of the Marketing Period, be on
an exclusive basis. In the event the Lessee is unable to procure during
such period a bona fide bid from a non-Affiliated Person with demonstrable
financial capacity to consummate such bid for any Leased Asset, from and
after such third month, the agency hereunder shall be on a non-exclusive
basis.
(f) The Lessee shall submit all bids to the Lessor and
the Lessor will have the right to review the same and the right to submit
any one or more bids. All bids shall be on an all-cash basis unless the
Lessor shall otherwise agree in its sole discretion. No such purchaser
shall be the Lessee or an Affiliate of the Lessee. The written offer must
specify the Expiration Date as the closing date unless the Lessor shall
otherwise agree in its sole discretion.
(g) In connection with any such sale of Lessor's interest
in the Leased Assets, the Lessee will provide to the purchaser all
customary "seller's" indemnities, representations and warranties regarding
absence of Liens (except Lessor Liens) and the condition of such Leased
Assets, including, without limitation, an environmental indemnity for any
Property to the extent the same are required by the purchaser. The Lessee
shall have obtained, at its cost and expense, all required governmental and
regulatory consents and approvals and shall have made all filings as
required by Applicable Law in order to carry out and complete the transfer
of the Leased Assets. As to the Lessor, any such sale of Lessor's interest
in the Leased Assets shall be made on an "as is, with all faults" basis
without representation or warranty by the Lessor other than the absence of
Lessor Liens. Any agreement as to such sale shall be made subject to the
Lessor's rights hereunder.
(h) The Lessee shall pay directly, and not from the sale
proceeds, all prorations, credits, costs and expenses of the sale of
Lessor's interest in the Leased Assets, whether incurred by the Lessor or
the Lessee, including without limitation, the cost of all title insurance,
surveys, environmental reports, appraisals, transfer taxes, the Lessor's
reasonable attorneys' fees, the Lessee's attorneys' fees, commissions,
escrow fees, recording fees, and all applicable documentary and other
transfer taxes.
(i) The Lessee shall pay to the Lessor on or prior to the
Expiration Date (or to such other Person as the Lessor shall notify the
Lessee in writing) an amount equal to the Contingent Rental Adjustment for
such Leased Assets, plus all Base Rent and all other amounts hereunder
which have accrued or will accrue with respect thereto prior to or as of
the Expiration Date, in the type of funds specified in Section 7.5 hereof.
(j) The purchase of Lessor's interest in such Leased
Assets shall be consummated on the Expiration Date and the Gross Proceeds
of the sale of the Leased Assets shall be paid directly to the Lessor. The
Lessor shall remit to the Lessee from Gross Proceeds the documented
expenses incurred by the Lessee under clause (h) hereof in connection with
such sale. If the remaining Gross Proceeds plus the aggregate Contingent
Rental Adjustment received by Lessor, exceeds the Lease Balance for such
Leased Assets as of such date, then the excess shall be paid to the Lessee
on the Expiration Date.
Except as provided in the next sentence hereof or as may be otherwise
provided in a Lease Supplement, if one or more of the foregoing provisions
shall not be fulfilled as of the date set forth above with respect to the
Leased Assets under any Lease Supplement, then the Lessor shall declare by
written notice to the Lessee the Remarketing Option to be null and void
(whether or not it has been theretofore exercised by the Lessee), in which
event all of the Lessee's rights under this Section 24.1 shall immediately
terminate and the Lessee shall be obligated to purchase Lessor's interest
in such Leased Assets as if it had exercised its option under Section 22.1
on the Expiration Date. Notwithstanding the foregoing, the Lessee shall not
be required to purchase Lessor's interest in such Leased Assets pursuant to
the preceding sentence if Lessor's interest in such Leased Assets is not
sold on or prior to the Expiration Date and the Lessee has otherwise
fulfilled all of its obligations under clauses (a) through (i) hereof
(including the payment of all amounts referred to therein).
Except as expressly set forth herein, the Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale
of Lessor's interest in the any Leased Asset.
In the event that the sale of any Leased Asset is not consummated on
the Expiration Date, but such sale is consummated any time thereafter, the
Lessor shall remit to the Lessee, promptly after the consummation of the
sale of the such Leased Asset, any excess remaining after deducting the
then outstanding Lease Balance plus the Imputed Equity Return thereon
accruing from and after the Expiration Date from the Gross Proceeds.
24.2 Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent shall continue undiminished until
payment in full to the Lessor of the Contingent Rental Adjustment and all
other amounts due to the Lessor with respect to the Leased Assets under
each Lease Supplement under the Operative Documents to which the Lessee is
a party. The Lessor shall have the right, but shall be under no duty, to
solicit bids, to inquire into the efforts of the Lessee to obtain bids or
otherwise to take action in connection with any such sale of Lessor's
interest in the Leased Assets, other than as expressly provided in this
Article XXIV.
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
25.1 Provisions Relating to the Purchase and Conveyance Upon
Remarketing. (a) In connection with the Lessee's purchase of the Leased
Assets under any Lease Supplement pursuant to Section 22.1 or 22.2, or in
connection with a purchase of Lessor's interest in any Leased Asset under
Article XIX or the payment of all amounts due under Section 5.1 of the
Construction Agency Agreement:
(i) the Lessee shall pay the amounts set forth in
Section 22.1, Section 22.2, Article XIX, Section 5.1 of the
Construction Agency Agreement, as applicable, together with all
accrued Rent relating to such Leased Assets and any other amount then
due and payable by the Lessee to the Lessor under this Lease or the
other Operative Documents;
(ii) the Lessor shall execute and deliver to the
Lessee (or to the Lessee's designee) at the Lessee's cost and expense
a special warranty deed with respect to the Improvements, a special
warranty deed or release of Ground Lease with respect to the Land, a
bill of sale with respect to the Equipment or any other Leased Asset
and an assignment of the Lessor's entire interest in the Leased
Assets being sold (which shall include an assignment of all of the
Lessor's right, title and interest in and to any Net Proceeds not
previously received by the Lessor and, if applicable, a termination
notice pursuant to the Ground Lease, in each case in recordable form
and otherwise in conformity with local custom and free and clear of
the Lien of the Mortgage and any Lessor Liens attributable to the
Lessor;
(iii) the Leased Assets being sold shall be conveyed
to the Lessee "AS IS" and in their then present physical condition;
and
(iv) the Lessor shall execute and deliver to Lessee
and the Lessee's title insurance company an affidavit as to the
absence of Lessor Liens.
(b) If the Lessee properly exercises the Remarketing
Option with respect to the Leased Assets under any Lease Supplement, then
the Lessee shall, on the Expiration Date, and at its own cost, transfer
possession of the Leased Assets to the Lessor or the independent
purchaser(s) thereof, as the case may be, in each case by surrendering the
same into the possession of the Lessor or such purchaser(s), as the case
may be, free and clear of all Liens other than Lessor Liens, in good
condition (as modified by Modifications permitted by this Lease), ordinary
wear and tear excepted, and in compliance with Applicable Law. The Lessee
shall, on and within a reasonable time before and up to one year after the
Expiration Date, cooperate reasonably with the Lessor and the independent
purchaser(s) of Lessor's interest in the Leased Assets in order to
facilitate the purchase by such purchaser's) of Lessor's interest in the
Leased Assets, which cooperation shall include the following, all of which
the Lessee shall do on or before the Expiration Date or as soon thereafter
as is reasonably practicable: providing copies of all books and records
regarding the maintenance and ownership of the Leased Assets and all data
and technical and all other information relating thereto, providing a
current copy of the Plans and Specifications for the Properties, granting
or assigning all licenses (to the extent such licenses are assignable under
Applicable Law) necessary for the operation and maintenance of the Leased
Assets and cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Lease.
ARTICLE XXVI
INDEMNIFICATION
26.1 General Indemnification. The Lessee agrees, whether or not any
of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless
each Indemnitee from and against, any and all Claims that may be imposed
on, incurred by or asserted against such Indemnitee (whether because of
action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the Closing
Date or after the Expiration Date, in any way relating to or arising out
of:
(a) any of the Operative Documents or any of the
transactions contemplated thereby, and any amendment, modification or
waiver in respect thereof entered into or acknowledged by the Lessee;
(b) the Leased Assets or any part thereof or interest
therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
ownership, management, possession, operation, rental, lease, sublease,
repossession, maintenance, repair, alteration, modification, addition or
substitution, storage, transfer of title, redelivery, use, financing,
refinancing, disposition, operation, condition, sale (including, without
limitation, any sale pursuant to any provision hereof), return or other
disposition of all or any part or any interest in any Leased Asset or the
imposition of any Lien (or incurring of any liability to refund or pay over
any amount as a result of any Lien) thereon, including, without limitation:
(1) Claims or penalties arising from any violation of law or in tort
(strict liability or otherwise), (2) latent or other defects, whether or
not discoverable, (3) any Claim based upon a violation or alleged violation
of the terms of any restriction, easement, condition or covenant or other
matter affecting title to any Leased Asset, (4) the making of any
Modifications in violation of any standards imposed by any insurance
policies required to be maintained by the Lessee pursuant to this Lease
which are in effect at any time with respect to any Leased Asset or any
part thereof, (5) any Claim for patent, trademark or copyright
infringement, (6) Claims which would otherwise be covered by insurance
policies of the Lessee, as required by Article XVII, and (7) Claims arising
from any public improvements with respect to any Property resulting in any
charge or special assessments being levied against the Property or any
plans to widen, modify or realign any street or highway adjacent to any
Property, or any Claim for utility "tap-in" fees;
(d) the breach by the Lessee of any covenant,
representation or warranty made by it or deemed made by it in any Operative
Document or any certificate required to be delivered by any Operative
Document;
(e) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection with the
transactions contemplated hereby;
(f) the existence of any Lien on or with respect to any
Leased Asset, any Capitalized Interest or Base Rent or Supplemental Rent,
title thereto, or any interest therein including any Liens which arise out
of the possession, use, occupancy, construction, repair or rebuilding of
any Leased Asset or by reason of labor or materials furnished or claimed to
have been furnished to the Lessee, or any of its contractors or agents or
by reason of the financing of any personalty or equipment purchased or
leased by the Lessee or Modifications constructed by the Lessee, except
Lessor Liens and Liens in favor of the Lessor; or
(g) subject to the accuracy of Lessor's representation
set forth in Section 6.1(a), the transactions contemplated by this Lease or
by any other Operative Document, in respect of the application of Parts 4
and 5 of Subtitle B of Title I of ERISA and any prohibited transaction
described in Section 4975 (c) of the Code; provided, however, the Lessee
shall not be required to indemnify any Indemnitee under this Section 26.1
for any of the following: (1) any Claim to the extent resulting from the
willful misconduct or gross negligence of such Indemnitee (it being
understood that the Lessee shall be required to indemnify an Indemnitee
even if the ordinary (but not gross) negligence of such Indemnitee caused
or contributed to such Claim) or the breach of any representation, warranty
or covenant of such Indemnitee set forth in any Operative Document, (2) any
Claim resulting from Lessor Liens which the Lessor is responsible for
discharging under the Operative Documents, (3) any Claim to the extent
attributable to acts or events occurring after the expiration of the Base
Term and the return or remarketing of any Leased Asset so long as the
Lessor is not exercising remedies against the Lessee in respect of the
Operative Documents, (4) any Claim arising from a breach or alleged breach
by the Lessor of any agreement entered into in connection with the
assignment or participation of Rent and (5) any Claim arising from the
Lessor's or any other Indemnitee's violation of any state or federal law or
regulation relating to banking or the offer or sale of securities. It is
expressly understood and agreed that the indemnity provided for herein
shall survive the expiration or termination of and shall be separate and
independent from any remedy under this Lease or any other Operative
Document. Without limiting the express rights of any Indemnitee under this
Section 26.1, this Section 26.1 shall be construed as an indemnity only and
not a guaranty of residual value of any Leased Asset.
26.2 Environmental Indemnity. Without limitation of the other
provisions of this Article XXVI, the Lessee hereby agrees to indemnify,
hold harmless and defend each Indemnitee from and against any and all
claims (including without limitation third party claims for personal injury
or real or personal property damage), losses (including but not limited to,
to the extent the Lease Balance has not been fully paid, any loss of value
of any Property), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings)
and orders, judgments, remedial action, requirements, enforcement actions
of any kind, and all reasonable and documented costs and expenses incurred
in connection therewith (including but not limited to reasonable and
documented attorneys' and/or paralegals' fees and expenses), including, but
not limited to, all costs incurred in connection with any investigation or
monitoring of site conditions or any clean-up, remedial, removal or
restoration work by any federal, state or local government agency, arising
in whole or in part, out of
(a) the presence on or under any Property of any
Hazardous Materials, or any releases or discharges of any Hazardous
Materials on, under, from or onto any Property for which any Indemnitee or
Lessee may be legally liable,
(b) any activity for which any Indemnitee or Lessee may
be legally liable, including, without limitation, construction, carried on
or undertaken on or off the Property, and whether by the Lessee or any
predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials that at any time are located or present
on or under or that at any time migrate, flow, percolate, diffuse or in any
way move onto or under any Property,
(c) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs, remediation
and removal costs, cost of corrective action, costs of financial assurance,
fines and penalties and natural resource damages), or death or injury to
any Person, and all expenses associated with the protection of wildlife,
aquatic species, vegetation, flora and fauna, and any mitigative action
required by or under Environmental Laws for which any Indemnitee or Lessee
may be legally liable,
(d) any claim concerning any Indemnitee's or Lessee's
lack of compliance with Environmental Laws, or any act or omission by any
Indemnitee, the Lessee or any of their agents, employees or contractors
causing an environmental condition that requires remediation or would allow
any Governmental Authority to record a Lien on the land records, or
(e) any residual contamination on or under the Land, or
affecting any natural resources, and to any contamination of any property
or natural resources arising in connection with the generation, use,
handling, storage, transport or disposal of any such Hazardous Materials,
and irrespective of whether any of such activities were or will be
undertaken in accordance with applicable laws, regulations, codes and
ordinances for which any Indemnitee or Lessee may be legally liable;
provided, however, the Lessee shall not be required to indemnify any
Indemnitee under this Section 26.2 for (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such
Indemnitee (it being understood that the Lessee shall be required to
indemnify an Indemnitee even if the ordinary (but not gross) negligence of
such Indemnitee caused or contributed to such Claim) or (2) any Claim to
the extent attributable to acts or events occurring after the expiration of
the Base Term and the return or remarketing of the Properties so long as
the Lessor is not exercising remedies against the Lessee in respect of the
Operative Documents. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration or
termination of and shall be separate and independent from any remedy
under this Lease or any other Operative Document.
26.3 Proceedings in Respect of Claims. With respect to any amount
that the Lessee is requested by an Indemnitee to pay by reason of Section
26.1 or 26.2, such Indemnitee shall, if so requested by the Lessee and
prior to any payment, submit such additional information to the Lessee as
the Lessee may reasonably request and which is in the possession of such
Indemnitee to substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement
thereof, and the Lessee shall be entitled, at its expense, to participate
in, and, to the extent that the Lessee desires to, assume and control the
defense thereof; provided, however, that the Lessee shall have acknowledged
in writing its obligation to fully indemnify such Indemnitee in respect of
such action, suit or proceeding, and, the Lessee shall keep such Indemnitee
fully apprised of the status of such action, suit or proceeding and shall
provide such Indemnitee with all information with respect to such action,
suit or proceeding as such Indemnitee shall reasonably request, and
provided, further, that the Lessee shall not be entitled to assume and
control the defense of any such action, suit or proceeding if and to the
extent that, (A) in the reasonable opinion of such Indemnitee, (x) such
action, suit or proceeding involves any risk of imposition of criminal
liability or any risk of imposition of material civil liability on such
Indemnitee beyond that for which the Indemnitee is jointly and severally
liable with the Lessor or will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on any Leased Asset or any part thereof unless, in the case of civil
liability, the Lessee shall have posted a bond or other security
satisfactory to the relevant Indemnitees in respect to such risk or (y) the
control of such action, suit or proceeding would involve a material actual
conflict of interest, (B) such proceeding involves Claims not fully
indemnified by the Lessee which the Lessee and the Indemnitee have been
unable to sever from the indemnified claim(s), or (C) an Event of Default
has occurred and is continuing. The Indemnitee may participate in a
reasonable manner at its own expense and with its own counsel in any
proceeding conducted by the Lessee in accordance with the foregoing. The
Lessee shall not enter into any settlement or other compromise with respect
to any Claim which is entitled to be indemnified under Section 26.1 or 26.2
without the prior written consent of the Indemnitee which consent shall not
be unreasonably withheld in the case of a money settlement not involving an
admission of liability of such Indemnitee; provided, however, that in the
event that such Indemnitee withholds consent to any settlement or other
compromise, the Lessee shall not be required to indemnify such Indemnitee
under Section 26.1 or 26.2 to the extent that the applicable Claim (x) is
for legal fees and expenses incurred after the date of the proposed
settlement or (y) results in a judgment in excess of such offered money
settlement.
Each Indemnitee shall at the expense of the Lessee supply the Lessee
with such information and documents reasonably requested by the Lessee and
in the possession of such Indemnitee as are necessary or advisable for the
Lessee to participate in any action, suit or proceeding to the extent
permitted by Section 26.1 or 26.2. Unless an Event of Default shall have
occurred and be continuing under Section 20.1(a), (f) or (g) no Indemnitee
shall enter into any settlement or other compromise with respect to any
Claim for which it is entitled to be indemnified under Section 26.1 or 26.2
without the prior written consent of the Lessee, which consent shall not be
unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under Section 26.1 or 26.2 with respect to such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section
26.1 or 26.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (including claims in respect of
insurance policies maintained by such Indemnitee at its own expense), and
such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be necessary to preserve any such claims
and otherwise cooperate with the Lessee and give such further assurances as
are necessary or advisable to enable the Lessee vigorously to pursue such
claims.
Any amount required to be paid to an Indemnitee pursuant to Section
26.1 or 26.2 shall be paid to such Indemnitee promptly upon receipt of a
written demand therefor from such Indemnitee, accompanied by a written
statement describing in reasonable detail the basis for such indemnity and
the computation of the amount so payable and, if requested by the Lessee,
such determination shall be verified by a nationally recognized independent
accounting firm mutually acceptable to the Lessee and the Indemnitee at the
expense of the Lessee; provided, however, that if the Lessee has assumed
the defense of the related Claim or is paying the costs of the Indemnitee's
defense of the related Claim on an ongoing basis, the Lessee shall not be
required to pay such amount to the applicable Indemnitee until such time as
a judgment is entered with respect to such Claim, the enforcement of which
is not stayed or which judgment is not bonded over, or the Claim is
otherwise settled or lost.
26.4 General Tax Indemnity.
(a) Indemnification. The Lessee agrees to pay and assume
liability for, and to indemnify, protect, defend, save and keep harmless
each Indemnitee from and against, all Impositions.
(b) Contests. If any claim shall be made against any
Indemnitee or if any proceeding shall be commenced against any Indemnitee
(including a written notice of such proceeding) for any Imposition as to
which the Lessee may have an indemnity obligation pursuant to this Section
26.4, or if any Indemnitee shall reasonably determine that any Imposition
to which the Lessee may have an indemnity obligation pursuant to this
Section 26.4 may be payable, such Indemnitee shall promptly (and in any
event, within thirty (30) days) notify the Lessee in writing (provided that
failure to so notify the Lessee within thirty (30) days shall not alter
such Indemnitee's rights under this Section 26.4 except to the extent such
failure precludes or materially adversely affects the ability to conduct a
contest of any indemnified Taxes) and shall not take any action with
respect to such claim, proceeding or Imposition without the written consent
of the Lessee (such consent not to be unreasonably withheld or unreasonably
delayed) for thirty (30) days after the receipt of such notice by the
Lessee; provided, however, that in the case of any such claim or
proceeding, if such Indemnitee shall be required by law or regulation to
take action prior to the end of such 30-day period, such Indemnitee shall
in such notice to the Lessee, so inform the Lessee, and such Indemnitee
shall not take any action with respect to such claim, proceeding or
Imposition without the consent of the Lessee (such consent not to be
unreasonably withheld or unreasonably delayed) for ten (10) days after the
receipt of such notice by the Lessee unless the Indemnitee shall be
required by law or regulation to take action prior to the end of such
10-day period.
The Lessee shall be entitled for a period of thirty (30) days from
receipt of such notice from the Indemnitee (or such shorter period as the
Indemnitee has notified the Lessee is required by law or regulation for the
Indemnitee to commence such contest), to request in writing that such
Indemnitee contest the imposition of such Tax, at the Lessee's expense. If
(x) such contest can be pursued in the name of the Lessee and independently
from any other proceeding involving a Tax liability of such Indemnitee for
which the Lessee has not agreed to indemnify such Indemnitee, (y) such
contest must be pursued in the name of the Indemnitee, but can be pursued
independently from any other proceeding involving a Tax liability of such
Indemnitee for which the Lessee has not agreed to indemnify such Indemnitee
or (z) the Indemnitee so requests, then the Lessee shall be permitted to
control the contest of such claim, provided that in the case of a contest
described in clause (y), if the Indemnitee determines in good faith that
such contest by the Lessee could have a material adverse impact on the
business or operations of the Indemnitee and provides a written explanation
to the Lessee of such determination, the Indemnitee may elect to control or
reassert control of the contest, and provided, that by taking control of
the contest, Lessee acknowledges that it is responsible for the Imposition
ultimately determined to be due by reason of such claim, and provided,
further, that in determining the application of clauses (x) and (y) of the
preceding sentence, each Indemnitee shall take any and all reasonable steps
to segregate claims for any Taxes for which the Lessee indemnifies
hereunder from Taxes for which the Lessee is not obligated to indemnify
hereunder, so that the Lessee can control the contest of the former. In all
other claims requested to be contested by the Lessee, the Indemnitee shall
control the contest of such claim, acting through counsel reasonably
acceptable to the Lessee. In no event shall the Lessee be permitted to
contest (or the Indemnitee required to contest) any claim, (A) if such
Indemnitee provides the Lessee with a legal opinion of counsel reasonably
acceptable to the Lessee that such action, suit or proceeding involves a
risk of imposition of criminal liability or will involve a material risk of
the sale, forfeiture or loss of, or the creation of any Lien (other than a
Permitted Lien) on any Leased Asset or any part of any thereof unless the
Lessee shall have posted and maintained a bond or other security
satisfactory to the relevant Indemnitee in respect to such risk, (B) if an
Event of Default has occurred and is continuing under Section 20.1(a), (f)
or (g) unless the Lessee shall have posted and maintained a bond or other
security satisfactory to the relevant Indemnitee in respect of the Taxes
subject to such claim and any and all expenses for which the Lessee is
responsible hereunder reasonably foreseeable in connection with the contest
of such claim, (C) unless the Lessee shall have agreed to pay and shall
pay, to such Indemnitee on demand all reasonable out-of-pocket costs,
losses and expenses that such Indemnitee may incur in connection with
contesting such Imposition including all reasonable legal, accounting and
investigatory fees and disbursements, or (D) if such contest shall involve
the payment of the Tax prior to the contest, unless the Lessee shall
provide to the Indemnitee an interest-free advance in an amount equal to
the Imposition that the Indemnitee is required to pay (with no additional
net after-tax costs to such Indemnitee). In addition, for Indemnitee
controlled contests and claims contested in the name of the Indemnitee in a
public forum, no contest shall be required: (A) unless the amount of the
potential indemnity (taking into account all similar or logically related
claims that have been or could be raised in any audit involving such
Indemnitee for which the Lessee may be liable to pay an indemnity under
this Section 26.4(b)) exceeds $50,000 and (B) unless, if requested by the
Indemnitee, the Lessee shall have provided to the Indemnitee an opinion of
counsel selected by the Lessee (which may be in-house counsel) (except, in
the case of income taxes indemnified hereunder which shall be an opinion of
independent tax counsel selected by the Indemnitee and reasonably
acceptable to the Lessee) that a reasonable basis exists to contest such
claim. In no event shall an Indemnitee be required to appeal an adverse
judicial determination to the United States Supreme Court.
The party conducting the contest shall consult in good faith with the
other party and its counsel with respect to the contest of such claim for
Taxes (or claim for refund) but the decisions regarding what actions are to
be taken shall be made by the controlling party in its sole judgement,
provided, however, that if the Indemnitee is the controlling party and the
Lessee recommends the acceptance of a settlement offer made by the relevant
Governmental Authority and such Indemnitee rejects such settlement offer
then the amount for which the Lessee will be required to indemnify such
Indemnitee with respect to the Taxes subject to such offer shall not exceed
the amount which it would have owed if such settlement offer had been
accepted. In addition, the controlling party shall keep the noncontrolling
party reasonably informed as to the progress of the contest, and shall
provide the noncontrolling party with a copy of (or appropriate excerpts
from) any reports or claims issued by the relevant auditing agents or
taxing authority to the controlling party thereof, in connection with such
claim or the contest thereof.
Each Indemnitee shall at the Lessee's expense supply the Lessee with
such information and documents reasonably requested by the Lessee as are
necessary or advisable for the Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section 26.4(b). No Indemnitee
shall enter into any settlement or other compromise or fail to appeal an
adverse ruling with respect to any claim which is entitled to be
indemnified under this Section 26.4 (and with respect to which contest is
required under this Section 26.4(b)) without the prior written consent of
the Lessee, unless such Indemnitee waives its right to be indemnified under
this Section 26.4 with respect to such claim.
Notwithstanding anything contained herein to the contrary, an
Indemnitee will not be required to contest (and the Lessee shall not be
permitted to contest) a claim with respect to the imposition of any Tax if
such Indemnitee shall waive its right to indemnification under this Section
26.4 with respect to such claim (and any claim with respect to such year or
any other taxable year the contest of which is materially adversely
affected as a result of such waiver).
(c) Reimbursement for Tax Savings. If (x) an Indemnitee
or any Affiliate thereof actually realizes a deduction, offset, credit or
refund of any Taxes or any other savings or benefit as a result of any
indemnity paid by the Lessee pursuant to this Section 26.4 or (y) by reason
of the incurrence or imposition of any Tax (or the circumstances or event
giving rise thereto) for which an Indemnitee is indemnified hereunder or
any payment made to or for the account of such Indemnitee by the Lessee
pursuant to this Section 26.4 or any payment made by an Indemnitee to the
Lessee by reason of this Section 26.4(c), such Indemnitee at any time
actually realizes a reduction in any Taxes for which the Lessee is not
required to indemnify such Indemnitee pursuant to this Section 26.4, then
such Indemnitee shall promptly pay to the Lessee (xx) the amount of such
deduction, offset, credit, refund, or other savings or benefit together
with the amount of any interest received by such Indemnitee on account of
such deduction, offset, credit, refund or other savings or benefit or (yy)
an amount equal to such reduction in Taxes, as the case may be, in either
case together with an amount equal to any reduced Taxes payable by such
Indemnitee as a result of such payment. Each Indemnitee agrees to take such
actions as the Lessee may reasonably request (provided in the good faith
judgment of the Indemnitee, such actions would not result in a material
adverse effect on the Indemnitee for which the Indemnitee is not entitled
to indemnification from the Lessee) and to otherwise act in good faith to
claim such refunds and other available Tax benefits, and take such other
actions as may be reasonable to minimize any payment due from the Lessee
pursuant to this Section 26.4 and to maximize the amount of any Tax savings
available to it. The disallowance or reduction of any credit, refund or
other tax savings with respect to which an Indemnitee has made a payment to
the Lessee under this Section 26.4(c) shall be treated as a Tax for which
the Lessee is obligated to indemnify such Indemnitee hereunder without
regard to the exclusions set forth in the definition of Impositions.
(d) Payments. Any Imposition identifiable under this
Section 26.4 shall be paid directly when due to the applicable taxing
authority if direct payment is practicable and permitted. If direct payment
to the applicable taxing authority is not permitted or is otherwise not
made, any amount payable to an Indemnitee pursuant to Section 26.4 shall be
paid within thirty (30) days after receipt of a written demand therefor
from such Indemnitee accompanied by a written statement describing in
reasonable detail the amount so payable, but not before two Business Days
prior to the date that the relevant Taxes are due. Any payments made
pursuant to this Section 26.4 shall be made directly to the Indemnitee
entitled thereto or the Lessee, as the case may be, in immediately
available funds at such bank or to such account as specified by the payee
in written directions to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of the payee by
certified mail, postage prepaid at its address. Upon the request of any
Indemnitee with respect to a Tax that the Lessee is required to pay, the
Lessee shall furnish to such Indemnitee the original or a certified copy of
a receipt for the Lessee's payment of such Tax or such other evidence of
payment as is reasonably acceptable to such Indemnitee.
(e) Reports. In the case of any report, return or
statement required to be filed with respect to any Taxes that are subject
to indemnification under this Section 26.4 and of which the Lessee has
knowledge, the Lessee shall promptly notify the Indemnitee of such
requirement and, at the Lessee's expense (i) if the Lessee is permitted
(unless otherwise requested by the Indemnitee) by Applicable Law, timely
file such report, return or statement in its own name or (ii) if such
report, return or statement is required to be in the name of or filed by
such Indemnitee or the Indemnitee otherwise requests that such report,
return or statement for filing by such Indemnitee in such manner as shall
be satisfactory to such Indemnitee and send the same to the Indemnitee for
filing no later than fifteen (15) days prior to the due date therefor. In
any case in which the Indemnitee will file any such report, return or
statement, the Lessee shall, upon written request of such Indemnitee,
provide such Indemnitee with such information as is reasonably necessary to
allow the Indemnitee to file such report, return or statement.
(f) Verification. At the Lessee's request, the amount of
any indemnity payment by the Lessee or any payment by an Indemnitee to the
Lessee pursuant to this Section 26.4 shall be verified and certified by an
independent public accounting firm mutually acceptable to the Lessee and
the Indemnitee. The Indemnitee shall provide such independent public
accounting firm, on a confidential basis, the requisite financial
information. The costs of such verification shall be borne by the Lessee
unless such verification shall result in an adjustment in the Lessee's
favor of the lesser of (i) $10,000, and (ii) five percent of the payment as
computed by the Indemnitee, in which case such fee shall be paid by the
Indemnitee. In no event shall the Lessee have the right to review the
Indemnitee's tax returns or receive any other confidential information from
the Indemnitee in connection with such verification. Any information
provided to such accountants by any Person shall be and remain the
exclusive property of such Person and shall be deemed by the parties to be
(and the accountants will confirm in writing that they will treat such
information as) the private, proprietary and confidential property of such
Person, and no Person other than such Person and the accountants shall be
entitled thereto and all such materials shall be returned to such Person.
Such accounting firm shall be requested to make its determination within
thirty (30) days of the Lessee's request for verifications and the
computations of the accounting firm shall be final, binding and conclusive
upon the Lessee and the Indemnitee. The parties agree that the sole
responsibility of the independent public accounting firm shall be to verify
the amount of a payment pursuant to this Lease and that matters of
interpretation of this Lease are not within the scope of the independent
accounting firm's responsibilities.
(g) Tax Ownership. The Lessor represents and warrants
that it will not, prior to the termination, claim ownership of (or any tax
benefits, including depreciation, with respect to) the Leased Assets for
any income tax purposes, it being understood that the Lessee is and will
remain the owner of the Leased Assets for such income tax purposes until
the termination of this Lease. If, notwithstanding the income tax
intentions of the parties as set forth herein, the Lessor actually receives
any income tax deductions, reductions in income tax or other income tax
benefit as a result of any claim for, or recharacterization requiring such
party to take, any tax benefits attributable to ownership of the Leased
Assets for income tax purposes, the Lessor shall pay to the Lessee the
amount of such income tax savings actually realized by the Lessor (less the
amount of any anticipated increase in income tax which the Lessor
determines is currently payable as a result of such claim or
recharacterization), provided that the Lessee shall agree to reimburse the
Lessor for any subsequent increase in the Lessor's income taxes resulting
from such claim or recharacterization not taken into account in the payment
made to the Lessee, up to the amount paid to the Lessee by the Lessor. The
parties agree that this Section 26.4(g) is intended to require a payment to
the Lessee if and only if the Lessor shall have actually received an
unanticipated tax savings with respect to the Leased Assets that would not
have been received if the Lessor had advanced funds to the Lessee in the
form of a loan secured by the Leased Assets in an amount equal to the
aggregate amount of Advances made with respect to such Leased Assets.
Nothing in this Section 26.4(g) shall be construed to require the Lessor to
take any affirmative action to realize any tax savings if in its good faith
judgment such action may have a material adverse affect on the Lessor.
26.5 Funding Losses. If any payment of Base Rent or any portion of a
Lease Balance is made on any day other than the last day of an Interest
Period applicable thereto (other than as a result of the failure of the
Lessor and each Liquidity Provider to act in accordance with the provisions
of the Operative Documents), the Lessee shall reimburse the Lessor, each
Conduit and each Liquidity Provider within fifteen (15) days after demand
for any resulting loss or expense incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period
after any such payment or conversion or failure to borrow or prepay,
provided that the Lessor, such Conduit and such Liquidity Provider shall
have delivered to the Lessee a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest
error, and provided, further, that such loss shall in no event exceed the
then effective Lease Rate which would have been payable for the balance of
such Interest Period. In the event that the Lessee pays any portion of the
Lease Balance allocated to one or more CP Tranches prior to the maturity
date thereof, the Lessee shall pay to the Lessor for the account of each
Conduit the interest that would have accrued on its CP Tranches at the
applicable CP Rates to such maturity dates. Any amount paid to the Lessor
pursuant to the preceding sentence shall be invested in Permitted
Investments of the type described in clause (a) of the definition thereof,
which investments shall mature as close as possible to, but not later than,
the date such CP Tranche(s) mature. All earnings on such Permitted
Investments shall be paid over to the Lessee provided that no Event of
Default has occurred and is continuing. The Lessor will, at the request of
the Lessee, furnish such additional information concerning the
determination of such loss as the Lessee may reasonably request.
26.6 Regulation D Compensation. For so long as the Equity Lender or
any Liquidity Provider is required to maintain reserves against
"Eurocurrency Liabilities" (or any other category of liabilities which
include deposits by reference to which the Base Rent is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Liquidity Provider to United States
residents), and, as a result, the cost to (i) the Lessor of making or
maintaining its Advances, (ii) the Receivable Purchaser of making or
maintaining the Seller Loan or its purchases of Purchaser's Interests, or
(iii) any Liquidity Provider of making or maintaining its Loans or
Liquidity Purchases, which in each case bear interest by reference to the
Eurodollar Rate is increased, then the Lessor, on behalf of the Equity
Lender, the Receivable Purchaser or such Liquidity Provider, as the case
may be, may require the Lessee to pay, contemporaneously with each payment
of Base Rent, an additional amount at a rate per annum up to but not
exceeding the excess of (i) (A) the applicable Eurodollar Rate divided by
(B) one minus the Eurocurrency Reserve Requirements over (ii) the
applicable Eurodollar Rate to reimburse the Equity Lender, the Receivable
Purchaser, or such Liquidity Provider to the extent any such Person is
required to maintain such reserves. In the event that the Equity Lender,
the Receivable Purchaser or a Liquidity Provider wishes to require payment
of such additional amount, the Lessor (x) shall so notify the Lessee, in
which case such additional Rent shall be payable to the Equity Lender or
such Liquidity Provider, as the case may be, at the place indicated in such
notice and (y) shall furnish to the Lessee at least five (5) Business Days
prior to each date on which Rent is payable a certificate setting forth the
amount to which it is then entitled under this Section (which shall be
consistent with its good faith estimate of the level at which the required
related reserves are maintained by it).
Each such certificate shall be accompanied by such information as the
Lessee may reasonably request as to the computation set forth therein.
26.7 Basis for Determining Eurodollar Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are
not being offered to the Equity Lender or any Liquidity Provider in the
relevant market for such Interest Period, or
(b) the Lessor advises the Lessee that the Eurodollar
Rate as determined by the Liquidity Agent and/or the Equity Lender will not
adequately and fairly reflect the cost to the Equity Lender and the
Liquidity Providers of funding loans under the Equity Loan Agreement, Loans
or Liquidity Purchases, as the case may be, for such Interest Period,
the Lessor shall forthwith give notice thereof to the Lessee, whereupon
until the Lessor notifies the Lessee that the circumstances giving rise to
such suspension no longer exist, (i) the obligation of the Lessor to make
Advances based on the Eurodollar Rate shall be suspended and Advances shall
be made on the basis of the Alternate Base Rate and (ii) each outstanding
Advance shall begin to bear interest at the Alternate Base Rate on the last
day of the then current Interest Period applicable thereto.
26.8 Illegality. If, on or after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lessor, the Equity Lender, the
Receivable Purchaser or any Liquidity Provider with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for
the Lessor, Receivable Purchaser (or any lender to either) or any Liquidity
Provider to make, maintain or fund its Advances, loans under the Equity
Loan Agreement, Loans or Liquidity Purchases, as the case may be, based on
the Eurodollar Rate and the Lessor shall so notify the Lessee, whereupon
until the Lessor notifies the Lessee that the circumstances giving rise to
such suspension no longer exist, the obligation to make Advances based on
the Eurodollar Rate shall be suspended and Advances shall be made on the
basis of the Alternate Base Rate. If such notice is given (i) the Lessee
shall be entitled, upon its request, to a reasonable explanation of the
factors underlying such notice and (ii) each Advance then outstanding shall
begin to bear interest at the Alternate Base Rate either (a) on the last
day of the then current Interest Period applicable thereto, if the Lessor
may lawfully continue to maintain and fund such Advance to such day or (b)
immediately, if the Lessor, the Equity Lender, Receivable Purchaser (or any
Affiliate of either) or any Liquidity Provider shall determine that it
may not lawfully continue to maintain and fund such Advance, loan under the
Equity Loan Agreement, Loan or Liquidity Purchase, as the case may be, to
such day.
26.9 Increased Cost and Reduced Return. (a) In the event that the
adoption of any applicable law, rule or regulation, or any change therein
or in the interpretation or application thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by the Lessor, the
Equity Lender, Receivable Purchaser or any Liquidity Provider with any
request or directive after the date hereof (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(i) does or shall subject the Lessor, the Equity
Lender, Receivable Purchaser or any Liquidity Provider to any
additional tax of any kind whatsoever with respect to the Operative
Documents or any Advance, loan under the Equity Loan Agreement, Loan
or Liquidity Purchase, as the case may be, made by it, or change the
basis or the applicable rate of taxation of payments to the Lessor,
the Equity Lender, Receivable Purchaser or any Liquidity Provider of
principal, interest or any other amount payable hereunder or under
any other Operative Document (except for the imposition of or change
in any tax on or measured by the overall net income of the Lessor,
the Equity Lender, Receivable Purchaser (or any Affiliate of either)
or any Liquidity Provider (other than any such tax imposed by means
of withholding));
(ii) does or shall impose, modify or hold applicable
any reserve, special deposit, insurance assessment, compulsory loan
or similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, the Lessor,
any office of the Equity Lender, Receivable Purchaser or any
Liquidity Provider which are not otherwise included in determination
of the rate of interest on Advances hereunder; or
(iii) does or shall impose on the Lessor, the
Equity Lender, Receivable Purchaser or any Liquidity Provider any other
condition;
and the result of any of the foregoing is to increase the cost to the
Lessor, the Equity Lender, Receivable Purchaser or any Liquidity Provider
of making or maintaining Advances, Loans or Liquidity Purchases, as the
case may be, or to reduce any amount receivable hereunder, then in any such
case, the Lessee shall promptly pay to the Lessor, the Equity Lender, the
Receivable Purchaser or any Liquidity Provider, upon demand, any additional
amounts necessary to compensate such affected Person for such increased
cost or reduced amount receivable.
(b) If the Lessor, the Equity Lender, Receivable
Purchaser or any Liquidity Provider shall have determined that, after the
date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, or if any Liquidity Provider shall have
determined that a change in the risk weighing of its Commitment is
necessary, and any of the foregoing has or would have the effect of
reducing the rate of return on capital of the Lessor, the Equity Lender,
the Receivable Purchaser or any Liquidity Provider (or any entity directly
or indirectly controlling any of such Persons) as a consequence of their
respective obligations under the Operative Documents to a level below that
which they could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time, within fifteen (15) days after demand by
the Lessor on its own behalf or on behalf of the Equity Lender, the
Receivable Purchaser, or any Liquidity Provider, the Lessee shall pay to
the Lessor such additional amount or amounts as will compensate the Lessor,
the Equity Lender, the Receivable Purchaser (or any Affiliate of either)
and the Liquidity Providers (or their respective controlling entities) for
such reduction.
(c) The Lessor will promptly notify the Lessee of any
event of which it has knowledge, occurring after the date hereof, which
will require the Lessee to make payments pursuant to this Section. A
certificate of the Person claiming compensation under this Section and
setting forth in reasonable detail its computation of the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the affected Person may use any
reasonable averaging and attribution methods.
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1 Estoppel Certificates. At any time and from time to time upon
not less than twenty (20) days' prior request by the Lessor or the Lessee
(the "Requesting Party"), the other party (whichever party shall have
received such request, the "Certifying Party") shall furnish to the
Requesting Party (but in the case of the Lessor, as Certifying Party, not
more than four times per year unless required to satisfy the requirements
of any sublessees and only to the extent that the required information has
been provided to the Lessor by the Lessee) a certificate signed by an
individual having the office of vice president or higher in the Certifying
Party certifying that this Lease is in full force and effect (or that this
Lease is in full force and effect as modified and setting forth the
modifications); the dates to which the Base Rent and Supplemental Rent have
been paid; to the best knowledge of the signer of such certificate, whether
or not the Requesting Party is in default under any of its obligations
hereunder (and, if so, the nature of such alleged default); and such other
matters under this Lease as the Requesting Party may reasonably request.
Any such certificate furnished pursuant to this Article XXVII may be relied
upon by the Requesting Party, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to the
Requesting Party (or any Affiliate thereof).
ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
28.1 Acceptance of Surrender. No surrender to the Lessor of this
Lease or of all or any portion of any Leased Asset or of any part of any
thereof or of any interest therein shall be valid or effective unless
agreed to and accepted in writing by the Lessor, and no act by the Lessor
or any representative or agent of the Lessor, other than a written
acceptance, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
NO MERGER OF TITLE
29.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in
part, (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate, (b) the fee or ground leasehold
estate in any Leased Asset, except as may expressly be stated in a written
instrument duly executed and delivered by the appropriate Person or (c) a
beneficial interest in the Lessor.
ARTICLE XXX
INTENT OF THE PARTIES
30.1 Ownership of the Properties. (a) It is the intent of the parties
hereto that: (i) this Lease constitutes an operating lease from the Lessor
to the Lessee for the purposes of the Lessee's financial reporting, (ii)
the Lease and other transactions contemplated hereby preserve ownership in
the Leased Assets in the Lessee for Federal and state income tax and
bankruptcy purposes, (iii) each Lease Supplement grants to the Lessor a
Lien on the Leased Assets covered thereby, and (iv) the obligations of the
Lessee to pay Base Rent and any part of the Lease Balance shall be treated
as payments of interest and principal, respectively, for Federal and state
income tax and bankruptcy purposes. The Lessor shall be deemed to have a
valid and binding security interest in and Lien on the Leased Assets, free
and clear of all Liens other than Permitted Liens, as security for the
obligations of the Lessee under the Operative Documents (it being
understood and agreed that the Lessee does hereby grant a security interest
in and Lien on, and convey, transfer, assign, mortgage and warrant to the
Lessor and its successors, transferees and assigns, the Leased Assets and
any proceeds or products thereof, to have and hold the same as collateral
security for the payment and performance of the obligations of the Lessee
under the Operative Documents), and each of the parties hereto agrees that
it will not, nor will it permit any Affiliate to at any time, take any
action or fail to take any action with respect to the preparation or filing
of any income tax return, including an amended income tax return, to the
extent that such action or such failure to take action would be
inconsistent with the intention of the parties expressed in this Section
30.1.
(b) Specifically, without limiting the generality of
clause (a) of the Section 30.1, the parties hereto intend and agree that in
the event of any insolvency or receivership proceedings or a petition under
the United States bankruptcy laws or any other applicable insolvency laws
or statute of the United States of America or any State or Commonwealth
thereof affecting the Lessee, the Guarantor, the Lessor, any other Person
or any collective actions, the transactions evidenced by the Operative
Documents shall be regarded as loans made by the Lessor to the Lessee.
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1 Transaction Expenses. (a) The Lessee shall pay, or cause to be
paid, from time to time all Transaction Expenses in respect of the
transactions taking place on the Closing Date and on each Funding Date on
such respective date; provided, however, that, if the Lessee has not
received written invoices therefor five (5) days prior to such date, such
Transaction Expenses shall be paid on the earlier of (i) the next Funding
Date and (ii) the date thirty-five (35) days after the Lessee has received
written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) the
reasonable fees and expenses of the Paying Agent or any successor Paying
Agent, (ii) all reasonable Transaction Expenses from time to time incurred
by the Lessor in entering into any future amendments or supplements with
respect to any of the Operative Documents, whether or not such amendments
or supplements are ultimately entered into, or giving or withholding of
waivers of consents hereto or thereto, in each case which have been
requested by or approved by the Lessee, (iii) all reasonable Transaction
Expenses incurred by the Lessor in connection with any purchase of any
Leased Asset by the Lessee or other Person pursuant to this Lease and (iv)
all Transaction Expenses incurred by the Lessor, the Receivable Purchaser,
the Collateral Agent, the Conduits, the Liquidity Agent and the Liquidity
Providers in respect of enforcement of any of their rights or remedies
against the Lessee or the Guarantor in respect of the Operative Documents.
31.2 Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause to
be paid any brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Lease and the other Operative Documents. The Lessor and the Lessee each
represent to the other that it has not employed any brokers in connection
with the transactions contemplated by the Operative Documents.
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1 Information. The Lessee will deliver to the Lessor:
(a) within five (5) days after a Responsible Employee of
the Lessee or any Affiliate of the Lessee obtains knowledge of the
occurrence of each Event of Default or each event that, with the giving of
notice or time elapse, or both, would constitute an Event of Default
continuing on the date of such statement, a statement of the authorized
officer setting forth details of such Event of Default or event and the
action that the Lessee proposes to take with respect thereto;
(b) within five (5) days of any change of the Guarantor's
or the Lessee's independent public accountants, notification thereof;
(c) promptly upon becoming aware thereof, written notice
of any material adverse change in the business, financial position or
results of operations of the Guarantor and its Subsidiaries, considered as
a whole;
(d) as soon as possible and in any event within five (5)
days after knowledge of (or such time as a Responsible Employee of Lessee
or any Affiliate of the Lessee reasonably should have had knowledge of) the
occurrence of any material violation or alleged violation of an
Environmental Law relating to any Property, a statement of an authorized
officer setting forth the details of such violation and the action which
the Lessee proposes to take with respect thereto;
(e) from time to time such additional information
regarding the business, properties, condition or operations, financial or
otherwise, of the Guarantor and its Significant Subsidiaries, or regarding
the Leased Assets or the status of any construction thereon, as the Lessor
may reasonably request;
(f) not later than five (5) Business Days after request,
copies of all amendments to and waivers of the Credit Agreement requested
by the Guarantor; and
(g) not later than five (5) Business days after delivery,
copies of all amendments to and waivers of the Credit Agreement.
32.2 Financial Statements.
(a) The Lessee will furnish or cause to be furnished to
the Lessor and each Liquidity Provider, as and when required by Section
5.01(a)-(d) of the Credit Agreement, all the reports, schedules,
certificates and statements required of the Guarantor and its Subsidiaries
to be delivered pursuant to Section 5.01(a)-(d) of the Credit Agreement;
provided, however, that the Lessee shall not be required to furnish any
such document to any such Person pursuant to this Lease if such Person or
its Affiliate is a party to the Credit Agreement and receives such document
pursuant to the terms thereof.
(b) The Lessee will furnish to the Lessor and each
Liquidity Provider, not later than ninety (90) days after the end of each
of its fiscal years, unaudited financial statements of the Lessee, together
with a Responsible Employee Certificate of the Lessee certifying that, to
the best knowledge of such Responsible Employee, no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default
has occurred and is continuing, the nature thereof and the action the
Lessee is taking with respect thereto.
32.3 Other Covenants. If any covenants are set forth in any Lease
Supplement, then the Lessee will observe and perform such covenants
according to the terms thereof with the same force and effect as if set
forth in full
herein.
ARTICLE XXXIII
MISCELLANEOUS
33.1 Survival; Severability; Etc. If any term or provision of this
Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of
such term or provision shall not be affected thereby. If any right or
option of the Lessee provided in this Lease would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being
in violation of the rule against perpetuities or any other rule of law
relating to the vesting of an interest in or the suspension of the power of
alienation of property, then such right or option shall be exercisable only
during the period which shall end twenty-one (21) years after the date of
death of the last survivor of the descendants of Franklin D. Roosevelt, the
former President of the United States, and John D. Rockefeller, the founder
of the Standard Oil Company, known to be alive on the date of the
execution, acknowledgement and delivery of this Lease.
33.2 Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by
an instrument in writing signed by the Lessor and the Lessee.
33.3 No Waiver. No failure by the Lessor or the Lessee to insist upon
the strict performance of any term hereof or to exercise any right, power
or remedy upon a default hereunder, and no acceptance of full or partial
payment of Rent during the continuance of any such default, shall
constitute a waiver of any such default or of any such term. To the fullest
extent permitted by law, no waiver of any default shall affect or alter
this Lease, and this Lease shall continue in full force and effect with
respect to any other then existing or subsequent default.
33.4 Notices. All notices, demands, requests, consents, approvals and
other communications hereunder shall be in writing (including by
facsimile), and directed to the address of the appropriate party as set
forth in Schedule I hereto.
33.5 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted
assigns.
33.6 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
33.7 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute
one and the same instrument.
33.8 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS
RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER WITH RESPECT TO
ANY PROPERTY (AS DEFINED IN THIS LEASE) AND THE EXERCISE OF RIGHTS AND
REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE WHERE SUCH PROPERTY IS LOCATED.
WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO
CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS
EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND THE
ENFORCEMENT OF SAID LIEN WITH RESPECT TO ANY PROPERTY (AS DEFINED IN THIS
LEASE) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE WHERE SUCH PROPERTY IS LOCATED.
33.9 Original Lease. The single executed original of this Lease
containing the receipt of the Lessor therefor on or following the signature
page thereof shall be the Original Executed Counterpart of this Lease (the
"Original Executed Counterpart"). To the extent that this Lease constitutes
chattel paper, as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction, no security interest in this Lease
may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.
33.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS LEASE AND/OR ANY OF THE OTHER OPERATIVE
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF SUCH PARTIES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY
HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE
LEASE AND EACH SUCH OTHER OPERATIVE DOCUMENTS.
33.11 TRUTH IN LEASING REQUIREMENT IN COMPLIANCE WITH FEDERAL
AVIATION REGULATION ss.91.23. THE LESSEE HEREBY ADVISES THE LESSOR THAT
FROM THE DATE OF ITS MANUFACTURE TO THE DATE OF THIS LEASE, THE AIRCRAFT
LEASED UNDER THIS LEASE HAS BEEN MAINTAINED AND INSPECTED IN ACCORDANCE
WITH ss.91.409(f)(3) OF THE FEDERAL AVIATION REGULATIONS.
THE LESSEE CERTIFIES THAT IT IS RESPONSIBLE FOR THE STATUS OF
COMPLIANCE OF THE AIRCRAFT WITH APPLICABLE MAINTENANCE AND INSPECTION
REQUIREMENTS AS SET FORTH UNDER FAA REGULATIONS APPLICABLE TO THE LESSEE'S
USE AND OPERATION OF THE AIRCRAFT. IN ADDITION, UPON THE LESSOR'S REQUEST,
THE LESSEE AGREES TO ADVISE THE LESSOR WHICH OF THE REQUIRED FAA
MAINTENANCE PROGRAMS THE LESSEE HAS SELECTED AND AGREES TO PROVIDE THE
LESSOR WITH WRITTEN INSPECTION REPORTS FOR INSPECTIONS ACCOMPLISHED UNDER
SAID PROGRAM.
THE LESSEE IS SOLELY RESPONSIBLE FOR OPERATIONAL CONTROL OF THE
AIRCRAFT UNDER THIS LEASE AND CERTIFIES AND AGREES TO COMPLY WITH ALL
APPLICABLE FAA REGULATIONS ISSUED DURING THE TERM OF THIS LEASE. THE LESSEE
IS HEREBY ADVISED THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL
CONTROL AND PERTINENT FAA REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE OR AIR
CARRIER DISTRICT OFFICE.
THE LESSEE AGREES TO KEEP A COPY OF THIS LEASE IN THE AIRCRAFT AT ALL
TIMES DURING THE TERM OF THIS LEASE.
THE LESSEE AGREES TO COMPLY WITH ALL REQUIREMENTS OF
FEDERAL AVIATION REGULATION ss. 91.23.
IN WITNESS WHEREOF, the parties have caused this Lease be duly
executed and delivered as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By: ___________________________________
Name:
Title:
RAC LEASING LLC, as Lessor
By: The Diversified Group Incorporated,
as manager
By: _______________________________
Name:
Title:
Exhibit 4.16
EXECUTION COPY
WAIVER NO. 1 TO GUARANTY
WAIVER dated as of January 11, 2000 to Guaranty dated as of May 30, 1997,
as amended by Amendment No. 1, dated as of October 25, 1999, and as further
amended by Amendment No. 2, dated as of December 2, 1999 (as so amended,
the "Guaranty") between RITE AID CORPORATION, a Delaware Corporation (the
"Guarantor") and SUMITOMO BANK LEASING AND FINANCE, INC.
W I T N E S S E T H :
The parties hereto agree as follows:
SECTION 1. DEFINED TERMS; REFERENCES. (a) Unless otherwise specifically
defined herein, each term used herein which is defined in the Guaranty has
the meaning assigned to such term in the Guaranty. For the purposes of this
Waiver, "Public Debt" means debt securities of the Guarantor issued
pursuant to an indenture qualified under (or in form suitable for
qualification under) the Trust Indenture Act of 1939, as amended.
SECTION 2. LIMITED WAIVER. At the request of the Guarantor, the Required
Participants hereby waive any Default for breaches of covenants under
Section 1.01(a), Section 1.01(b), Section 1.01(c) or Section 1.01(d) Annex
A to the Guaranty, to the extent that such Default would arise from failure
of the Guarantor to deliver to the Liquidity Providers the financial
statements referred to in Section 1.01(a) or Section 1.01(b) of Annex A to
the Guaranty and the related officer's certificate and statement of the
Guarantor's independent accountants referred to in Sections 1.01(c) and
1.01(d) of Annex A to the Guaranty, such waivers to be effective solely for
the period commencing on January 11, 2000 and ending on July 11, 2000;
provided, however, that the effectiveness of this Waiver is subject to the
satisfaction of the conditions specified in Section 3 of this Waiver. This
Waiver shall be limited precisely as written, and shall not extend to any
Default under any other provision of the Guaranty or to any Default under
Section 1.01(a), Section 1.01(b), Section 1.01(c) or Section 1.01(d) of
Annex A to the Guaranty during any other period.
SECTION 3. CONDITIONS TO WAIVER. The waivers granted pursuant to Section 2
above are subject the conditions that:
(a) the Guarantor shall deliver to each of the Liquidity Providers
the following items on or prior to the dates specified below (or, in the
reasonable discretion of the Liquidity Agent, no later than 5 days
thereafter):
(i) a monthly forecast of cash receipts and disbursements,
commencing with February, 2000, no later than the first day of
each month in respect of such forecast ;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant
to clause (i) above, no later than the 25th day of the next
succeeding month;
(iii) a weekly sales report for each week, commencing with the
week ending January 8, 2000, no later than the 4th day
following the last day of the week in respect of which such
sales report is to be delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March
31, 2000; and
(v) a monthly reconciliation of actual operating results for
each month specified in the operating forecast delivered
pursuant to clause (iv) above to the budget for such month, no
later than the 30th day of the next succeeding month; and
(b) the Guarantor shall not directly or indirectly, make or agree to make
any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
SECTION 4. GOVERNING LAW. This Waiver shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 5. COUNTERPARTS. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 6. EFFECTIVENESS. This Waiver shall become effective on the date
when the following conditions are met:
(a) the Liquidity Agent shall have received from each of the
Guarantor and the Required Participants a counterpart hereof signed by such
party or facsimile or other written confirmation (in form satisfactory to
the Liquidity Agent) that such party has signed a counterpart hereof; and
(b) the Agent shall have received evidence satisfactory to it that
substantially identical waivers to any covenant requiring delivery of
financial statements or reports set forth in any other agreement
obligations under which are secured by the Collateral shall have become or
shall simultaneously become effective.
IN WITNESS WHEREOF, each of the parties hereto has caused this Waiver
to be executed by their officers thereunto duly authorized as of the date
first above written.
RITE AID CORPORATION,
as Guarantor
By: ________________________________
Name:
Title:
Acknowledged and Agreed:
SUMITOMO BANK LEASING AND FINANCE, INC.
By: ___________________________________
Name:
Title:
Exhibit 4.17
EXECUTION COPY
AMENDMENT NO. 2 TO GUARANTY
AMENDMENT NO. 2 TO GUARANTY ("Amendment No. 2"), dated as of December
2, 1999, from RITE AID CORPORATION, a Delaware corporation (the
"Guarantor"), to SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware
corporation (the "Lessor").
WHEREAS, the Lessor and Rite Aid Realty Corp. (the "Lessee") entered
into a Master Lease and Security Agreement dated as of May 30, 1997, as
amended by Amendment No. 1, dated as of March 11, 1998, and as further
amended by Amendment No. 2, dated as of June 22, 1998, and as further
amended by Amendment No. 3, dated as of May 26, 1999, and as further
amended by Amendment No. 4, dated as of October 25, 1999 (as so amended,
the "Lease"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty, dated
as of May 30, 1997, as amended by Amendment No. 1, dated as of October 25,
1999 (as so amended, the "Guaranty"); and
WHEREAS, the Guarantor and the Lessor now desire to further amend the
Guaranty; and
WHEREAS, capitalized terms used but not defined herein shall have the
respective meanings given to such terms in Appendix I to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Amendments to Guaranty. Annex A to the Guaranty is
hereby amended as follows:
(a) The following new definition is added to the definition section
of Annex A in its appropriate alphabetical position:
"LIFO Adjustments" means, for any period, the net adjustment to
costs of goods sold for such period required by the Guarantor's
LIFO inventory method, determined in accordance with generally
accepted accounting principles.
(b) The following definitions contained in Annex A are amended to
read in their entirety as follows:
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period, plus (a), to the extent deducted in
determining Consolidated Net Income for such period, the
aggregate amount of (i) Consolidated Interest Charges, (ii)
provision for income taxes, (iii) depreciation and
amortization, (iv) LIFO Adjustments, (v) store closing expenses
and (vi) any other nonrecurring charge to the extent such
nonrecurring charge does not involve any cash expenditure
during such period, less (b), to the extent not deducted in
determining Consolidated Net Income for such period, the
aggregate amount of (i) any cash expenditure during such period
in connection with which a nonrecurring charge was taken in any
prior period and (ii) LIFO Adjustments.
"Consolidated Net Income" means, for any period, the net income
(or loss) of the Guarantor and its Consolidated Subsidiaries
(exclusive of (a) extraordinary items of gain or loss, (b) any
gain or loss in connection with any sale of assets other than
sales of inventory in the ordinary course of business, but in
the case of loss only to the extent that such loss does not
involve any cash expenditure during such period and (c) the
Guarantor's share of the net income (or loss) of
drugstore.com), determined on a consolidated basis for such
period.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated
Subsidiaries determined as of such date; provided that such
consolidated stockholders' equity shall be adjusted to exclude
the effect of items which have been excluded from Consolidated
Net Income for any period commencing after August 28, 1999 by
reason of the parenthetical phrase contained in the definition
of such term. Consolidated Net Worth includes the Guarantor's
8% Convertible Pay-In-Kind Preferred Stock.
"Consolidated Rent" means, for any period, the consolidated
rental expense of the Guarantor and its Consolidated
Subsidiaries for such period, and including in any event rental
costs of closed stores for such period whether or not reflected
as an expense in the determination of Consolidated Net Income
for such period.
"Credit Agreement" means the Amended and Restated Credit
Agreement dated as of October 25, 1999, as amended by Amendment
No. 1, dated as of December 2, 1999, among Rite Aid
Corporation, the banks from time to time parties thereto and
Morgan Guaranty Trust Company of New York, as Agent, without
giving effect to any amendments or waivers thereof made by the
requisite parties thereunder after December 2, 1999 unless
expressly consented to by the Required Participants.
"1999 Facility" means the $1,300,000,000 Term Loan Agreement
dated as of October 25, 1999, as amended by Amendment No. 1,
dated as of December 2, 1999, among Rite Aid Corporation, the
banks listed therein and Morgan Guaranty Trust Company of New
York, as Agent, without giving effect to any amendments or
waivers thereof made by the requisite parties thereunder after
December 2, 1999 unless expressly consented to by the Required
Participants.
(c) Section 1.12 of Annex A is amended to read in its entirety as
follows:
"SECTION 1.12 Capitalization Leverage Ratio. At no time shall
the ratio of (i) Consolidated Debt at such time to (ii) Total
Capital at such time, exceed 0.695; provided that upon any sale
of the capital stock of PCS, such maximum ratio shall be reset
at the level which produces the result that the amount of
additional Debt that the Guarantor may incur within the limits
of this ratio immediately after giving effect to such sale and
the repayment of any Debt required in connection therewith is
equal to the amount of additional Debt that the Guarantor could
incur within the limits of this ratio immediately before giving
effect to such sale and the repayment of any Debt required in
connection therewith."
(d) Section 1.13 of Annex A is amended to read in its entirety as
follows:
"SECTION 1.13. Limitation on Debt. The Guarantor will not, and
will not permit any of its Subsidiaries to, incur or at any
time be liable with respect to any Debt except:
(a) Debt under the Credit Agreement or the 1999 Facility;
(b) Debt outstanding on December 2, 1999;
(c) Debt incurred to refinance Debt referred to in clause (a)
or clause (b) above, provided that the amount thereof that is
at the time outstanding or committed is not increased and the
maturity thereof is not shortened; and
(d) Debt not permitted by clauses (a), (b) and (c) above in an
aggregate principal amount at any time outstanding not to
exceed $25,000,000."
(f) Section 1.14 of Annex A is amended to read in its entirety as
follows (including the table following the end of the quotation marks:
"SECTION 1.14. Fixed Charge Coverage. At no time during any
period set forth below shall the Fixed Charge Coverage Ratio be
less than the ratio set forth below opposite such period:"
Fiscal Quarter Ending on or Ratio
Closest to:
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 200 and thereafter 1.25
Section 2. Amendment Fee. In consideration of the Required
Participants' consent to this Amendment No. 2, concurrently with the
execution and delivery of this Amendment No. 2, and as a condition
precedent to the effectiveness of this Amendment No. 2, the Guarantor shall
pay an amendment fee to the Liquidity Agent in an amount equal to 0.25% of
$119,000,000 for the ratable benefit of the Lenders and the Lessor. Such
fee is payable in full on the date hereof by wire transfer of immediately
available funds to an account to be designated by the Liquidity Agent. The
Guarantor hereby agrees that the amendment fee have been fully earned and
once paid are nonrefundable.
Section 3. Conditions Precedent. This Amendment No. 2 shall become
effective when the following conditions are met: (i) the Liquidity Agent
shall have received the Amendment Fee in accordance with Section 2 of this
Amendment No. 2; (ii) the Liquidity Agent shall have received from each of
the Guarantor and the Required Participants a duly executed counterpart
hereof; and (iii) the Guarantor shall have satisfied all of the conditions
precedent to each of (x) Amendment No. 1 to the Credit Agreement and (y)
Amendment No. 1 to the 1999 Facility.
Section 4. Representations and Warranties. The Guarantor hereby
represents and warrants that (a) each of the representations and warranties
made in Section 4 of the Guaranty are true and correct with the same force
and effect as though made on and as of the date of this Amendment No. 2,
except (i) to the extent that any such representations or warranties
expressly relate to an earlier date, such representations and warranties
were true and correct on and as of such earlier date, (ii) with respect to
the representation set forth in Section 4(d) and (e) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Information (as defined in Annex A hereto) and (iii) with respect to the
representation set forth in Section 4(f) of the Guaranty, such
representation is true and correct on and as of the date hereof as if made
on and as of the date hereof except to the extent set forth in the
Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999, and (b) no Default or Event of Default has occurred and
is continuing.
Section 5. Continuing Effect. Except as expressly modified and
amended hereby, the Guaranty remains unchanged and in full force and effect
in all respects. As expressly modified and amended hereby, the Guarantor
hereby ratifies and affirms the Guaranty.
Section 6. Governing Law. THIS AMENDMENT NO. 2 SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
Section 7. Counterparts. This Amendment No. 2 may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same Amendment No. 2.
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on next page.]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 2 to be executed by their officers thereunto duly authorized
as of the date first above written.
RITE AID CORPORATION,
as Guarantor
By:__________________________________
Name:
Title:
Acknowledged and Agreed:
SUMITOMO BANK LEASING AND FINANCE, INC.
By:__________________________________
Name:
Title:
Exhibit 4.18
AMENDMENT NO. 1 TO GUARANTY
AMENDMENT NO. 1 TO GUARANTY ("Amendment No. 1"), dated as of
October 25, 1999, from RITE AID CORPORATION, a Delaware corporation (the
"Guarantor"), to SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware
corporation (the "Lessor").
WHEREAS, the Lessor and Rite Aid Realty Corp. (the "Lessee")
entered into a Master Lease and Security Agreement dated as of May 30,
1997, as amended by Amendment No. 1, dated as of March 11, 1998, and as
further amended by Amendment No. 2, dated as of June 22, 1998, and as
further amended by Amendment No. 3, dated as of May 26, 1999, and as
further amended by Amendment No. 4, dated as of the date hereof (as so
amended, the "Lease"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty,
dated as of May 30, 1997 (the "Guaranty"); and
WHEREAS, the Lessor has pledged and assigned its rights in the
Guaranty pursuant to the Intercreditor and Security Agreement, dated as of
May 30, 1998, as amended by Amendment No. 1, dated as of May 26, 1997,
among the Lessor, the Guarantor, the Lessee, The Sumitomo Bank, Limited,
New York Branch, as Collateral Agent and the other parties thereto; and
WHEREAS, the obligations of the Guarantor under the Guaranty have
been secured under the PCS Pledge Agreement and the drugstore.com Pledge
Agreement (as such terms are defined in the Amended and Restated Credit
Agreement dated as of October 25, 1999 among the Guarantor, the banks
parties thereto and Morgan Guaranty Trust Company of New York, as agent);
and
WHEREAS, the Guarantor and the Lessor now desire to amend the
Guaranty; and
WHEREAS, capitalized terms used but not defined herein shall have
the respective meanings given to such terms in Appendix I to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Guaranty. Section 11(a) of the
Guaranty is hereby amended to read in its entirety as follows:
(a) The covenants set forth in Annex A hereto are
hereby incorporated herein in their entirety with the same force and
effect as if such covenants were set forth expressly herein. The
Guarantor further covenants and agrees that it shall not cause or
permit any increase in the principal amount secured under the PCS
Pledge Agreement (as defined in Annex A) or the drugstore.com Pledge
Agreement (as defined in Annex A and together with the PCS Pledge
Agreement, the "Pledge Agreements") or cause or permit any amendment
or waiver to either Pledge Agreement that by its terms materially
adversely affects the rights of the holders of the Synthetic Lease
Obligations (as defined in the Pledge Agreements) in a manner
different from its effect on the rights of holders of any other
Secured Obligations (as defined in the Pledge Agreements) without the
prior written consent of the Required Participants."
SECTION 2. Pledge Agreements. The Lessor hereby accepts the
benefits of and agrees to be bound by the terms of the PCS Pledge Agreement
and the drugstore.com Pledge Agreement and confirms its appointment of
Morgan Guaranty Trust Company of New York as its agent thereunder in
accordance with the terms thereof.
SECTION 3. Secretary's Certificate. The Guarantor hereby
agrees to deliver to the Collateral Agent on the date hereof a certificate
dated the date of this Amendment No. 1, from the Secretary or Assistant
Secretary of the Guarantor certifying (i) as to the incumbency and
signature of each officer of the Guarantor authorized to execute and
deliver this Amendment No. 1, (ii) that attached thereto are true and
complete copies of the Certificate of Incorporation and By-Laws of the
Guarantor as in full force and effect on the date of this Amendment No. 1
and (iii) that attached thereto is a true and complete copy of the
resolutions of the Board of Directors of the Guarantor authorizing the
execution, delivery and performance of this Amendment No. 1 and the
transactions contemplated hereby, together with a certificate of another
officer of the Guarantor as to the incumbency and signature of such
Secretary or Assistant Secretary.
SECTION 4. Representations and Warranties. The Guarantor
hereby represents and warrants that (a) each of the representations and
warranties made in Section 4 of the Guaranty are true and correct with the
same force and effect as though made on and as of the date of this
Amendment No. 1, except (i) to the extent that any such representations or
warranties expressly relate to an earlier date, such representations and
warranties were true and correct on and as of such earlier date, (ii) with
respect to the representation set forth in Section 4(d) and (e) of the
Guaranty, such representation is true and correct on and as of the date
hereof as if made on and as of the date hereof except to the extent set
forth in the Information (as defined in Annex A hereto) and (iii) with
respect to the representation set forth in Section 4(f) of the Guaranty,
such representation is true and correct on and as of the date hereof as if
made on and as of the date hereof except to the extent set forth in the
Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999, and (b) no Default or Event of Default has occurred and
is continuing.
SECTION 5. Continuing Effect. Except as expressly modified
and amended hereby, the Guaranty remains unchanged and in full force and
effect in all respects. As expressly modified and amended hereby, the
Guarantor hereby ratifies and affirms the Guaranty.
SECTION 6. Governing Law. THIS AMENDMENT NO. 1 SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Amendment No. 1 may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Amendment No. 1.
[Remainder of this page left intentionally blank. Signatures begin on next
page.]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 1 to be executed by their officers thereunto duly authorized
as of the date first above written.
RITE AID CORPORATION,
as Guarantor
By: ____________________________
Name:
Title:
ANNEX A TO GUARANTY
DEFINITIONS
Definitions. Unless otherwise defined in the text of this Annex
A, the following terms, as used in this Annex A, have the following
meanings (capitalized terms used in this Annex A but not otherwise defined
in this Annex A shall have their respective meanings as set forth in the
Guaranty; unless otherwise specified in this Annex A, references to section
numbers in this Annex A refer to the numbered sections of this Annex A):
"ATTRIBUTABLE DEBT" means, as to any particular Sale and
Leaseback Transaction under which the Guarantor or any Subsidiary is at the
time liable, at any date as of which the amount thereof is to be determined
(i) in the case of any such transaction involving a Capital Lease, the
amount on such date of the Capital Lease Obligation thereunder, or (ii) in
the case of any other Sale and Leaseback Transaction, the then present
value of the minimum rental obligations under such Sale and Leaseback
Transaction during the remaining term thereof (after giving effect to any
extensions at the option of the lessor) computed by discounting the
respective rental payments at the actual interest factor included in such
payments or, if such interest factor cannot be readily determined, at the
rate of 14% per annum. The amount of any rental payment required to be made
under any such Sale and Leaseback Transaction not involving a Capital Lease
may exclude amounts required to be paid by the lessee on account of
maintenance and repairs, insurance, taxes, assessments, utilities,
operating and labor costs and similar charges.
"BANK" means each bank listed on the signature pages of the
Credit Agreement, each Assignee (as defined in the Credit Agreement) which
becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement, and
their respective successors.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"BORROWING" means the aggregation of Loans of the same Class to
be made to the Guarantor by the Banks pursuant to Article 2 of the Credit
Agreement on a single date and for a single Interest Period.
"BUSINESS ACQUISITION" means (i) an Investment by the Guarantor
or any of its Subsidiaries in any other Person (including an Investment by
way of acquisition of securities of any other Person) pursuant to which
such Person shall become a Subsidiary or shall be merged into or
consolidated with the Guarantor or any of its Subsidiaries or (ii) an
acquisition by the Guarantor or any of its Subsidiaries of the property and
assets of any Person (other than the Guarantor or any of its Subsidiaries)
that constitute substantially all the assets of such Person or any division
or other business unit of such Person.
"CAPITAL LEASE" means any lease of property which, in accordance
with generally accepted accounting principles, should be capitalized on the
lessee's balance sheet; and
"CAPITAL LEASE OBLIGATION" means the amount of the liability so
capitalized in respect of a Capital Lease.
"CLASS" has the meaning set forth in Section 1.03 of the Credit
Agreement.
"COLLATERAL" means collateral subject to the Collateral
Documents.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, any
additional pledge agreements required to be delivered pursuant to the Loan
Documents and any other instruments or agreements executed pursuant to the
foregoing.
"COMMITMENT" means a Tranche A Commitment or a Tranche B
Commitment, and
"COMMITMENTS" means any two or more of the foregoing, as the
context may require.
"COMMITMENT SCHEDULE" means the Schedule attached to the Credit
Agreement and identified as such.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount of expenditures by the Guarantor and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction permitted by Section 1.08.
"CONSOLIDATED DEBT" means at any date the Debt of the Guarantor
and its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"CONSOLIDATED EBITDA" for any period, Consolidated Net Income for
such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Charges, (ii) provision for income taxes, (iii) depreciation and
amortization and (iv) charges incurred in connection with store closings
not in excess of $48,000,000 and $20,000,000 during the fiscal years ending
on or closest to February 28, 2000 and February 28, 2001, respectively;
provided that if there shall have been an acquisition or disposition of
operations during such period, Consolidated EBITDA shall be calculated on a
pro forma basis giving effect thereto as if such acquisition or disposition
had occurred on the first day of such period.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the
aggregate amount of interest charges, whether expensed or capitalized,
incurred or accrued by the Guarantor and its Consolidated Subsidiaries
during such period.
"CONSOLIDATED NET INCOME" means, for any period, the net income
(or loss) of the Guarantor and its Consolidated Subsidiaries (exclusive of
(a) any non-cash loss on account of a sale of any drugstore and (b)
extraordinary items of gain or loss and other non-recurring items of gain
or loss, but only to the extent that such non-recurring items of loss do
not (i) involve any cash expenditure by the Guarantor during such period or
any future period or (ii) exceed $50,000,000 in any fiscal year),
determined on a consolidated basis for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries after deducting therefrom (i) all liabilities and liability
items, including amounts in respect of obligations or guarantees of
obligations under leases, which under generally accepted accounting
principles would be included on such balance sheet, except Funded Debt,
capital stock and surplus, surplus reserves and provisions for deferred
income taxes, and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, which in
each case under generally accepted accounting principles would be included
on such consolidated balance sheet.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Guarantor and its Consolidated Subsidiaries
determined as of such date.
"CONSOLIDATED RENT" means, for any period, the consolidated
rental expense of the Guarantor and its Consolidated Subsidiaries for such
period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Guarantor in its consolidated financial statements if such statements were
prepared as of such date.
"CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement dated as of October 25, 1999 among Rite Aid Corporation, the
banks from time to time parties thereto and Morgan Guaranty Trust Company
of New York, as Agent, without giving effect to any amendments or waivers
thereof made by the requisite parties thereunder after October 25, 1999
unless expressly consented to by the Required Participants.
"DEBT" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with generally
accepted accounting principles, (v) all non-contingent obligations (and,
for purposes of Section 1.10 and the definition of Material Financial
Obligations, all contingent obligations) of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vi) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person,
and (vii) all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event
of Default under the Credit Agreement or which with the giving of notice or
lapse of time or both would, unless cured or waived, become an Event of
Default under the Credit Agreement.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized by
law to close.
"DRUGSTORE.COM" means drugstore.com, inc., a Delaware
corporation, and its successors.
"DRUGSTORE.COM PLEDGE AGREEMENT" means the drugstore.com Pledge
Agreement dated as of October 25, 1999 between the Guarantor and Morgan
Guaranty Trust Company of New York, as agent thereunder.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA GROUP" means the Guarantor, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether
or not incorporated) under common control which, together with the
Guarantor or any Subsidiary, are treated as a single employer under Section
414 of the Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in dollar deposits) in London.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01 of
the Credit Agreement.
"FIXED CHARGE COVERAGE RATIO" means at any date, the ratio of (i)
Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated Interest
Charges plus Consolidated Rent, in each case for the period of four
consecutive fiscal quarters most recently ended on or prior to such date.
"FUNDED DEBT" means any Debt maturing more than one year after
the date of determination thereof and any Debt, regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include:
(a) any Debt for the payment, redemption or satisfaction of
which money (or evidences of indebtedness, if permitted under the
instrument creating such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or proper depository
either at or before maturity or redemption date thereof; or
(b) guarantees arising in connection with the sale,
discount, guarantee or pledge of notes, chattel mortgages, leases,
accounts receivable, trade acceptances and other paper arising, in the
ordinary course of business, out of installment or conditional sales
to or by, or transactions involving title retention with,
distributors, dealers or other customers of merchandise, equipment or
services or guarantees other than guarantees of indebtedness for
borrowed money.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "GUARANTEE" used as a verb has a corresponding meaning.
"INDENTURES" means (i) the Indenture dated as of December 21,
1998 between the Guarantor and Harris Trust and Savings Bank, as trustee,
(ii) the Indenture dated as of September 22, 1998 between the Guarantor and
Harris Trust and Savings Bank, as trustee and (iii) the Indenture dated as
of August 1, 1993, between the Guarantor and First Trust of New York,
National Association, as successor trustee.
"INFORMATION" means, collectively, (i) the information provided
to the Banks in connection with the waiver dated as of September 29, 1999
to the Existing Credit Agreement and (ii) the information presented to the
Banks at meetings in New York City on October 4, 1999 and October 18, 1999
among the Borrower and certain financial institutions.
"INTEREST PERIOD" shall have the meaning set forth in Section
1.01 of the Credit Agreement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
Any repurchase by the Guarantor of its own capital stock shall not
constitute an Investment for purposes of this Annex A. The amount of any
Investment shall be the original principal or capital amount thereof less
all returns of principal or equity thereon (and without adjustment by
reason of the financial condition of such other Person) and shall, if made
by the transfer or exchange of property other than cash, be deemed to have
been made in an original principal or capital amount equal, to the fair
market value of such property at the time of such transfer or exchange.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Annex A, the Guarantor or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title retention
agreement relating to such asset.
"LOAN" means a Tranche A Loan or a Tranche B Loan and "LOANS"
means Tranche A Loans or Tranche B Loans or any combination of the
foregoing.
"LOAN DOCUMENTS" means the Credit Agreement, the Notes and the
Collateral Documents.
"MATERIAL FINANCIAL OBLIGATIONS" means (i) a principal or face
amount of Debt (except Debt outstanding hereunder) and/or (ii) payment or
collateralization obligations in respect of Derivatives Obligations and/or
(iii) payment or collateralization obligations in respect of leases (other
than Capital Leases, which are Debt) of the Guarantor and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001 (a) (3) of ERISA to which
any member of the ERISA Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"1999 FACILITY" means the $1,300,000,000 Term Loan Agreement
dated as of the date of this Amended Agreement among Rite Aid Corporation,
the banks listed therein and Morgan Guaranty Trust Company of New York, as
administrative agent thereunder, without giving effect to any amendments or
waivers thereof made by the requisite parties thereunder after October 25,
1999 unless expressly consented to by the Required Participants.
"1999 EXPOSURES" mans the undrawn commitments and/or the
outstanding loans under the 1999 Facility.
"1999 LOAN DOCUMENTS" means the "Loan Documents" as defined in
the 1999 Facility.
"NOTES" means promissory notes of the Guarantor, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Guarantor to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PCS" means PCS Holding Corporation, a Delaware corporation, and
its successors.
"PCS PLEDGE AGREEMENT" means the PCS Pledge Agreement dated as
October 25, 1999 between the Guarantor and Morgan Guaranty Trust Company of
New York, as agent thereunder.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"PLAN" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed
to, by any Person which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of the ERISA Group.
"PLEDGE AGREEMENTS" means the drugstore.com Pledge Agreement and
the PCS Pledge Agreement.
"REFUNDING BANK" shall have the meaning set forth in Section 1.01
of the Credit Agreement.
"REGULATION T, U OR X" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution
on any shares of the Guarantor's capital stock (except dividends payable
solely in shares of its capital stock) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of
the Guarantor's capital stock or (b) any option, warrant or other right to
acquire shares of the Guarantor's capital stock (other than such payment in
connection with employee benefit plans in the ordinary course of business).
"SALE AND LEASEBACK TRANSACTION" has the meaning set forth in
Section 1.09.
"SEC" means the Securities and Exchange Commission, or any Person
succeeding to its functions under the Securities Exchange Act of 1934, as
amended.
"SECURED DEBT" means Debt which is secured by a Lien on property
of the Guarantor or any Subsidiary, but shall not include guarantees
arising in connection with the sale, discount, guarantee or pledge of
notes, chattel mortgages, leases, accounts receivable, trade acceptances
and other papers arising, in the ordinary course of business, out of
installment or conditional sales to or by, or transactions involving title
retention with, distributors, dealers or other customers, of merchandise,
equipment or services.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 8% of the consolidated assets of the
Guarantor and its Consolidated Subsidiaries at such time.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Guarantor.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial
paper rated at least A-I by S&P and P- I by Moody's, (iii) time deposits
with, including certificates of deposit issued by, any office located in
the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000,
(iv) repurchase agreements with respect to securities described in clause
(i) above entered into with an office of a bank or trust company meeting
the criteria specified in clause (iii) above, provided in each case that
such Investment matures within one year from the date of acquisition
thereof by the Guarantor or a Subsidiary or (v) money market mutual funds
at least 90% the assets of which are held in Investments referred to in
clauses (i) through (iv) above (except that the maturities of certain
Investments held by any such money market funds may exceed one year so long
as the dollar-weighted average life of the Investments of such money market
mutual fund is less than one year).
"TERMINATION DATE" means July 19, 2001, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Termination Date shall be the next preceding Euro-Dollar
Business Day.
"TOTAL CAPITAL" means, at any date, the sum of Consolidated Debt
and Consolidated Net Worth, each determined as of such date.
"TRANCHE A COMMITMENT" means (i) with respect to each Bank listed
in the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche A Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c)
of the Credit Agreement, the amount of the Tranche A Commitment thereby
assumed by it, in each case as such amount may be changed from time to time
pursuant to Sections 2.08, 2.10 and 9.06(c) of the Credit Agreement.
"TRANCHE A EXPOSURE" means, with respect to each Bank, the amount
of its Tranche A Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche A Loans, if its Tranche A
Commitment is no longer in existence.
"TRANCHE A LOAN" means a loan made by a Bank pursuant to Section
2. 01(a) of the Credit Agreement.
"TRANCHE B COMMITMENT" means (i) with respect to each Bank listed
in the Commitment Schedule, the amount set forth opposite the name of such
Bank in the Commitment Schedule as its Tranche B Commitment and (ii) with
respect to each Assignee which becomes a Bank pursuant to Section 9.06(c)
of the Credit Agreement, the amount of the Tranche B Commitment thereby
assumed by it, in each case as such amount may be changed from time to time
pursuant to Sections 2.08, 2. 10 and 9.06(c) of the Credit Agreement.
"TRANCHE B EXPOSURE" means, with respect to each Bank, the amount
of its Tranche B Commitment, if still in existence, or the aggregate
outstanding principal amount of its Tranche B Loans, if its Tranche B
Commitment is no longer in existence.
"TRANCHE B LOAN" means a loan made by a Bank pursuant to Section
2.01(b) of the Credit Agreement.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date
for such Plan, but only to the extent that such excess represents a
potential liability of a member of the ERISA Group to the PBGC or any other
Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Guarantor.
Accounting Terms and Determinations. (a) Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred
in by the Guarantor's independent public accountants) with the most recent
audited consolidated financial statements of the Guarantor and its
Consolidated Subsidiaries delivered accordance with such timetable.
COVENANTS
The Guarantor agrees that, until the Commitments (as defined in
the Committed Loan Agreement) of the all of the Lenders have been
terminated and all of the Secured Obligations (as defined in the
Intercreditor Agreement) have been paid or performed in full:
SECTION 1. Information. The Guarantor will deliver to each of
the Liquidity Providers:
(a) as soon as available and in any event within 90
days (or within such longer period of time, not greater than 120 days,
to which the SEC may extend the filing deadline for the Guarantor's
Annual Report on Form 10-K) after the end of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor and its
Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on in a manner
acceptable to the SEC by KPMG Peat Marwick LLP or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45
days (or (x) in the case of the fiscal quarter most recently ended
prior to October 25, 1999, within 65 days or (y) in the case of any
subsequent fiscal quarter, within such longer period of time, not
greater than 60 days, to which the SEC may extend the filing deadline
for the Guarantor's Quarterly Report on Form 10-Q) after the end of
each of the first three quarters of each fiscal year of the Guarantor,
a consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of the end of such quarter and the related
consolidated statements of income and cash flows for such quarter and
for the portion of the Guarantor's fiscal year ended at the end of
such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of
the Guarantor's previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Guarantor;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, a
certificate of the chief financial officer or the chief accounting
officer of the Guarantor (i) setting forth in reasonable detail the
calculations required to establish whether the Guarantor was in
compliance with the requirements of Sections 1.08 to 1.15, inclusive,
on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default
then exists, setting forth the details thereof and the action which
the Guarantor is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a statement of
the firm of independent public accountants which reported on such
statements (i) whether anything has come to their attention to cause
them to believe that any Default existed on the date of such
statements and (ii) confirming the calculations set forth in the
officer's certificate delivered simultaneously therewith pursuant to
clause (c) above;
(e) within five days after any officer of the
Guarantor obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer or the chief
accounting officer of the Guarantor setting forth the details thereof
and the action which the Guarantor is taking or proposes to take with
respect thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Guarantor generally, copies of all financial
statements, reports and proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Guarantor
shall have filed with the SEC;
(h) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer, any Plan, a copy of such notice;
(iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application;
(v) gives notice of intent to terminate any Plan under Section 4041(c)
of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make
any payment or contribution to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting
officer of the Guarantor setting forth details as to such occurrence
and action, if any, which the Guarantor or applicable member of the
ERISA Group is required or proposes to take; and
(i) from time to time such additional information
regarding the financial position or business of the Guarantor and its
Subsidiaries as the Liquidity Agent, at the request of any Liquidity
Provider, may reasonably request.
Information required to be delivered pursuant to Section 1.01
(a), 1.01 (b), 1.01 (f) or 1.01 (g) above shall be deemed to have been
delivered on the date on which the Guarantor provides notice to the
Liquidity Providers that such information has been posted on the
Guarantor's website on the Internet at the website address listed on the
signature pages hereof, at sec.gov/edaux/searches.htm or at another website
identified in such notice and accessible by the Liquidity Providers without
charge; provided that (i) such notice may be included in a certificate
delivered pursuant to Section 1.01(c) and (ii) the Guarantor shall deliver
paper copies of the information referred to in Section 1.01(a), 1.01(b),
1.01(f) or 1.01(g) to any Liquidity Provider which requests such delivery.
SECTION 2. Payment of Obligations. The Guarantor will, and
will cause each of its Subsidiaries to, pay and discharge, as the same
shall become due and payable, (i) all material claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons prior to the time such claims or demands give rise to a Lien upon
any of its property or assets, and (ii) all material taxes, assessments and
governmental charges or levies upon it or its property or assets, except
where any of the items in clause (i) or (ii) above may be contested in good
faith by appropriate proceedings, and the Guarantor or such Subsidiary, as
the case may be, shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves, if any, for
the accrual of any such items.
SECTION 3. Maintenance of Property; Insurance.
(a) The Guarantor will keep, and will cause each Subsidiary
to keep, all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
(b) The Guarantor will, and will cause each of its
Subsidiaries to, maintain (either in the name of the Guarantor or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such
amounts and against at least such risks (and with such risk retention) as
are usually insured against in the same general area by companies of
established repute engaged in the same or a similar business; and will
furnish to the Liquidity Providers, upon request from the Liquidity Agent,
information presented in reasonable detail as to the insurance so carried.
SECTION 4. Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in the covenants set forth in this Annex A,
the Guarantor will continue, and will cause each Significant Subsidiary to
continue, to engage in business of the same general type as now conducted
by the Guarantor and its Significant Subsidiaries, and will preserve, renew
and keep in full force and effect, and will cause each Significant
Subsidiary (except where such Significant Subsidiary merges into the
Guarantor or any other Subsidiary) to preserve, renew and keep in full
force and effect their respective legal existences and their respective
rights, privileges and franchises necessary or desirable in the normal
conduct of business.
SECTION 5. Compliance with Laws. The Guarantor will comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws
and ERISA and the rules and regulations thereunder) except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply would not have a material
adverse effect on the business, financial position or results of operations
of the Guarantor and its Consolidated Subsidiaries, considered as a whole.
SECTION 6. Inspection of Property, Books and Records. The
Guarantor will keep, and will cause each Subsidiary to keep, proper books
of record and account in which full, true and correct entries shall be made
of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit,
representatives of any Liquidity Provider at such Liquidity Provider's
expense to visit and inspect any of their respective properties, to examine
and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
SECTION 7. Restriction on Other Agreements. The Guarantor
will not, and will not permit any Subsidiary to, enter into any agreement
(other than the Loan Documents and the 1999 Loan Documents) which imposes a
limitation on incurrence by the Guarantor and its Subsidiaries of Liens
that is more restrictive than the limitation on Liens set forth in the
Indentures (other than agreements with respect to Debt secured by Liens
permitted by Section 1.10(a) containing restrictions on the ability to
transfer or grant Liens on the assets securing such Debt and other than
customary restrictions contained in purchase and sale agreements limiting
the transfer of the subject assets pending closing and customary
non-assignment provisions in leases and other contracts entered into in the
ordinary course of business) or which imposes other covenants more
restrictive than those set forth in this Annex A.
SECTION 8. Restriction on Debt of Subsidiaries. The Guarantor
will not permit any Subsidiary to create, issue, incur, assume, or in any
other way become liable for any unsecured Debt unless immediately prior
thereto the Guarantor would be entitled under Section 1.10(e) to create
Secured Debt not specifically permitted under Section 1.10 but for
subsection (e) thereof in an amount equal to such Debt; provided that the
foregoing restriction shall not prevent (i) any Subsidiary from becoming
liable to the Guarantor or to a Wholly-Owned Consolidated Subsidiary for
Debt or (ii) the extension, renewal or refunding of any Debt of any
Subsidiary so long as Consolidated Debt is not thereby increased.
SECTION 9. Restriction on Sales with Leases Back. Except for
a sale or transfer by a Subsidiary to the Guarantor or a Wholly-Owned
Consolidated Subsidiary, the Guarantor will not, and will not permit any
Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail
store or equipment now or hereafter owned and operated by the Guarantor or
a Subsidiary, with the intention that the Guarantor or any Subsidiary take
back a lease thereof, except a lease for a period, including renewals, not
exceeding 24 months, by the end of which period it is intended that the use
of such property or equipment by the lessee will be discontinued (any such
transaction being herein referred to as a "SALE AND LEASEBACK
TRANSACTION"); provided that, notwithstanding the foregoing, the Guarantor
or any Subsidiary may enter into a Sale and Leaseback Transaction if the
Guarantor or a Subsidiary would be entitled under Section 1.10(e) to create
Secured Debt not specifically permitted under Section 1. 10 but for Section
1.10(e) in an amount equal to the Attributable Debt respecting such Sale
and Leaseback Transaction; provided further that, notwithstanding the
foregoing, the Guarantor or any Subsidiary may enter into a Sale and
Leaseback Transaction if entered into in respect of property acquired by
the Guarantor or a Subsidiary if such Sale and Leaseback Transaction is
entered into within 24 months from the date of such acquisition; and
provided still further that, notwithstanding the foregoing, the Guarantor
or any Subsidiary may enter into a Sale and Leaseback Transaction so long
as the Net Cash Proceeds thereof are applied as contemplated by Section
2.10 of the Credit Agreement.
SECTION 10. Restriction on Liens. The Guarantor will not,
and will not permit any Subsidiary to, create, issue, incur, assume or
guarantee any Secured Debt; provided that the foregoing covenant shall not
apply to the following:
(a) (i) Any Lien on any property acquired or
constructed by the Guarantor or a Subsidiary and created
contemporaneously with, or within 24 months after, such acquisition or
the completion of such construction and commencement of full operation
of such property, whichever is later, to secure or provide for the
payment of any part of the purchase or construction price of such
property, or (ii) the acquisition by the Guarantor or a Subsidiary of
property subject to any Lien upon such property existing at the time
of acquisition thereof, whether or not assumed by the Guarantor or
such Subsidiary, or (iii) any conditional sales agreement or other
title retention agreement with respect to any property hereafter
acquired; provided that the Lien does not spread to other property
except unimproved real property previously owned upon which any new
construction has taken place and subsequent additions to such acquired
or constructed property;
(b) Any Lien created for the sole purpose of
extending, renewing or refunding, in whole or part, any Lien permitted
by this Section 1.10 or any Lien securing the Debt of the Guarantor or
of any Subsidiary on October 25, 1999 or of a corporation at the time
such corporation becomes a Subsidiary, or any extensions, renewals or
refundings of any such Lien; provided that the principal amount of
Debt secured thereby shall not exceed the principal amount of Debt so
secured at the time of such extension, renewal or refunding and that
such extension, renewal or refunding Lien shall be limited to all or
that part of the same property which secured the Debt so extended,
renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the
Guarantor or a Wholly-Owned Consolidated Subsidiary;
(d) Any Lien created by the Loan Documents or the 1999
Loan Documents; and
(e) Secured Debt of the Guarantor and its Subsidiaries
which would otherwise be prohibited by the foregoing restrictions (not
including Secured Debt permitted to be secured under subsections (a)
through (d) above) so long as the sum of any such Secured Debt
hereafter incurred and outstanding at the time plus Attributable Debt
of the Guarantor and any Subsidiaries in respect of Sale and Leaseback
Transactions hereafter entered into and outstanding at the time
(excluding Attributable Debt incurred in respect of any Sale and
Leaseback Transaction (i) entered into in respect of property acquired
by the Guarantor or a Subsidiary not more than 24 months prior to the
date such Sale and Leaseback Transaction is entered into or (ii) if
the Guarantor, within 120 days before or after such Sale and Leaseback
Transaction is entered into applies an amount equal to the greater of
(A) the net proceeds of the sale of the property so sold and leased
back or (B) the fair market value of such property at the date such
arrangement is entered into to the retirement of Secured Debt (other
than at maturity or pursuant to any mandatory payment provision) or to
reduction of the Commitments) plus unsecured Debt of any Subsidiary
hereafter incurred and outstanding at the time (excluding unsecured
Debt incurred through the extension, renewal or refunding of Debt of
such Subsidiary where Consolidated Debt was not thereby increased and
excluding any Debt owed to the Guarantor or a Wholly-Owned
Consolidated Subsidiary) does not at the time exceed 5% of
Consolidated Net Tangible Assets.
SECTION 11. Capital Expenditures. The aggregate amount of
Consolidated Capital Expenditures for any period set forth below shall not
exceed the amount set forth below opposite such period:
FISCAL YEAR ENDING ON AMOUNT
OR CLOSEST TO
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
SECTION 12. Capitalization Leverage Ratio. At no time during
any period set forth below shall the ratio of (i) Consolidated Debt at
such time to (ii) Total Capital at such time, exceed the ratio set forth
below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 0.635
February 29, 2000 0.635
May 31, 2000 and thereafter 0.62
SECTION 13. Cash Flow Leverage Ratio. At no time during any
period set forth below shall the ratio of (i) Consolidated Debt at such
time to (ii) Consolidated EBITDA for the four consecutive fiscal quarters
then most recently ended at or prior to such time, exceed the ratio set
forth below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 6.30
February 29, 2000 6.00
May 31, 2000 5.75
August 31, 2000 4.75
November 30, 2000 4.50
February 28, 2001 and thereafter 4.00
SECTION 14. Fixed Charge Coverage. At no time during any
period set forth below shall the Fixed Charge Coverage Ratio be less than
the ratio set forth below opposite such period:
FISCAL QUARTER ENDING RATIO
ON OR CLOSEST TO
November 30, 1999 1.35
February 29, 2000 1.35
May 31, 2000 1.35
August 31, 2000 1.45
November 30, 2000 1.55
February 28, 2001 and thereafter 1.60
SECTION 15. Limitation on Investments and Acquisitions.
(a) Neither the Guarantor nor any Consolidated Subsidiary
will make or acquire any Investment in any Person other than:
(i) Investments in Consolidated Subsidiaries;
provided, that Investments (exclusive of inter-company payables
owing to the Guarantor or a Subsidiary arising from cash
management transactions in the ordinary course of business) in
PCS, whether existing on the date hereof or hereafter made, may
be made only by the Guarantor and only in the form of a
contribution to the capital of PCS and without issuance of
additional shares of capital stock therefor, and provided further
that no such Investment may be made in any Subsidiary of PCS
except by PCS or another Subsidiary of PCS;
(ii) Temporary Cash Investments;
(iii) Investments received as consideration
for sale or other disposition of the capital stock of PCS or
drugstore.com permitted by Section 1.16;
(iv) Investments in drugstore.com existing on the
date hereof; and
(v) Any Investment not otherwise permitted by the
foregoing clauses of this Section if, immediately after such
Investment is made or acquired, the aggregate net book value of
all Investments permitted by this clause (c) does not exceed 10%
of Consolidated Net Worth.
(b) The Guarantor will not, and will not permit any
Subsidiary to, consummate any Business Acquisition to the extent that the
aggregate consideration paid or payable by the Guarantor or any Subsidiary
in connection with all such Business Acquisitions on or after the Closing
Date would exceed $15,000,000.
SECTION 16. Consolidations, Mergers and Sales of Assets. The
Guarantor will not (i) consolidate or merge with or into any other Person,
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Guarantor and its Subsidiaries, taken
as a whole, to any other Person or (iii) sell, lease or otherwise transfer
any Collateral to any other Person; provided that (x) the Guarantor may
merge with another Person if (A) the Guarantor is the corporation surviving
such merger and (B) immediately after giving effect to such merger, no
Default shall have occurred and be continuing and (y) the Guarantor may
sell or otherwise dispose of the capital stock of PCS or drugstore.com, in
whole but not in part, so long as the consideration therefor is not less
than the fair market value of such capital stock and shall consist solely
of a combination of cash and publicly traded securities payable and
deliverable at the closing of such sale.
SECTION 17. Use of Proceeds. The proceeds of the Tranche A
Loans made under the Credit Agreement will be used by the Guarantor
exclusively to repay commercial paper (or to refund borrowings the proceeds
of which were used solely to repay commercial paper), which commercial
paper provided funds for the payment of the purchase price of the capital
stock of PCS. The proceeds of the Tranche B Loans made under the Credit
Agreement will be used by the Guarantor for the Guarantor's general
corporate purposes; provided that no Tranche B Loans may be borrowed for a
purpose for which Tranche A Loans may be borrowed unless the Tranche A
Commitments are at the time fully drawn. No such use of the proceeds will
be for the purpose of prepaying commercial paper prior to the maturity
thereof and no such use of proceeds will be, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of buying or
carrying any "MARGIN STOCK" within the meaning of Regulation U, other than
publicly traded securities issued to the Guarantor in connection with the
sale of the capital stock of PCS. The Guarantor will ensure that no such
use of proceeds violates Regulation T, U or X.
SECTION 18. Restricted Payments. After the date hereof,
neither the Guarantor nor any Subsidiary will declare or make any
Restricted Payment.
SECTION 19. Synthetic Leases. Neither the Guarantor nor any
Subsidiary will enter into any Synthetic Lease if, after giving effect
thereof, the aggregate amount financed under all Synthetic Leases entered
into in any period of twelve consecutive calendar months commencing after
October 25, 1999 would exceed $35,000,000.
SECTION 20. Tranche A Limitations.
(a) No Tranche A Loans may be borrowed under the Credit
Agreement unless the commitments under the 1999 Facility are fully drawn.
(b) The Guarantor will not for so long as the Tranche B
Commitments remain in existence use any source of funds other than
additional Tranche A Loans to repay or prepay Tranche A Loans prior to the
Termination Date, except as expressly contemplated by Section 2.10 of the
Credit Agreement.
(c) If the capital stock of PCS is sold for consideration
consisting in whole or in part of "margin stock" within the meaning of
Regulation U, then for so long as such margin stock is held as substitute
collateral under the PCS Pledge Agreement, the Guarantor may not make any
Tranche A Borrowing other than a from a Refunding Bank unless it shall have
delivered to the Liquidity Agent an opinion of Skadden, Arps, Slate,
Meagher & Flom, LLP, satisfactory in form and substance to the Liquidity
Agent, to the effect that such Borrowing does not result in a violation of
Regulation T, U or X.
SECTION 21. Mandatory Payments. The Guarantor agrees to use
all Net Cash Proceeds, if any, from the sale of the Collateral (or any part
thereof) that are remaining after the application of such Net Cash Proceeds
in accordance with all mandatory prepayment provisions set forth in each
Debt agreement to which the Guarantor is a party on October 25, 1999, and
any refinancings, renewals or extensions thereof, and which is in effect at
the time of such sale, to reduce the Lease Balance under the Lease.
Exhibit 4.19
AMENDMENT NO. 4
Dated as of October 25, 1999
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
Sumitomo Bank Leasing and Finance, Inc.
Amendment No. 4, dated as of October 25, 1999 ("Amendment No. 4"),
between Sumitomo Bank Leasing and Finance, Inc., a Delaware corporation, as
lessor ("Lessor"), and Rite Aid Realty Corp., a Delaware corporation, as
lessee ("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a Master
Lease and Security Agreement, dated as of May 30, 1997, as amended by
Amendment No. 1, dated as of March 11, 1998, and as further amended by
Amendment No. 2, dated as of June 22, 1998, and as further amended by
Amendment No. 3, dated as of May 26, 1999 (as so amended, the "Lease"); and
WHEREAS, Lessor and Lessee wish to further amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
Section 1. Amendments to the Lease.
(a) Appendix 2 to the Lease is hereby amended by deleting the
reference to 0.10% in Paragraph (i) of Section (A) thereof and inserting in
lieu thereof "0.450%".
(b) Appendix 2 to the Lease is hereby further amended by deleting
the tables set forth under the headings "Determination of Lessor Applicable
Margin and Liquidity Applicable Margin" and "Determination of Lessor
Commitment Fee and Liquidity Commitment Fee", respectively, and inserting
in lieu thereof the following:
[TABLES OMITTED]
Section 3. Representations and Warranties. The Lessee
represents and warrants to the Liquidity Agent that:
(a) The execution, delivery and performance of this Amendment
No. 4 and any related documents executed in connection with this Amendment
No. 4, including, without limitation, Amendment No. 1 to the Guaranty,
dated as of the date hereof, from the Guarantor to the Lessor (the
"Amendment to Guaranty") and any documents and certificates furnished
pursuant hereto (collectively, the "Amendment Documents") and the
performance of the Lease, as amended by the Amendment Documents, have been
duly authorized by all necessary action of the Lessee. The Amendment
Documents have been duly executed and delivered by the Lessee and each
Amendment Document and the Lease, as amended by the Amendment Documents,
constitutes a legal, valid and binding obligation of the Lessee,
enforceable according to its terms, subject, as to enforceability, to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(b) The representations and warranties made under Section 6.2
of the Lease are true and correct with the same force and effect as though
made on and as of the date hereof and after giving effect to the Amendment
Documents, except (i) to the extent that such representations and
warranties expressly relate to an earlier date such representations and
warranties were true and correct on and as of such earlier date and (ii)
with respect to the representation set forth in Section 6.2(d) of the
Lease, such representation is true and correct on and as of the date hereof
as if made on and as of the date hereof except to the extent set forth in
the Guarantor's 1999 Annual Report on Form 10-K for the fiscal year ended
February 27, 1999; and
(c) No Default or Event of Default has occurred and is
continuing, or will result from the execution, delivery or performance of
the Amendment Documents, the performance of the Lease, as amended by the
Amendment Documents, or the consummation of the transactions contemplated
hereby.
Section 4. Conditions Precedent. As a condition precedent to
the effectiveness of this Amendment No. 4, the Liquidity Agent shall have
received the following items in form and substance satisfactory to it:
(a) fully executed counterparts of (i) this Amendment No. 4;
(ii) Amendment to Guaranty and (iii) the Fee Agreement, dated as of the
date hereof, between the Lessee and the Liquidity Agent (the "Fee
Agreement");
(b) a fully executed counterpart of the PCS Pledge Agreement
and the drugstore.com Pledge Agreement (as such terms are defined in the
Credit Agreement) showing a lien for the benefit of the Collateral Agent
and the Secured Parties under the Intercreditor Agreement.
(c) any and all fees payable to the Lessor, the Liquidity
Providers and the Liquidity Agent in connection with this Amendment No. 4,
including, without limitation, the fees payable under the Fee Agreement,
together with all costs and expenses incurred by the Liquidity Agent in
connection with the preparation, execution and delivery of the Amendment
Documents;
(d) an executed, witnessed and notarized copy of the Mortgage,
Security Agreement and Fixture Filing, dated as of October 25, 1999 between
the Lessor and the Lessee (the "Maryland Mortgage") together with duly
executed UCC-1 Financing Statements;
(e) evidence satisfactory to the Liquidity Agent that the
Maryland Mortgage has been duly recorded in the real property records of
Harford County, Maryland, including, without limitation, evidence of the
payment and satisfaction of all Impositions in connection therewith;
(f) evidence satisfactory to the Liquidity Agent that the UCC
Financing Statement covering the Lessee's Equipment and Systems located in
Maryland has been duly filed with the Department of Taxation and Assessment
of the State of Maryland and any appropriate counties thereof, including,
without limitation, evidence of the payment and satisfaction of all
Impositions in connection therewith;
(g) a legal opinion addressed to the Liquidity Agent from the
Lessee's special Maryland counsel in form and substance satisfactory to the
Liquidity Agent and its
counsel;
(h) certificates from the Secretary of State of the State of
Delaware evidencing the good standing each of the Lessee and the Guarantor;
(i) a certificate from the Secretary or an Assistant Secretary
of the Lessee certifying (i) as to the incumbency and signature of the
officer of the Lessee to execute and deliver the Amendment Documents to
which it is a party, (ii) that the charter and by-laws of the Lessee are in
full force and effect and have not been amended or modified since the date
last delivered to the Liquidity Agent, and (iii) that attached thereto is a
true and complete copy of the resolutions of the Boards of Directors of the
Lessee authorizing the execution, delivery and performance of the Amendment
Documents, the performance of the Lease, as amended by the Amendment
Documents, and the transactions contemplated thereby, together with a
certification by another officer of the Lessee as to the incumbency and
signature of such Secretary or Assistant Secretary;
(j) a certificate from a Responsible Officer of the Lessee,
certifying that, to the best knowledge of such officer, the representations
and warranties contained in Section 6.2 of the Lease are true and correct
on and as of the date of such certificate and after giving effect to the
Amendment Documents and that no Default or Event of Default has occurred or
is continuing or would result from the execution, delivery and performance
of the Amendment Documents or the performance of the Lease, as amended by
the Amendment Documents;
(k) a legal opinion addressed to the Liquidity Agent from the
outside or General Counsel to the Lessee and the Guarantor as to the due
authorization, execution and binding effect of the Amendment Documents, and
the Lease and the Guaranty, as amended by the Amendment Documents, in form
and substance satisfactory to the Liquidity Agent and its counsel; and
(l) such other documents, instruments, certificates and
information as the Liquidity Agent on behalf of itself and/or the other
Required Participants may request.
Section 5. Counterparts. This Amendment No. 4 may be executed
in several counterparts, each of which when executed and delivered shall be
deemed an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment No. 4.
Section 6. Governing Law. THIS AMENDMENT NO. 4 SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
Section 7. Continuing Effect. Except as herein provided, all provisions,
terms and conditions of the Lease shall remain in full force and effect. As
amended hereby, the Lease is ratified and confirmed in all respects.
[Remainder of this page left intentionally blank. Signatures begin
on next page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
be duly executed as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By:__________________________________
Name:
Title:
SUMITOMO BANK LEASING AND FINANCE, INC., as
Lessor
By:__________________________________
Name:
Title:
Exhibit 4.20
AMENDMENT NO. 3
Dated as of May 26, 1999
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
Sumitomo Bank Leasing and Finance, Inc.
Amendment No. 3, dated as of May 26, 1999 ("Amendment No. 3"), between
Sumitomo Bank Leasing and Finance, Inc. , a Delaware corporation, as lessor
("Lessor"), and Rite Aid Realty Corp., a Delaware corporation, as lessee
("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a Master Lease
and Security Agreement, dated as of May 30, 1997, (as amended by Amendment
No. 1, dated as of March 11, 1998, as further amended by Amendment No. 2,
dated as of June 22, 1998, the "Lease"); and
WHEREAS, Lessor and Lessee wish to further amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
1. Section 7.4 of the Lease is hereby amended by adding a new
subsection (c) thereto as follows:
"(c) Surety Fee. The Lessee shall pay to the Lessor for the
period (including any portion thereof when the Lessor's
obligations pursuant to Section 3.1 are suspended by
reason of the Lessee's inability to satisfy any
condition of Article IV), commencing on May 26, 1999
and ending on the Final Payment Date, a surety fee (the
"Surety Fee") as set forth in Appendix 2 hereof."
2. Section 31.1(b) of the Lease is hereby amended by deleting clause
(iv) of subsection (b) thereof and inserting in its place the following:
"(iv) all Transaction Expenses incurred by the Lessor,
the Receivable Purchaser, the Collateral Agent, the
Conduits, the Liquidity Agent, the Liquidity Providers
and the Surety Providers in respect of enforcement of
any of their rights or remedies against the Lessee or
the Guarantor in respect of the Operative Documents."
3. Appendix 1 to the Lease, Definitions and Interpretations is
hereby amended as follows:
(a) a new defined term "Eligible Assignee" is added in
the appropriate alphabetical order as follows:
""Eligible Assignee" means any bank or financial
institution that, at the time it becomes a party to the
Liquidity Asset Purchase Agreement and the Committed
Loan Agreement, has a short-term debt rating of at
least A-1 by S&P and at least P-1 by Moody's."
(b) the definition of the term "Indemnitee" is hereby
deleted in its entirety and the following is
inserted in its place:
""Indemnitee" means the Lessor, the Liquidity Agent,
each Liquidity Provider, each Conduit, the Receivable
Purchaser, each Lender, the Collateral Agent, each
Surety Provider and each of their respective
successors, assigns, directors, shareholders, partners,
members, officers, employees and agents."
(c) the definition of the term "Operative Documents"
is hereby amended by deleting the word "and" after
item (o) thereof, inserting the word "and" after
item (p) thereof and inserting a new item (q)
thereof that shall read as follows"
"(q) each Surety Bond."
(d) a new defined term "Surety Bond" is added in the
appropriate alphabetical order as follows:
""Surety Bond" means each surety bond and/or policy of
financial guaranty insurance issued by a Surety
Provider for the benefit of a Conduit."
(e) a new defined term "Surety Provider" is added in
the appropriate alphabetical order as follows:
""Surety Provider" means each of Ambac Assurance
Corporation and any other provider of a Surety Bond for
the benefit of a Conduit."
(f) the definition of the term "Transaction Expenses"
is hereby amended by deleting subsections (b) and
(c) thereof in their entirety and inserting in
their place the following:
"(b) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external
counsel, and (without duplication) the reasonable
allocated cost of internal legal services and all
disbursements of internal counsel of the Lessor, the
Receivable Purchaser, the Collateral Agent, the
Conduits, the Liquidity Agent, the Lenders, the
Liquidity Providers and the Surety Providers in
connection with (1) any amendment, supplement, waiver
or consent with respect to any Operative Documents
requested or approved by the Lessee and (2) any
enforcement of any rights or remedies against the
Lessee or the Guarantor or any Affiliate thereof in
respect of the Operative Documents;
(c) any other reasonable fees, out-of-pocket expenses,
disbursements or cost of the Lessor, the Receivable
Purchaser, the Collateral Agent, the Conduits, the
Liquidity Agent, the Lenders, the Liquidity Providers
and the Surety Providers related to the Operative
Documents or any of the other transaction documents;"
5. Appendix 2 to the Lease is hereby amended by adding a new section
as follows:
"Surety Fee
The Lessee shall pay on each Scheduled Payment Date,
beginning on July 15, 1999 and ending on the Final
Payment Date, the Surety Fee, for the benefit of Ambac
Assurance Corporation, at the rate per annum equal to
the difference between (i) $175,000 and (ii) the amount
payable to Ambac Assurance Corporation as a surety fee
in connection with Surety Bond No. AB0175BE dated June
22, 1998 during such period; provided, however, that in
no event shall the Surety Fee be in excess of 0.125%
per annum of the amount equal to the difference between
(x) the aggregate of all Liquidity Commitments (as
defined in the Liquidity Asset Purchase Agreement) of
all Liquidity Providers and (y) $50,000,000."
6. Lessee hereby represents and warrants that each of the
representations and warranties made in Section 6.2 of the Lease is true and
correct on the date hereof with the same force and effect as though made on
and as of such date, except to the extent that such representations and
warranties expressly relate to an earlier date, and that no Default or
Event of Default has occurred and is continuing.
7. This Amendment No. 3 may be executed in several counterparts,
each of which when executed and delivered shall be deemed an original and
all of which counterparts, taken together, shall constitute but one and the
same Amendment No. 3.
9. THIS AMENDMENT NO. 3 SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
10. Except as herein provided, all provisions, terms and conditions
of the Lease shall remain in full force and effect. As amended hereby, the
Lease is ratified and confirmed in all respects.
[signatures begin on next page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 3 to be duly executed as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By: _____________________________________
Name:
Title:
SUMITOMO BANK LEASING AND FINANCE, INC.,
as Lessor
By: ____________________________________
Name:
Title:
Exhibit 4.21
AMENDMENT NO. 2
Dated as of June 22, 1998
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
Sumitomo Bank Leasing and Finance, Inc.
Amendment No. 2, dated as of June 22, 1998 ("Amendment No. 2"),
between Sumitomo Bank Leasing and Finance, Inc., a Delaware corporation, as
lessor ("Lessor"), and Rite Aid Realty Corp., a Delaware corporation, as
lessee ("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a Master
Lease and Security Agreement, dated as of May 30, 1997, as amended by
Amendment No. 1 to Master Lease and Security Agreement, dated as of March
11, 1998 (as so amended, the "Lease"); and
WHEREAS, Lessor and Lessee wish to amend the Lease as hereinafter
provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
1. Article XXXII of the Lease is hereby amended to add a new
Section 32.4 reading in its entirety as follows:
32.4. Recordation of Mortgages on Certain Properties
and Security Interests in Certain Leased Assets. If a
Trigger Event (as defined below) shall occur, and if the Lessor
shall thereafter elect to record a mortgage on any Property
located in the state of Maryland or file UCC Financing Statements
with respect to any fixtures or Equipment and Systems located in
the state of Maryland, then the Lessor shall promptly notify the
Lessee thereof, whereupon the Lessee shall promptly, and in any
event not later than (i) ten (10) Business Days after receipt of
such notice or (ii) the date on which such recording or filing is
to be made, whichever is later, pay to Lessor all recording taxes
and fees payable in connection with such recording or filing,
provided, that the Lessee shall not be required to pay such
amounts if such Trigger Event is not continuing on the date of
such recording or filing. As used herein, "Trigger Event" means
(i) the occurrence and continuance of an Event of Default or (ii)
neither Standard & Poor's Rating Services nor Moody's Investor's
Services, Inc. rates the Guarantor's long-term senior unsecured
debt at least BBB- or Baa3, respectively.
2. Appendix 1 to the Lease, consisting of Definitions, is
amended by adding the following phrase to the end of subsection (d) of the
definition of "Transaction Expenses" after the term "Operative Documents"
and before the semicolon immediately following such term: ", except for
mortgages recorded, and UCC Financing Statements filed, in the state of
Maryland other than pursuant to Section 32.4 of the Lease.
3. Annex 1 to the Lease, consisting of the Description of
Initial Leased Assets, is amended to read in its entirety as set forth in
Annex 1 to this Amendment No. 2.
4. In connection with the execution and delivery of this
Amendment No. 2, the parties hereby acknowledge and agree that (a) the
California warehouse currently leased under the Lease pursuant to Lease
Supplement No. 4 thereto shall be purchased from the Lessor by RAC Leasing
LLC and leased to the Lessee pursuant to a Master Lease and Security
Agreement between RAC Leasing LLC, as lessor and Lessee, dated as of March
19, 1998 and (b) Lease Supplement No. 4 is hereby terminated and of no
further force or effect.
5. Lessee hereby represents and warrants that each of the
representations and warranties made in Section 6.2 of the Lease is true and
correct on the date hereof with the same force and effect as though made on
and as of such date, except to the extent that such representations and
warranties expressly relate to an earlier date, and that no Default or
Event of Default has occurred and is continuing.
6. This Amendment No. 2 may be executed in several
counterparts, each of which when executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute
but one and the same Amendment No. 1.
7. THIS AMENDMENT NO. 2 SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
8. Except as herein provided, all provisions, terms and
conditions of the Lease shall remain in full force and effect. As amended
hereby, the Lease is ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed as of the date first above written.
SUMITOMO BANK LEASING AND
FINANCE, INC.
By: ______________________________
RITE AID REALTY CORP.
By: ______________________________
Exhibit 4.22
AMENDMENT NO. 1
Dated as of March 11, 1998
to
MASTER LEASE AND SECURITY AGREEMENT
between
Rite Aid Realty Corp.
and
Sumitomo Bank Leasing and Finance, Inc.
Amendment No. 1, dated as of March 11, 1998 ("Amendment No.
1"), between Sumitomo Bank Leasing and Finance, Inc., a Delaware
corporation, as lessor ("Lessor"), and Rite Aid Realty Corp., a Delaware
corporation, as lessee ("Lessee"), amending the Lease referred to below.
WHEREAS, Lessor and Lessee have heretofore entered into a
Master Lease and Security Agreement, dated as of May 30, 1997 (the
"Lease"); and
WHEREAS, Lessor and Lessee wish to amend the Lease as
hereinafter provided;
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
1. Section 33.2 of the Lease is hereby amended to read in its
entirety as follows:
Neither this Lease nor any provision hereof may be
amended, waived, discharged or terminated except by an
instrument in writing signed by the Lessor and the
Lessee.
2. Annex 1 to the Lease, consisting of the Description of
Initial Leased Assets, is amended to read in its entirety as set forth in
Annex 1 to this Amendment No. 1.
3. Appendix 1 to the Lease, consisting of the Definitions and
Interpretation, is amended to add the following definition thereto in the
appropriate alphabetical order:
"Termination Date" means, with respect to each Leased
Asset, the last day of the Base Term.
4. In connection with the execution and delivery of this
Amendment No. 1, the aircraft currently leased under the Lease shall be
purchased by a designee of the Lessee pursuant to the Purchase Notice dated
the date hereof.
5. Lessee hereby represents and warrants that each of the
representations and warranties made in Section 6.2 of the Lease is true and
correct on the date hereof with the same force and effect as though made on
and as of such date, except to the extent that such representations and
warranties expressly relate to an earlier date, and that no Default or
Event of Default has occurred and is continuing.
6. This Amendment No. 1 may be executed in several
counterparts, each of which when executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute
but one and the same Amendment No. 1.
7. THIS AMENDMENT NO. 1 SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
8. Except as herein provided, all provisions, terms and
conditions of the Lease shall remain in full force and effect. As amended
hereby, the Lease is ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed as of the date first above written.
SUMITOMO BANK LEASING AND
FINANCE, INC.
By:________________________________
RITE AID REALTY CORP.
By:_______________________________
Exhibit 4.23
GUARANTY
GUARANTY, dated as of May 30, 1997 (the "Guaranty"), from RITE
AID CORPORATION, a Delaware corporation (the "Guarantor"), to SUMITOMO BANK
LEASING AND FINANCE, INC., a Delaware corporation (the "Lessor").
W I T N E S S E T H:
WHEREAS, the Guarantor wishes to induce the Lessor to enter
into (i) a certain Master Lease and Security Agreement (the "Master Lease")
dated as of the date hereof and with Rite Aid Realty Corp., a Delaware
corporation and a wholly-owned subsidiary of the Guarantor (the "Lessee")
and (ii) certain other Operative Documents (as defined in the Master Lease)
with the Lessee on or after the date hereof (the Master Lease and such
Operative Documents, as each of them may be amended, modified,
supplemented, or extended from time to time, are collectively referred to
hereinafter as the "Guaranteed Agreements"); and
WHEREAS, the Lessor is unwilling to enter into the Guaranteed
Agreements with the Lessee unless the Guarantor enters into this Guaranty;
and
WHEREAS, capitalized terms used but not otherwise defined in
this guaranty have the respective meanings specified in Appendix 1 to the
Master Lease; and the rules of interpretation set forth in Appendix 1 to
the Master Lease shall apply to this Guaranty;
NOW, THEREFORE, in order to induce the Lessor to enter into the
Guaranteed Agreements and to consummate the transactions contemplated
thereby, the Guarantor hereby agrees as follows:
1. Guaranty. (a) The Guarantor unconditionally and irrevocably
guarantees to the Lessor the due and punctual performance of and compliance
by the Lessee with all obligations, covenants, warranties, undertakings and
conditions agreed by the Lessee to be performed, observed or complied with
by the Lessee and contained in or arising under the Guaranteed Agreements
including but not limited to, the full and punctual payment by the Lessee,
when due, whether at the stated due date, by acceleration or otherwise, of
any and all rent, obligations, liabilities, indebtedness and other amounts
of every kind arising out of the Guaranteed Agreements, all amounts in
respect to indemnities provided for in the Guaranteed Agreements, and all
damages (whether provided for in the Guaranteed Agreements or otherwise
permitted by law) in respect of a failure or refusal by the Lessee to make
any such payment, howsoever created, arising or evidenced, voluntary or
involuntary, whether direct or indirect, absolute or contingent, now or
hereafter existing or owing to the Lessor (all the foregoing obligations
and undertakings are collectively referred to hereinafter as the
"Obligations").
(b) This Guaranty is an absolute and unconditional
guaranty of performance and payment when due under the Guaranteed
Agreements and not of collection of any indebtedness contained in or
arising under the Guaranteed Agreements. This Guaranty is in no way
conditioned upon any attempt to collect from the Lessee or upon any other
event or contingency, and shall be binding upon and enforceable against the
Guarantor without regard to the validity or enforceability of the
Guaranteed Agreements, or of any term thereof. If for any reason the Lessee
shall fail or be unable duly and punctually to pay any such amount when due
under the Guaranteed Agreements, the Guarantor will forthwith pay, if not
already paid by the Lessee, the same immediately upon written demand.
(c) In case any of the Guaranteed Agreements shall be
terminated as a result of the rejection thereof by any trustee, receiver or
liquidating agent of the Lessee or any of its properties in any bankruptcy,
insolvency, reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar proceeding, the Guarantor's obligations
hereunder shall continue to the same extent as if such agreement had not
been so rejected. The Guarantor agrees that this Guaranty shall continue to
be effective or be reinstated, as the case may be, if at any time payment
to the Lessor of the Obligations or any part thereof is rescinded or must
otherwise be returned by the Lessor upon the insolvency, bankruptcy or
reorganization of the Lessee, or otherwise, as though such payment to the
Lessor had not been made.
(d) The Guarantor shall pay on demand all reasonable
costs, expenses and damages incurred (including, without limitation,
attorneys' fees and disbursements) in connection with the enforcement of
the obligations of the Guarantor under this Guaranty.
2. Guaranty Continuing and Unlimited. The obligations of the
Guarantor hereunder shall be continuing and unlimited, shall not be subject
to any non- compulsory counterclaim, set-off, deduction or defense (other
than payment or performance) based upon any claim the Guarantor may have
against the Lessor or the Lessee or any other Person, and shall remain in
full force and effect without regard to, and shall not be released,
discharged or in any way affected by any circumstance or condition (whether
or not the Guarantor shall have any knowledge or notice thereof) whatsoever
which might constitute a legal or equitable discharge or defense including,
but not limited to, (a) any express or implied amendment or modification of
or supplement to the Guaranteed Agreements or any other agreement referred
to in either thereof, or any other instrument applicable to the Lessee or
to the Obligations, or any part thereof, or any assignment or transfer of
any thereof; (b) any failure on the part of the Lessee to perform or comply
with the Guaranteed Agreements or any failure of any other Person to
perform or comply with any term of the Guaranteed Agreements, or any other
agreement as aforesaid; (c) any waiver, consent, change, extension,
indulgence or other action or any action or inaction under or in respect of
the Guaranteed Agreements, or any other agreement as aforesaid, or this
Guaranty, whether or not the Lessor, the Lessee or the Guarantor has notice
or knowledge of any of the foregoing; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or
similar proceeding with respect to the Guarantor or the Lessee, or their
respective properties or their creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding; (e) any
furnishing or acceptance of additional security or any release of any
security (and the Guarantor authorizes the Lessor to obtain, accept or
release said security); (f) any limitation on the liability or Obligations
of the Lessee under the Guaranteed Agreements (other than any limitation
expressly provided for therein) or any termination, cancellation,
frustration, invalidity or unenforceability, in whole or in part, of the
Guaranteed Agreements, or any term of any thereof; (g) any lien, charge or
encumbrance on or affecting the Guarantor's or any of the Lessee's
respective assets and properties; (h) any act, omission or breach on the
part of the Lessor or any other Person under the Guaranteed Agreements, or
any other agreement at any time existing between the Lessor and the Lessee
or any other law, governmental regulation or other agreement applicable to
the Lessor or any Obligation; (i) any claim as a result of any other
dealings among the Lessor, the Guarantor or the Lessee or any of them; (j)
the assignment of the Guaranteed Agreements by the Lessor to any other
Person, or the assignment of this Guaranty by the Lessor to any Person; or
(k) any change in the name or ownership of the Lessor, the Lessee or any
other person referred to herein.
3. Waiver. (a) The Guarantor unconditionally waives: (i) notice
of any of the matters referred to in Section 2 hereof; (ii) all notices
which may be required by statute, rule of law or otherwise to preserve any
rights against the Guarantor hereunder, including, without limitation,
notice of the acceptance of this Guaranty, or the creation, renewal,
extension, modification or accrual of the Obligations or notice of any
other matters relating thereto, any presentment, demand, notice of
dishonor, protest, nonpayment of any damages or other amounts payable under
the Guaranteed Agreements; (iii) any requirement for the enforcement,
assertion or exercise of any right, remedy, power or privilege under or in
respect of the Guaranteed Agreements, including, without limitation,
diligence in collection or protection of or realization upon the
Obligations or any part thereof or any collateral therefor; (iv) any
requirement of diligence; (v) any requirement to mitigate the damages
resulting from a default by the Lessee under the Guaranteed Agreements;
(vi) the occurrence of every other condition precedent to which the
Guarantor or the Lessee may otherwise be entitled; (vii) the right to
require the Lessor to proceed against the Lessee or any other Person liable
on the Obligations, to proceed against or exhaust any security held from
the Lessee or any other Person, or to pursue any other remedy in the
Lessor's power whatsoever; (viii) the right to have the property of the
Lessee first applied to the discharge of the Obligations; and any defense
arising by reason of any disability or other defense of the Lessee or by
reason of the cessation from any cause whatsoever of the liability, either
in whole or in part, of the Lessee to the Lessor for the Obligations,
provided that nothing contained herein shall be deemed to be a waiver by
Guarantor of the benefit to Guarantor of any notice or grace period to
which the Lessee is entitled pursuant to the express terms of the Operative
Documents.
(b) The Lessor may, at its election, exercise any right
or remedy it may have against the Lessee or any security held by the
Lessor, including, without limitation, the right to foreclose upon any such
security by judicial or nonjudicial sale, without affecting or impairing in
any way the liability of the Guarantor hereunder, except to the extent the
Obligations have been paid, and the Guarantor waives any defense arising
out of the absence, impairment or loss of any right of reimbursement,
contribution or subrogation or any other right or remedy of the Guarantor
against the Lessee or any such security, whether resulting from such
election by the Lessor or otherwise. The Guarantor understands that the
liability of the Lessee to the Lessor for the Obligations may be secured by
real property and that the Guarantor shall be liable for the full amount of
its liability hereunder notwithstanding foreclosure on such real property
by trustee sale or any other reason impairing the Guarantor's right to
proceed against the Lessee.
(c) The Guarantor understands that the Lessor's exercise
of certain rights and remedies contained in the Guaranteed Agreements may
affect or eliminate the Guarantor's rights of subrogation against the
Lessee and that the Guarantor may therefore incur partially or totally
nonreimbursable liability hereunder; nevertheless, the Guarantor hereby
authorizes and empowers the Lessor, its successors, endorsees and/or
assignees, to exercise in its or their sole discretion, any rights and
remedies, or any combination thereof, which may then be available, it being
the purpose and intent of the Guarantor that its obligations hereunder
shall be absolute, independent and unconditional under any and all
circumstances.
(d) The Guarantor assumes the responsibility for being and
keeping informed of the financial condition of the Lessee and of all other
circumstances bearing upon the risk of nonpayment of the Obligations and
agrees that the Lessor shall not have any duty to advise the Guarantor of
information regarding any condition or circumstance or any change in such
condition or circumstance. The Guarantor acknowledges that the Lessor has
not made any representation to the Guarantor concerning the financial
condition of the Lessee.
4. Representations and Warranties of the Guarantor.
The Guarantor represents and warrants to the Lessor that:
(a) Corporate Existence and Power. The Guarantor is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(b) Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Guarantor of
this Guaranty are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or
by-laws of the Guarantor or of any agreement or instrument evidencing or
governing debt of the Guarantor or any Subsidiary or any other material
agreement, instrument, judgment, injunction, order or decree binding upon
the Guarantor or any Subsidiary or result in the creation or imposition of
any Lien on any asset of the Guarantor or any Subsidiary pursuant to any
such agreement, instrument, judgment, injunction, order or decree.
(c) Binding Effect. This Guaranty constitutes a valid and
binding agreement of the Guarantor enforceable in accordance with its
terms.
(d) Financial Information.
(i) The consolidated balance sheet of the Guarantor and
its Consolidated Subsidiaries as of March 1, 1997 and the related consolidated
statements of income and cash flows for the fiscal year then ended,
reported on by KPMG Peat Marwick LLP, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial
position of the Guarantor and its Consolidated Subsidiaries as of such date
and their consolidated results of operations and cash flows for such fiscal
year.
(ii) Since March 1, 1997, there has been no material
adverse change in the business, financial position, results of operations
or prospects of the Guarantor and its Consolidated Subsidiaries, considered
as a whole.
(e) Full Disclosure. All financial statements and other
documents furnished by the Guarantor to the Lessor in connection with this
Guaranty and the transactions contemplated hereby do not and will not
contain any untrue statement of material fact or omit to state a material
fact necessary in order to make the statements contained therein not
misleading. The Guarantor has disclosed to the Lessor in writing any and
all facts which materially and adversely affect the business, operations or
condition, financial or otherwise, of the Guarantor and its Subsidiaries or
the Guarantor's ability to perform its obligations under this Guaranty.
(f) Litigation There is no action, suit or proceeding
pending against, or to the knowledge of the Guarantor threatened against or
affecting, the Guarantor or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or
consolidated results of operations of the Guarantor and its Consolidated
Subsidiaries or which in any manner draws into question the validity or
enforceability of this Guaranty.
(g) Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA
and the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code
with respect to each Plan. No member of the ERISA Group has (i) sought a
waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or
made any amendment to any Plan or Benefit Arrangement, which has resulted
or could result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA.
(h) Taxes. The Guarantor and its Subsidiaries have filed
all United States Federal income tax returns, and the Guarantor and its
Significant Subsidiaries have filed all other material tax returns, which
are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Guarantor or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Guarantor and its Consolidated
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Guarantor, adequate.
(i) Subsidiaries. Each of the Guarantor's corporate
Significant Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
(j) Environmental Matters. In the ordinary course of its
business, the Guarantor conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the
Guarantor and its Subsidiaries, in the course of which it identifies and
evaluates associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or closure of
properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license,
permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction
in the level of or change in the nature of operations conducted thereat,
any costs or liabilities in connection with off-site disposal of wastes or
hazardous substances, and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). On the
basis of this review, the Guarantor has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Guarantor and its Consolidated Subsidiaries, considered as a whole.
(k) Lessee. The Guarantor owns and will continue to own,
directly or indirectly, not less than 100% of the issued and outstanding
shares of capital stock of the Lessee. All such shares have been validly
issued, are fully paid and non-assessable and are free and clear of any
liens or encumbrances.
(l) Defaults. The Guarantor is not in default under (and
no event has occurred which with the giving of notice or lapse of time
would result in a default under) any instrument evidencing any debt in
excess of $10,000,000 or any agreement relating thereto or any material
mortgage, deed of trust, security agreement, lease, franchise or other
agreement to which the Guarantor is a party or by which the Guarantor or
any of its properties or assets is bound or to which it may be subject.
5. Payments. Each payment by the Guarantor to the Lessor under
this Guaranty shall be made by transferring the amount thereof in
immediately available funds without set-off or counterclaim; provided that
no such payment shall be deemed a waiver of any rights the Guarantor may
have.
6. Parties. This Guaranty shall inure to the benefit of the
Lessor and its successors, assigns or transferees, and shall be binding
upon the Guarantor and its successors and assigns. The Guarantor may not
delegate any of its duties under this Guaranty without the prior written
consent of the Lessor or any Person to whom the Lessor has assigned this
Guaranty.
7. Notices. All notices, demands and other communications
between the Lessor and the Guarantor under this Guaranty shall be in
writing and shall be delivered or sent to the address or telecopier number
shown below, or to such other address or telecopier number as either of us
may by written notice to the other have designated for such purpose. Any
such notice, demand or other communication shall not be effective until
actually received.
If to the Lessor:
Sumitomo Bank Leasing
and Finance, Inc.
277 Park Avenue
New York, NY 10172
Attention: Chief Credit Officer
Telecopier: 212-224-5222
If to the Guarantor:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, PA 17011-2404
Attention: Chief Financial Officer
Telecopier: 717-731-3878
8. Remedies. The Guarantor stipulates that the remedies at law
in respect of any default or threatened default by the Guarantor in the
performance of or compliance with any of the terms of this Guaranty are not
and will not be adequate, and that any of such terms may be specifically
enforced by a decree for specific performance or by an injunction against
violation of any such terms or otherwise.
9. Rights to Deal with the Lessee. At any time and from time to
time, without terminating, affecting or impairing the validity of this
Guaranty or the obligations of the Guarantor hereunder, the Lessor may deal
with the Lessee in the same manner and as fully and as if this Guaranty did
not exist and shall be entitled, among other things, to grant the Lessee,
without notice or demand and without affecting the Guarantor's liability
hereunder, such extension or extensions of time to perform, renew,
compromise, accelerate or otherwise change the time for payment of or
otherwise change the terms of payment or any part thereof contained in or
arising under the Guaranteed Agreements, or to waive any Obligation of the
Lessee to perform, any act or acts as the Lessor may deem advisable.
10. Subrogation. Until such time as the Obligations (except for
any indemnification not then due and payable) shall have been paid or
performed in full by the Guarantor, no payment by or for the account of the
Guarantor shall entitle the Guarantor by subrogation or otherwise to any
payment by the Lessee or from or out of any property of the Lessee, and the
Guarantor shall not exercise any right or remedy against the Lessee or any
property of the Lessee by reason of any performance by the Guarantor.
11. Guarantor's Covenants. The Guarantor hereby covenants and
agrees that until the Obligations and all obligations of the Guarantor
under this Guaranty have been paid or discharged in full:
(a) The covenants contained in Article V of the Credit
Agreement are hereby incorporated herein by reference with the same force
and effect as if such covenants were set forth expressly herein.
Notwithstanding the foregoing, any amendments or waivers of such covenants
approved by the requisite parties under the Credit Agreement shall likewise
be effective hereunder provided that the Lessor and the Liquidity Providers
shall have received a pro rata share (based on the respective commitments
of the Lessor, Liquidity Providers and parties to the Credit Agreement) of
any consideration given by the Guarantor or any Affiliate of the Guarantor
in connection with such amendment or waiver. In the event the Credit
Agreement is no longer in effect, or in the event any Liquidity Provider
having a commitment which is equal to or greater than 30% of the Total
Commitment is no longer a party to the Credit Agreement, the covenants of
the Credit Agreement in effect for the purposes of this Guaranty
immediately prior to the termination of the Credit Agreement or the last
date on which such Liquidity Provider is a party to the Credit Agreement,
as the case may be, shall be deemed part of this Guaranty subject to
amendment or waiver at the discretion of the Lessor.
(b) The Guarantor will ensure that its obligations under this
Guaranty, and the obligations of the Lessee under the Guaranteed
Agreements, constitute senior debt for all purposes of all subordinated
debt for money borrowed issued, incurred or assumed by the Guarantor or the
Lessee, as the case may be, after the date hereof.
12. Survival of Representations, Warranties, etc. All
representations, warranties, covenants and agreements made herein and in
statements or certificates delivered pursuant hereto shall survive any
investigation or inspection made by or on behalf of the Lessor and shall
continue in full force and effect until all of the obligations of the
Guarantor under this Guaranty shall be fully performed in accordance with
the terms hereof, and until the payment in full of all sums payable by the
Lessee under the Guaranteed Agreements, and until performance in full of
all obligations of the Lessee in accordance with the terms and provisions
of such agreements.
13. Third Party Beneficiaries. The Guarantor expressly
acknowledges and agrees that each Indemnitee (as such term is defined in
the Master Lease) shall be a third party beneficiary of this Guaranty.
14. GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO
JURISDICTION. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO
HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, AND AGREE THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE
GUARANTOR HEREBY IRREVOCABLY AGREES THAT ANY JUDICIAL PROCEEDINGS BROUGHT
AGAINST THE GUARANTOR WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK
AND, BY THE EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR ACCEPTS
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. SERVICE OF PROCESS
MAY BE MADE BY ANY MEANS AUTHORIZED BY FEDERAL LAW OR THE LAW OF NEW YORK,
AS THE CASE MAY BE. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE GUARANTOR AT THE ADDRESS SET FORTH IN SECTION 7
HEREOF, OR AT SUCH OTHER ADDRESS AS MAY BE DESIGNATED BY THE GUARANTOR IN A
NOTICE TO THE LESSOR. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE LESSOR OR
ITS ASSIGNEE TO BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.
15. Miscellaneous. If any term of this Guaranty or any
application thereof shall be invalid or unenforceable, the remainder of
this Guaranty and any other application of such term shall not be affected
thereby. Any term of this Guaranty may be amended, waived, discharged or
terminated only by an instrument in writing signed by the Guarantor and the
Lessor. The headings in this Guaranty are for purposes of reference only
and shall not limit or define the meaning hereof. This Guaranty may be
executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have caused this Guaranty
to be executed and delivered as of the day and year first above
written.
RITE AID CORPORATION,
as Guarantor
By:___________________________________
Name:
Title:
Acknowledged and Agreed:
SUMITOMO BANK LEASING AND
FINANCE, INC.
By:______________________________
Name:
Title:
Exhibit 4.24
MASTER LEASE AND SECURITY AGREEMENT
THIS MASTER LEASE AND SECURITY AGREEMENT (this "Lease"), dated as of
May 30, 1997, is entered into between SUMITOMO BANK LEASING AND FINANCE,
INC., a Delaware corporation, as the Lessor, and RITE AID REALTY CORP., a
Delaware corporation, as the Lessee.
W I T N E S S E T H:
WHEREAS, the Lessor wishes to finance (i) the development of certain
real property and construction of improvements to be used by the Lessee and
(ii) the acquisition of certain equipment and systems related to such real
property and improvements and (iii) the acquisition of certain other assets
to be used by the Lessee;
WHEREAS, the Lessee, as Construction Agent, will construct such
improvements which, as constructed, will be the property of the Lessor and
will become part of the Leased Assets subject to the terms of this Lease;
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee
desires to lease from the Lessor, the Leased Assets from time to time
subject to this Lease; and
WHEREAS, the Lessee is a wholly-owned direct subsidiary of Rite Aid
Corporation, and Rite Aid Corporation is willing to guarantee the payment
and performance of all of the Lessee's obligations hereunder and under the
other documents entered into by the Lessee in connection herewith;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions; Interpretation. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
Appendix 1 to this Lease; and the rules of interpretation set forth in
Appendix 1 to this Lease shall apply to this Lease.
ARTICLE II
PURCHASE AND LEASE
2.1. Acceptance and Lease of Assets. (a) Properties. Subject to the
terms and conditions of this Lease, on each Acquisition Date for a parcel
of Land (i) the Lessee shall convey a leasehold interest in such parcel of
Land to the Lessor pursuant to a Ground Lease, or the Lessor shall purchase
a fee interest in such parcel of Land and the applicable Person shall
convey a fee simple interest in the Improvements to be constructed thereon
to the Lessor, and the Lessor shall accept delivery of, such Land pursuant
to the terms hereof and (ii) the Lessor shall demise and lease to the
Lessee hereunder for the Base Term applicable thereto the Lessor's interest
in such Land together with any Improvements which thereafter may be
constructed thereon pursuant to the Construction Agency Agreement or this
Lease, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease from the Lessor for such Base Term, the Lessor's
interest in such Land together with the Lessor's interest in any
Improvements which thereafter may be constructed thereon pursuant to the
Construction Agency Agreement and this Lease.
(b) Equipment and Systems. Subject to the terms and conditions
of this Lease, from time to time after the Acquisition Date for any
Property and on or before the Base Date therefor, (i) the Lessor shall
purchase Equipment and Systems relating to such Property pursuant to the
terms hereof (and subject to the conditions set forth herein) and (ii) the
Lessor shall demise and lease to the Lessee hereunder for the Base Term
applicable thereto the Lessor's interest in such Equipment and Systems, and
the Lessee hereby agrees, expressly for the direct benefit of the Lessor,
to lease from the Lessor for such Base Term, the Lessor's interest in such
Equipment and Systems.
(c) Additional Assets. Subject to the terms and conditions of
this Lease, on each Acquisition Date for any Other Asset not constituting
Equipment and Systems (i) the Lessor shall purchase such Other Asset
pursuant to the terms hereof (and subject to the conditions set forth
herein) and (ii) the Lessor shall demise and lease to the Lessee hereunder
for the Base Term applicable thereto the Lessor's interest in such Other
Asset, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease from the Lessor for such Base Term, the Lessor's
interest in such Other Asset.
2.2. Acceptance Procedure. The Lessee hereby agrees that the
execution and delivery by the Lessee on each Acquisition Date of an
appropriately completed Lease Supplement shall, without further act,
constitute the unconditional and irrevocable acceptance by the Lessee of
all of the Leased Asset which is the subject of such Lease Supplement for
all purposes of this Lease and the other Operative Documents on the terms
set forth therein and herein, and that all of such Leased Assets shall be
deemed to be included in the leasehold estate of this Lease and shall be
subject to the terms and conditions of this Lease as of the applicable
Acquisition Date (or, in the case of any asset constituting Equipment and
Systems, as of such later date on which such asset is acquired by the
Lessor).
2.3. Lease Term. This Lease shall be in full force and effect on the
Closing Date. The Base Date and the Base Term for each Leased Asset shall
be set forth in the applicable Lease Supplement therefor.
2.4. Title. Each Leased Asset is leased to the Lessee without, except
as expressly set forth herein, any representation or warranty, express or
implied, by the Lessor and subject to the rights of parties in possession,
the existing state of title (including, without limitation, Permitted Liens
other than Lessor Liens) and all applicable Requirements of Law. The Lessee
shall in no event have any recourse against the Lessor for any defect in or
exception to title to any Leased Asset other than to the extent resulting
from Lessor Liens.
ARTICLE III
FUNDING OF ADVANCES
3.1. Lessor Commitment. Subject to the conditions and terms hereof,
the Lessor shall, upon the written request of the Lessee from time to time,
make Advances on Funding Dates for the purpose of (i) in the case of any
Property, financing the acquisition, ownership, insurance, renovation and
improvement of such Property during the Construction Period applicable
thereto, (ii) in the case of any Equipment and Systems, financing the
acquisition, ownership and insurance of any asset constituting Equipment
and Systems during the Construction Period for the related Property and
(iii) in the case of any Other Asset not constituting Equipment and
Systems, financing the acquisition of such Other Asset. Notwithstanding any
other provision hereof, the Lessor shall not be obligated to make any
Advance if, after giving effect thereto, the aggregate original amounts of
Advances (x) with respect to the Leased Asset to be funded thereby would
exceed the Lessor's Commitment relating thereto or (y) with respect to all
Leased Assets would exceed the Lessor's Total Commitment.
3.2. Procedures for Advances. (a) With respect to each funding of an
Advance, the Lessee shall give the Lessor and the Paying Agent prior
written notice not later than 3:00 p.m., New York City time, five (5)
Business Days prior to the date of the proposed funding, pursuant to a
Funding Request substantially in the form of Exhibit A (a "Funding
Request"), specifying: (i) the proposed Funding Date (the "Funding Date"),
(ii) the amount of Advance requested, (iii) whether such proposed Funding
Date will also be an Acquisition Date, (iv) the Leased Asset to which such
Advance is being allocated and the allocation of such Advance among the
various categories of costs and expenses listed in clause (c) below, (v)
the allocation of the Debt Contribution between CP Tranches and Eurodollar
Tranches and (vi) the requested Interest Periods for such CP Tranches. With
respect to any Funding Request related to the acquisition of a Property, in
addition to the foregoing, the Lessee shall also specify: (i) the Property
to be acquired, (ii) whether the Land Component thereof is to be acquired
through a Ground Lease or fee interest, (iii) the seller and/or ground
lessor of the Property, and (iv) the Estimated Improvement Costs for such
Property.
(b) Except as the parties may otherwise agree in writing, and
except for the initial Funding Date for any Leased Asset and Funding Dates
caused by the maturity of a CP Tranche on a date other than a Scheduled
Payment Date, each Funding Date shall occur on a Scheduled Payment Date.
(c) Advances shall be made solely to pay or reimburse the
Construction Agent or the Lessee for (i) Land Acquisition Costs and
Property Improvement Costs (including Capitalized Interest and Capitalized
Commitment Fees relating to any Property), (ii) Other Asset Acquisition
Costs (including Capitalized Interest and Capitalized Commitment Fees
relating to Equipment and Systems) and (iii) Transaction Expenses paid or
payable by the Lessee in connection with the preparation, execution and
delivery of the Operative Documents and all fees paid or payable by the
Lessee to the Paying Agent and the Lessor in connection with the Operative
Documents.
(d) All remittances made by the Lessor for the funding of any
Advance shall be made through the Paying Agent on the applicable Funding
Date in immediately available federal funds by wire transfer to the account
designated by the Lessee except that a portion of the initial Advance shall
be made (in accordance with instructions to be included in the initial
Funding Request) by wire transfer directly to the appropriate Persons for
Transaction Expenses.
(e) Notwithstanding anything in this Lease or any other
Operative Document to the contrary, with respect to the Aircraft acquired
by the Lessor on the date hereof, the Lessee may, until the Base Date for
such Aircraft, request Advances to pay the cost of outfitting such Aircraft
to the Lessee's specifications, and to pay Capitalized Interest and
Capitalized Commitment Fees relating thereto, as if such Aircraft
constituted Equipment and Systems under this Lease. Any such Advance shall
constitute an Advance for all purposes of this Lease and the other
Operative Documents.
ARTICLE IV
CONDITIONS PRECEDENT TO
CLOSING DATE, ACQUISITION DATES AND ADVANCES
4.1. Closing Date. The closing date (the "Closing Date") shall occur
on the earliest date on which the following conditions precedent shall have
been satisfied or waived in the reasonable discretion of the parties
hereto:
(a) Master Lease. This Lease shall have been duly authorized,
executed and delivered by the parties hereto.
(b) Master Construction Agency Agreement. The Construction
Agency Agreement shall have been duly authorized, executed and
delivered by the parties hereto.
(c) Guaranty. The Guaranty shall have been duly authorized,
executed and delivered by the Guarantor.
(d) Responsible Employee's Certificate of Lessee. The Lessor
shall have received a Responsible Employee's Certificate of the
Lessee, in substantially the form of Exhibit E, stating that (i) each
and every representation and warranty of the Lessee contained in each
Operative Document to which it is a party is true and correct on and
as of the Closing Date; (ii) no Default or Event of Default has
occurred and is continuing under any Operative Document to which it
is a party; (iii) each Operative Document to which the Lessee is a
party is in full force and effect with respect to it; and (iv) the
Lessee has duly performed and complied with all covenants, agreements
and conditions contained herein or in any Operative Document required
to be performed or complied with by it.
(e) Resolutions and Incumbency Certificate, etc. of Lessee. The
Lessee shall have delivered to the Lessor (i) a certificate of its
Secretary or an Assistant Secretary attaching and certifying as to
(A) the resolutions of its Board of Directors duly authorizing the
execution, delivery and performance by it of each Operative Document
to which it is or will be a party, (B) its certificate of
incorporation and by-laws, and (C) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Documents to which it is a party and (ii) a certificate of good
standing with respect to it issued by the Secretary of State of the
State of its incorporation.
(f) Responsible Employee's Certificate of Guarantor. The Lessor
shall have received a Responsible Employee's Certificate of the
Guarantor, in substantially the form of Exhibit F, stating that (i) each
and every representation and warranty of the Guarantor contained in each
Operative Document to which it is a party is true and correct on and
as of the Closing Date; (ii) each Operative Document to which the
Guarantor is a party is in full force and effect with respect to it;
and (iii) the Guarantor has duly performed and complied with all
covenants, agreements and conditions contained herein or in any
Operative Document required to be performed or complied with by it.
(g) Resolutions and Incumbency Certificate, etc. of Guarantor.
The Guarantor shall have delivered to the Lessor (i) a certificate of
its Secretary or an Assistant Secretary attaching and certifying as
to (A) the resolutions of its Board of Directors duly authorizing the
execution, delivery and performance by it of each Operative Document
to which it is or will be a party, (B) its certificate of
incorporation and by-laws, and (C) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Documents to which it is a party and (ii) a certificate of good
standing with respect to it issued by the Secretary of State of the
State of its incorporation.
(h) Opinions of Counsel. Wolf, Block, Schorr and Solis-Cohen,
special counsel to the Lessee, internal counsel for the Company,
Wolf, Block, Schorr and Solis-Cohen, special counsel to the
Guarantor, and internal counsel for the Guarantor shall each have
issued to the Lessor an opinion in form and scope satisfactory to the
Lessor.
(i) Fee Letter. The Fee Letter shall have been duly authorized,
executed and delivered by the Lessor, the Paying Agent and the
Lessee.
(j) Arrangement Fee. The Lessor shall have received that
portion of the fees identified in the Fee Letter as the arrangement
fee.
4.2. Acquisition Date Conditions. (a) All Assets. The occurrence of
each Acquisition Date with respect to any Leased Asset is subject to the
following conditions precedent:
(i) Lease Supplement. The Lease Supplement relating to such
Leased Asset shall have been duly executed and delivered by the
parties hereto.
(ii) Appraisal. The Lessor shall have received an Appraisal of
such Leased Asset, which Appraisal shall show, in the case of a
Leased Asset consisting of Property, that as of Substantial
Completion and the Expiration Date the Fair Market Sales Value of
such Property shall not be less than 100% of the sum of the Land
Acquisition Cost, Estimated Improvements Cost, Capitalized Interest
and Transaction Expenses expected to be funded with respect to such
Property.
(iii) Filings. The Operative Documents (or memoranda thereof),
any supplements thereto and any UCC Financing Statements shall have
been recorded, registered and filed, if necessary, in such manner as
to perfect and protect the Lessor's interest in such Leased Asset.
(iv) Taxes. All taxes, assessments, fees and other charges in
connection with the execution, delivery, recording, filing and
registration of the Operative Documents shall have been paid or
provisions for such payment shall have been made to the satisfaction
of the Lessor.
(v) Governmental Approvals. All necessary (or, in the
reasonable opinion of the Lessor, advisable) Governmental Actions, in
each case required by any Requirement of Law, shall have been
obtained or made and be in full force and effect.
(vi) Requirements of Law. In the reasonable opinion of the
Lessor and its counsel, the acquisition and ownership of such Leased
Assets as contemplated by the Operative Documents do not and will not
violate in any material respect any material Requirement of Law and
do not and will not subject the Lessor to any material adverse
regulatory prohibitions or constraints.
(vii) Responsible Employee's Certificates. The Lessor shall
have received a Responsible Employee's Certificate of the Lessee, in
substantially the form of Exhibit E, and a Responsible Employee's
Certificate of the Guarantor, in substantially the form of Exhibit F.
(b) Properties. In addition to the conditions specified in (a)
above, the occurrence of each Acquisition Date with respect to any Leased
Asset consisting of Property is subject to the following conditions
precedent:
(i) Deed or Ground Lease. The Lessor shall have
received a Deed or Ground Lease with respect to the Land constituting
a part of such Property.
(ii) Mortgage. Except with respect to a Property located in
Maryland or such other jurisdiction as the lessor may agree, the
Lessor shall have received a Mortgage relating to such Property duly
executed and delivered by the Lessee.
(iii) Construction Agency Agreement Supplement. The
Construction Agency Agreement Supplement relating to such Property
shall have been duly executed and delivered by the parties hereto.
(iv) Opinion of Counsel. Counsel to the Lessee in the
jurisdiction where such Property is located shall have delivered an
opinion as to local law matters in form and scope satisfactory to the
Lessor.
(v) Environmental Audit. The Lessor shall have received an
Environmental Audit for such Property in form and substance
acceptable to the Lessor.
(vi) Survey and Title Insurance. The Lessee shall have
delivered to the Lessor an ALTA/1992 (Urban) Survey of the Land
included in such Property prepared by an independent, licensed
registered public land surveyor and meeting the Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys as adopted by
the American Land Title Association/American Society and American
Congress on Surveying and Mapping in 1992 certified to the Lessor and
the title company and otherwise in form reasonably acceptable to the
Lessor and an ALTA owners or leasehold title insurance policy
covering such Property in favor of the Lessor, such policy to be
dated as of the Acquisition Date and in an amount not less than the
aggregate Commitment of the Lessor with respect to such Property and to
be reasonably satisfactory to the Lessor with an owner's comprehensive
(ALTA 9) endorsement and a 3.0 zoning endorsement and such other
endorsements requested by the Lessor to the extent available in the
State where such Property is located.
(vii) Property Insurance. The Lessor shall have received
evidence of insurance with respect to such Property required to be
maintained pursuant to this Lease, setting forth the respective
coverages, limits of liability, carrier, policy number and period of
coverage.
(viii) Architect's Certificate. The Lessor shall have received a
certificate from the Architect, in form and scope satisfactory to the
Lessor, certifying that (i) such Property as improved in accordance
with the Plans and Specifications and the contemplated use thereof by
the Lessee will comply in all material respects with all Requirements
of Law (including, without limitation, all zoning and land use laws)
and Insurance Requirements and (ii) the Plans and Specifications have
been prepared in accordance with applicable Requirements of Law
(including, without limitation, building, planning, zoning and fire
codes) and upon completion of the Improvements in accordance with the
Plans and Specifications, such Improvements on the Property will not
encroach in any manner onto any adjoining land (except as permitted
by express written easements or as insured by appropriate title
insurance).
(c) Aircraft. In addition to the conditions specified in (a)
above, the occurrence of each Acquisition Date with respect to any Leased
Asset consisting of Aircraft is subject to the following conditions
precedent:
(i) Bill of Sale. The Lessor shall have received an AC Form
8050-2 Bill of Sale (or such other form of bill of sale as may be
approved by the FAA on the Acquisition Date for the Aircraft)
covering the Aircraft, executed by the owner thereof in favor of the
Lessor.
(ii) Registration. The Lessor shall have received evidence
satisfactory to it that application for registration of the Aircraft
in the name of the Lessee has been duly made with the FAA.
(iii) Airworthiness. The Lessor shall have received evidence
satisfactory to it that the Aircraft has been certified by the FAA
with an appropriate airworthiness certificate and that such
certificate is in full force and effect.
(iv) Opinion of Counsel. FAA counsel shall have delivered an
opinion in form and scope satisfactory to the Lessor.
(v) Aircraft Insurance. The Lessor shall have received evidence
of insurance with respect to such Aircraft required to be maintained
pursuant to this Lease, setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage.
4.3. Conditions Precedent to Each Advance. The obligations of
the Lessor to make an Advance on a Funding Date, including the
initial Advance occurring on any Acquisition Date, is subject to
satisfaction or waiver of the following conditions precedent:
(a) Funding Request. The Lessor shall have received a
fully executed counterpart of the applicable Funding Request,
executed by the Lessee.
(b) Accuracy of Representations and Warranties. On the
applicable Funding Date the representations and warranties of the
Lessee contained herein and in each of the other Operative Documents
to which it is a party and of the Guarantor contained in the Guaranty
shall each be true and correct in all material respects as though
made on and as of such date, except to the extent such
representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true
and correct on and as of such earlier date.
(c) No Default. There shall not have occurred and be continuing
any Default or Event of Default and no Default or Event of Default
will have occurred after giving effect to the making of the Advance
requested by such Funding Request.
(d) Permits. In the case of an Advance relating to a Property,
all permits and approvals required by any Governmental Authority in
connection with the Construction for which such Advance is being made
shall have been issued or obtained and shall be in full force and
effect.
(e) Title Policy Endorsement. In the case of an Advance
relating to a Property, the Lessor shall have received an endorsement
to the title policy delivered pursuant to this Lease, dated on or one
Business Day before the date of such Advance, (i) indicating that
since the date of the preceding Advance relating to such Property
there has been no change in the state of title no additional survey
exceptions not theretofor approved by the Lessor and (ii) updating
the title policy to the date of such endorsement.
ARTICLE V
CONDITIONS TO SUBSTANTIAL COMPLETION
5.1. Conditions to Substantial Completion of a Property. Substantial
Completion with respect to a Property shall be deemed to have occurred for
purposes of the Operative Documents at such time as the Construction shall
have been substantially completed in accordance with the Plans and
Specifications and all Applicable Law and the Lessee shall have delivered
to the Lessor a 3.1 zoning endorsement reasonably satisfactory to the
Lessor, and such Property shall be ready for occupancy and operation, as
evidenced by certificates of the Architect and the Construction Agent, the
Prime Contractor's application for the payment to be made upon substantial
completion and the issuance by the appropriate Governmental Authority of
certificates of occupancy for all of the Improvements contemplated by the
Plans and Specifications, all in form and substance reasonably satisfactory
to the Lessor.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Representations of the Lessor. The Lessor represents and
warrants to the Lessee that:
(a) ERISA. The Lessor is not and will not be funding its
Advances hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan"
(as defined in Section 3(3) of ERISA) which is subject to Title I of
ERISA, or a "plan" (as defined in Section 4975(e)(1) of the Code).
(b) Status. The Lessor is a commercial bank, savings and loan
association, savings bank, depository institution, insurance company,
branch or agency of a foreign bank or other similar financial
institution, or an Affiliate thereof.
(c) Corporate Power and Authority. The Lessor has the corporate
power and authority to execute, deliver and perform the terms and
provisions of the Operative Documents to which it is or will be a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each
Operative Document required to be executed and delivered by it and,
assuming the due authorization, execution and delivery thereof on the
part of each other party thereto, each such Operative Document
constitutes a legal, valid and binding obligation enforceable against
it in accordance with its terms, except as the same may be limited by
insolvency, bankruptcy, reorganization or other similar laws relating
to or affecting the enforcement of creditors' rights or by general
equitable principles and except as the same may be limited by certain
circumstances under law or court decisions in respect of provisions
providing for indemnification of a party with respect to liability
where such indemnification is contrary to public policy.
(d) Investment Company Act. The Lessor is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
6.2. Representations of Lessee. The Lessee represents and
warrants to the Lessor that:
(a) Corporate Status. The Lessee (i) is a duly organized and
validly existing corporation in good standing under the laws of the
State of Delaware and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where the
failure to do so might have a material adverse effect on it or its
properties.
(b) Corporate Power and Authority. The Lessee has the corporate
power and authority to execute, deliver and perform the terms and
provisions of the Operative Documents to which it is or will be a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Operative Documents to
which it is a party and has duly executed and delivered each
Operative Document required to be executed and delivered by it and,
assuming the due authorization, execution and delivery thereof on the
part of each other party thereto, each such Operative Document
constitutes a legal, valid and binding obligation enforceable against
it in accordance with its terms, except as the same may be limited by
insolvency, bankruptcy, reorganization or other similar laws relating
to or affecting the enforcement of creditors' rights or by general
equitable principles and except as the same may be limited by certain
circumstances under law or court decisions in respect of provisions
providing for indemnification of a party with respect to liability
where such indemnification is contrary to public policy.
(c) No Violation. Neither the execution, delivery and
performance by the Lessee of the Operative Documents to which it is
or will be a party nor compliance with the terms and provisions
thereof, nor the consummation by the Lessee of the transactions
contemplated therein (i) will result in a violation by the Lessee of
any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental
instrumentality having jurisdiction over the Lessee or any Leased
Asset that would materially adversely affect (x) the validity or
enforceability of the Operative Documents to which the Lessee is a
party, or the title to, or value or condition of, any Leased Asset,
or (y) the business, financial position, or results of operations of
the Lessee and its subsidiaries taken as a whole or the ability of
the Lessee to perform its obligations under the Operative Documents,
(ii) will result in any breach which would constitute a default
under, or (other than pursuant to the Operative Documents) result in
the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of the Lessee pursuant to
the terms of, any indenture, loan agreement or other agreement for
borrowed money to which the Lessee is a party or by which it or any
of its property or assets is bound or to which it may be subject
(other than Permitted Liens), or (iii) will violate any provision of
the certificate of incorporation or by-laws of the Lessee.
(d) Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Lessee, threatened (i) that are
reasonably likely to have a material adverse effect on any Leased
Asset or on the business, financial position or results of operations
of the Lessee and its subsidiaries taken as a whole or (ii) that
question the validity of the Operative Documents or the rights or
remedies of the Lessor with respect to the Lessee or any Leased Asset
under the Operative Documents.
(e) Governmental Approvals. No Governmental Action by any
Governmental Authority having jurisdiction over the Lessee or any
Leased Asset is required to authorize or is required in connection
with (i) the execution, delivery and performance by the Lessee of any
Operative Document to which it is a party or (ii) the Construction,
except for any such Governmental Action which is not yet required to
be obtained and will be duly obtained at and when required by
Applicable Law.
(f) Investment Company Act. The Lessee is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
(g) Public Utility Holding Company Act. The Lessee is not a
"holding company" or a "subsidiary company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Company Act of
1935, as amended.
(h) Provided Information. The information and materials which
have been provided by the Lessee or any Affiliate of the Lessee to
the Lessor in writing prior to the Closing Date are true and accurate
in all material respects on the date as of which such information and
materials are dated or certified and are not incomplete by omitting
to state any fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circumstances
under which such information was provided.
(i) Taxes. All United States Federal income tax returns and all
other tax returns which are required to have been filed have been or
will be filed by or on behalf of the Lessee by the respective due
dates, including extensions, and all taxes due with respect to the
Lessee shown on such returns or pursuant to any assessment received
by the Lessee have been or will be paid or are being contested in
good faith by the Lessee by appropriate procedures. The charges,
accruals and reserves on the books of the Lessee in respect of taxes
or other governmental charges are, in the opinion of the Lessee,
adequate.
(j) Environmental Laws. The Lessee is in compliance with all
Environmental Laws relating to pollution and environmental control in
all domestic jurisdictions in which all real property of the Lessee,
including all Land, is located, other than those the non-compliance
with which would not have a material adverse effect on any Land or
the business, financial position or results of operations of the
Lessee and its subsidiaries taken as a whole.
(k) Offer of Securities, etc. Neither the Lessee nor any Person
authorized to act on the Lessee's behalf has, directly or indirectly,
offered any interest in any Leased Asset or any other interest
similar thereto (the sale or offer of which would be integrated with
the sale or offer of such interest in any Leased Asset), for sale to,
or solicited any offer to acquire any of the same from, any Person
other than the Lessor and other "accredited investors" (as defined in
Regulation D of the Securities and Exchange Commission).
(l) Properties. Each Prime Construction Contract for a Property
will provide for construction of the Improvements thereto for a fixed
price or a guaranteed maximum price on or before a date certain, will
contain customary retainage provisions and otherwise be in form and
substance reasonably satisfactory to the Lessor. Each Property as
improved in accordance with the Plans and Specifications for such
Property and the contemplated use thereof by the Lessee and its
agents, assignees, employees, lessees, licensees and tenants will
comply in all material respects with all Requirements of Law
(including, without limitation, all zoning and land use laws) and
Insurance Requirements, except for such Requirements of Law as the
Lessee shall be contesting in good faith by appropriate proceedings.
Upon Substantial Completion of the Construction of the Improvements
to each Property, all water, sewer, electric, gas, telephone and
drainage facilities and all other utilities required to adequately
service such Improvements for its intended use will be available
pursuant to adequate permits (including any that may be required
under applicable Environmental Laws). There is no action, suit or
proceeding (including any proceeding in condemnation or eminent
domain or under any Environmental Law) pending or, to the best of the
Lessee's knowledge, threatened with respect to the Lessee, its
Affiliates or such Property which materially adversely affects the
title to, or the use, operation or value of, such Property. No fire
or other casualty with respect to such Property has occurred which
fire or other casualty has had a material adverse effect on the value
or condition of such Property. All utilities serving such Property,
or proposed to serve such Property in accordance with the related
Plans and Specifications, are located in, and vehicular access to the
Improvements on such Property is provided by, either public
rights-of-way abutting such Property or Appurtenant Rights. All
material licenses, approvals, authorizations, consents, permits
(including, without limitation, building, demolition and
environmental permits, licenses, approvals, authorizations and
consents), easements and rights-of-way, including proof and
dedication, required for (x) the use, treatment, storage, transport,
disposal or disposition of any Hazardous Substance on, at, under or
from such Property, and (y) construction of the Improvements in
accordance with the Plans and Specification and the Construction
Agency Agreement have either been obtained from the appropriate
Governmental Authorities having jurisdiction or from private parties,
as the case may be, or will be obtained from the appropriate
Governmental Authorities having jurisdiction or from private parties,
as the case may be, prior to commencing any such construction or use
and operation, as applicable.
(m) Aircraft. Neither the execution and delivery of a Lease
Supplement relating to Aircraft nor any of the transactions relative
to Aircraft contemplated by this Lease, require the consent or
approval of the FAA, except for notice pursuant to FAA Regulation
ss.91.23 (14 C.F.R. ss.91.23).
(n) Title; Ground Lease. The Lessor will at all times during
the Base Term have good title to all Improvements, subject only to
Permitted Liens. Each Ground Lease, if any, is in form and substance
sufficient to convey a valid leasehold interest in the applicable
Land. Each Deed is in form and substance sufficient to convey to the
Lessor good and marketable title to the applicable Property subject
only to Permitted Liens.
(o) Insurance. The Lessee carries insurance with reputable
insurers in respect of its material assets, in such manner, in such
amounts and against such risks as is customarily maintained by other
Persons of similar size engaged in similar business.
(p) Flood Hazard Areas. Except as otherwise identified on the
survey delivered pursuant to Section 4.2(b), no portion of any
Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
agency. If any Property is located in such an area, then flood
insurance has been obtained for such Property in accordance with
Section 17.2 and in accordance with the National Flood Insurance Act
of 1968, as amended.
(q) Defaults. The Lessee is not in default under (and no event
has occurred which with the giving of notice or lapse of time would
result in a default under) any instrument evidencing any debt or any
agreement relating thereto or any mortgage, deed of trust, security
agreement, lease, franchise or other agreement to which the Lessee is
a party or by which the Lessee or any of its properties or assets is
bound or to which it may be subject.
(r) Use of Advances. No part of any Advance will be used
directly or indirectly for the purpose of purchasing or carrying, or
for payment in full or in part of debt that was incurred for the
purposes of purchasing or carrying, any margin security as such term
is defined in Section 207.2 of Regulation G of the Board of Governors
of the Federal Reserve System (12 C.F.R., Chapter II, Part 207).
(s) Solvency. The Lessee is Solvent.
6.3. Representations of the Lessee with Respect to Each Advance. The
Lessee represents and warrants to the Lessor as of each Funding Date as
follows:
(a) Representations. The representations and warranties of the
Lessee and of the Guarantor set forth in the Operative Documents
(including the representations and warranties set forth in Section
6.2) are true and correct in all material respects on and as of such
Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations
and warranties shall have been true and correct on and as of such
earlier date. There exists no Default or Event of Default, and no
Default or Event of Default will occur as a result of, or after
giving effect to, the Advance requested by the Funding Request on
such date.
(b) Improvements. In the case of a Funding Date for any
Property, the Construction of the Improvements to such Property to
date, if any, has been performed in a good and workmanlike manner,
substantially in accordance with the Plans and Specifications for
such Property and in compliance with all material Insurance
Requirements and Requirements of Law.
(c) Liens. The Lessee has not permitted Liens to be placed
against any Leased Asset other than Permitted Liens.
(d) Advance. The conditions precedent to such Advance set forth
in Article IV have been satisfied. The amount of the Advance
requested represents amounts owed to third parties in respect of Land
Acquisition Costs or to the Lessee or third parties in respect of
Other Asset Acquisition Costs or owed or paid by the Construction
Agent to third parties in respect of Property Improvements Costs and
Transaction Expenses, in each case incurred prior to the date of such
Advance and for which neither the Lessee nor the Construction Agent
has previously been reimbursed by an Advance, provided that this
representation shall not apply to any portion of an Advance made on
Substantial Completion which is to be used to pay for open punch list
items or other holdbacks. With respect to any portion of an Advance
made on Substantial Completion which is to be used to pay for open
punch list items or other holdbacks, the Lessee represents that such
portion will be used for such purpose to the extent that a contractor
is entitled thereto and that neither the Lessee nor the Construction
Agent has previously been reimbursed therefor by an Advance.
ARTICLE VII
PAYMENT OF RENT; FEES
7.1. Rent. The Lessee shall pay Base Rent in arrears on each Leased
Asset on each Payment Date during the Base Term for such Leased Asset, on
the date required under Section 24.1(i) in connection with the Lessee's
exercise of the Remarketing Option and on any date on which this Lease
shall terminate. Base Rent shall be calculated as provided in Appendix 2
hereto.
7.2. Payment of Rent. Rent shall be paid absolutely net to the
Lessor, so that this Lease shall yield to the Lessor the full amount
thereof, without setoff, deduction or reduction. Neither the Lessee's
inability or failure to take possession of all or any portion of any Leased
Asset when delivered by the Lessor, whether or not attributable to any act
or omission of the Lessee or any act or omission of the Lessor, or for any
other reason whatsoever, shall delay or otherwise affect the Lessee's
obligation to pay Rent for such Leased Asset in accordance with the terms
of this Lease.
7.3. Supplemental Rent. The Lessee shall pay to the Lessor any and
all Supplemental Rent promptly after receipt of an invoice therefor as the
same shall become due and payable, and if the Lessee fails to pay any
Supplemental Rent, the Lessor shall have all rights, powers and remedies
provided for herein or by law or equity or otherwise in the case of
nonpayment of Base Rent. The Lessee shall pay to the Lessor, as
Supplemental Rent, among other things, on demand, interest at the
applicable Overdue Rate on any installment of Base Rent not paid when due
for the period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due or demanded by the Lessor for the
period from the due date or the date of any such demand, as the case may
be, until the same shall be paid. The expiration or other termination of
the Lessee's obligations to pay Base Rent hereunder shall not limit or
modify the obligations of the Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease, in the event of any
failure on the part of the Lessee to pay and discharge any Supplemental
Rent as and when due, the Lessee shall also promptly pay and discharge any
fine, penalty, interest or cost which may be assessed or added under any
agreement with a third party for nonpayment or late payment of such
Supplemental Rent, all of which shall also constitute Supplemental Rent.
7.4. Fees. The Lessee hereby agrees to pay to the Lessor the fees set
forth in this Section 7.4. All such fees shall be non-refundable, except as
may otherwise be provided in the Fee Letter.
(a) Fee Letter. The Lessee shall pay to the Lessor the fees set
forth in the Fee Letter, under which certain amounts shall be payable
on the Closing Date and may be capitalized and included in the Lease
Balance from the relevant Leased Asset. The Fee Letter may be
supplemented from time to time in connection with the acquisition of
additional Leased Assets.
(b) Commitment Fee. The Lessee shall pay to the Lessor for each
Leased Asset, for the period (including any portion thereof when the
Lessor's obligations pursuant to Section 3.1 are suspended by reason
of the Lessee's inability to satisfy any condition of Article IV)
commencing on (and including) the Closing Date and continuing to (but
excluding), in the case of the Lessor Commitment Fee, the Base Date
for such Leased Asset, and, in the case of the Liquidity Commitment
Fee, the Expiration Date for such Leased Asset, a Commitment Fee (the
"Commitment Fee") as set forth in Appendix 2.
7.5. Capitalized Interest. If and to the extent that the Lessee does
not request an Advance to pay any Capitalized Interest, then the Lessee
will pay the amount thereof to the Lessor on the last day of the Interest
Period during which such Capitalized Interest has accrued.
7.6. Method of Payment. Each payment of Rent or any other amount due
hereunder shall be made by the Lessee to the Lessor prior to 1:00 p.m., New
York City time, at the place of payment designated in writing by the Lessor
in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such
payment shall be due, unless such scheduled date shall not be a Business
Day, in which case such payment shall be made on the next succeeding
Business Day. Payments received after 1:00 p.m., New York City time, on any
day shall be deemed received on the next succeeding Business Day. If
requested by the Lessee, the Lessor shall make arrangements to permit
payments hereunder to be made by the automated clearing house payments
system.
ARTICLE VIII
QUIET ENJOYMENT; RIGHT TO INSPECT
8.1. Quiet Enjoyment. Subject to Sections 2.4 and 8.2, and subject to
the rights of the Lessor contained herein and the other terms of the
Operative Documents to which the Lessee is a party, the Lessee shall
peaceably and quietly have, hold and enjoy each Leased Asset for the Base
Term applicable thereto, free of any claim or other action by the Lessor or
anyone claiming by, through or under the Lessor (other than the Lessee)
with respect to any matters arising from and after the Acquisition Date.
Such right of quiet enjoyment is independent of, and shall not affect the
Lessor's rights otherwise to initiate legal action to enforce, the
obligations of the Lessee under this Lease.
8.2. Right to Inspect. During the Lease Term, the Lessee shall, upon
reasonable notice from the Lessor (except that no notice shall be required
if an Event of Default under this Lease has occurred and is continuing),
permit the Lessor and its authorized representatives to inspect any Leased
Asset during normal business hours. Lessor and its authorized
representatives shall maintain the confidentiality of any confidential
information obtained during the course of any inspection and, at the
request and expense of the Lessee, shall execute and deliver non-disclosure
agreements to such effect as may be reasonably appropriate.
ARTICLE IX
NET LEASE, ETC.
9.1. Net Lease. This Lease shall constitute a net lease. Any present
or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall the Lessee be entitled to any abatement, suspension,
deferment, reduction, setoff, counterclaim, or defense with respect to the
Rent, nor shall the obligations of the Lessee hereunder be affected (except
as expressly herein permitted and by performance of the obligations in
connection therewith) by reason of: (i) any defect in the condition,
merchantability, design, construction, quality or fitness for use of any
Leased Asset or any part thereof, or the failure of any Leased Asset to
comply with all Requirements of Law, including any inability to occupy or
use any Leased Asset by reason of such non-compliance; (ii) any damage to,
removal, abandonment, salvage, loss, contamination of or Release from,
scrapping or destruction of or any requisition or taking of any Leased
Asset or any part thereof; (iii) any restriction, prevention or curtailment
of or interference with any use of the Leased Asset or any part thereof
including eviction; (iv) any defect in title to or rights to any Leased
Asset or any Lien on such title or rights or on any Leased Asset (other
than Lessor Liens); (v) any change, waiver, extension, indulgence or other
action or omission or breach in respect of any obligation or liability of
or by the Lessor; (vi) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceedings
relating to the Lessee or any other Person, or any action taken with
respect to this Lease by any trustee or receiver of the Lessee or any other
Person, or by any court, in any such proceeding; (vii) any claim that the
Lessee has or might have against any Person, including without limitation
the Lessor and any vendor, manufacturer, contractor of or for any portion
of any Leased Asset; (viii) any failure on the part of the Lessor to
perform or comply with any of the terms of this Lease (other than
performance by Lessor of its obligations set forth in Section 2.1 hereof),
of any other Operative Document or of any other agreement; (ix) any
invalidity or unenforceability or illegality or disaffirmance of this Lease
against or by the Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof; (x) any restriction,
prevention or curtailment of or interference with the construction on or
any use of any Leased Asset or any part thereof; or (xi) any other cause or
circumstances, similar to the foregoing and whether or not the Lessee shall
have notice or knowledge of any of the foregoing. The agreement of the
Lessee in the preceding sentence shall not affect any claim, action or
right that the Lessee may have against the Lessor or any other Person. The
parties intend that the obligations of the Lessee hereunder shall be
covenants and agreements that are separate and independent from any
obligations of the Lessor hereunder or under any other Operative Documents
and the obligations of the Lessee shall continue unaffected unless such
obligations shall have been modified or terminated in accordance with an
express provision of this Lease.
9.2. No Termination or Abatement. The Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action
to terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Lessor, or any action with respect to this Lease
which may be taken by any trustee, receiver or liquidator of the Lessor or
by any court with respect to the Lessor. The Lessee hereby waives all right
(i) to terminate or surrender this Lease (except as provided herein) or
(ii) to avail itself of any abatement, suspension, deferment, reduction,
setoff, counterclaim or defense with respect to any Rent. The Lessee shall
remain obligated under this Lease in accordance with its terms and the
Lessee hereby waives any and all rights now or hereafter conferred by
statute or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. Notwithstanding any such statute or
otherwise, the Lessee shall be bound by all of the terms and conditions
contained in this Lease.
ARTICLE X
SUBLEASES
10.1. Subletting. The Lessee may, without the consent of the Lessor,
sublease any Leased Asset or any portion thereof to any Person who, to the
best of Lessee's knowledge, has not filed, or had filed against it,
insolvency proceedings or a petition under the bankruptcy laws of the
United States. No sublease or other relinquishment of possession of such
Leased Asset shall in any way discharge or diminish any of the Lessee's
obligations to the Lessor hereunder and the Lessee shall remain directly
and primarily liable under this Lease as to such Leased Asset, or portion
thereof, so sublet. Any sublease of such Leased Asset shall expressly be
made subject to and subordinated to this Lease and to the rights of the
Lessor hereunder. No such sublease may provide for use of such Leased Asset
by the sublessee in a manner materially different than that of the Lessee
prior to the sublease. In connection with any sublease, the Lessee may
request the Lessor to enter into a customary non-disturbance agreement with
the sublessee. The Lessor will act in a commercially reasonable manner in
determining whether or not to enter into such non-disturbance agreement.
ARTICLE XI
LESSEE ACKNOWLEDGMENTS
11.1. Condition of the Properties. THE LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE
CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND
CONSTRUCTION OF THE IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE
LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH LEASED ASSET
"AS IS" WITHOUT, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN,
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND
SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES
IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR
PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW
WHICH MAY EXIST ON THE DATE HEREOF OR AT ANY TIME HEREAFTER. THE LESSOR HAS
NOT MADE, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN, AND SHALL NOT BE
DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) AND SHALL NOT BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE
TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, OR FITNESS FOR USE OF ANY LEASED ASSET (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY LEASED ASSET (OR ANY PART THEREOF)
AND THE LESSOR SHALL NOT BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY LEASED ASSET,
OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW.
11.2. Risk of Loss. During the Construction Period and the Base Term
for any Leased Asset, the risk of loss of or decrease in the enjoyment and
beneficial use of such Leased Asset as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars
or otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE XII
POSSESSION AND USE, ETC.
12.1. Possession and Use. Each Leased Asset shall be used as
described in the applicable Lease Supplement therefor and in a manner
consistent with the standards applicable to properties of a similar nature
in the geographic area in which such Leased Asset is located or operated
and in any event not less than the standards applied by the Lessee and its
Affiliates for other comparable properties owned or leased by the Lessee
and its Affiliates.
12.2. Charges. The Lessee shall pay, or cause to be paid, all charges
and costs required in connection with the use of such Leased Asset as
contemplated by this Lease. The Lessee shall not commit or permit any waste
of such Leased Asset or any part thereof. The Lessee shall pay or cause to
be paid all charges for electricity, power, gas, oil, water, telephone,
sanitary sewer service and all other rents and utilities used in or on each
Property through the Expiration Date. The Lessee shall be entitled to
receive any credit or refund with respect to any utility charge paid by the
Lessee and the amount of any credit or refund received by the Lessor on
account of any utility charges paid by the Lessee, net of the costs and
expenses reasonably incurred by the Lessor in obtaining such credit or
refund, shall be promptly paid over to the Lessee.
12.3. Compliance with Requirements of Law and Insurance Requirements.
Subject to the terms hereof relating to permitted contests, the Lessee, at
its sole cost and expense, shall (i) comply in all material respects with
all Requirements of Law and Insurance Requirements relating to each Leased
Asset, including the construction, use, operation, maintenance, repair and
restoration thereof and the remarketing thereof pursuant to Article XXIV,
whether or not compliance therewith shall require structural or
extraordinary changes in any Improvements or interfere with the use and
enjoyment of such Leased Asset, and (ii) procure, maintain and comply in
all material respects with all material licenses, permits, orders,
approvals, consents and other authorizations required for the construction,
use, operation, maintenance, repair and restoration of the Leased Assets.
ARTICLE XIII
MAINTENANCE AND REPAIR; RETURN
13.1. Maintenance and Repair. (a) The Lessee, at its sole cost and
expense, shall maintain each Leased Asset in good condition (ordinary wear
and tear excepted) and make all necessary repairs thereto, of every kind
and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural or foreseen or unforeseen, in
each case as required by all Requirements of Law and Insurance Requirements
and on a basis consistent with the operation and maintenance of properties
comparable in type and location to such Leased Asset and in no event less
than the standards applied by the Lessee and its Affiliates in the
operation and maintenance of other comparable properties owned or leased by
the Lessee and its Affiliates.
(b) The Lessor shall under no circumstances be required to build any
improvements on any Property, make any replacements, alterations or
renewals of any nature or description to any Leased Asset or make any
expenditure whatsoever in connection with this Lease (other than for
Advances made in accordance with and pursuant to the terms of this Lease
and the Construction Agency Agreement). The Lessor shall not be required to
maintain, repair or rebuild all or any part of any Leased Asset, and the
Lessee waives any right to (i) require the Lessor to maintain, repair, or
rebuild all or any part of any Leased Assets, or (ii) make repairs at the
expense of the Lessor pursuant to any Requirement of Law, Insurance
Requirement, contract, agreement, or covenant, condition or restriction in
effect at any time during the Base Term applicable to any Leased Asset.
(c) With respect to Aircraft, without limiting the generality of
Section 13.1(a), the Lessee, at its sole cost and expense, shall: (i)
maintain, service, repair, overhaul and test such Aircraft (A) so as to
keep such Aircraft in operating condition as good as when delivered to the
Lessee hereunder, ordinary wear and tear excepted, and (B) so as to keep
such Aircraft in such operating condition as may be necessary to enable the
airworthiness certification of such Aircraft to be maintained in good
standing at all times under the Federal Aviation Act of 1958, as amended,
except during such period or periods as such Aircraft is being overhauled,
maintained, serviced, repaired or tested; (ii) maintain all records, logs
and other materials required by the FAA to be maintained in respect of such
Aircraft; and (iii) promptly furnish to the Lessor such notification and
take such other action on the Lessor's behalf as may be required to be
filed by the Lessor with any governmental authority because of the Lessor's
interest in such Aircraft. The Lessee shall forthwith upon the Acquisition
Date with respect to any Aircraft, cause such Aircraft to be fully
registered and at all times thereafter to remain duly registered in the
name of the Lessee. The Lessee shall affix or cause to be affixed to each
Aircraft in the place designated by the Lessor (or, if no such place shall
have been designated, in a prominent place), labels, plates or other
markings stating that such Aircraft is owned by the Lessor. The Lessee
shall not without the prior permission of the Lessor change or remove (or
permit to be changed or removed or otherwise permit a decrease in the
visibility of) any insignia or lettering which is on any Aircraft at the
time of delivery thereof or which is thereafter placed thereon indicating
the Lessor's ownership thereof.
13.2. Return. (a) The Lessee shall, upon the expiration or earlier
termination of this Lease, vacate and surrender each Leased Asset to the
Lessor in its then-current, "AS IS" condition, subject to the Lessee's
obligations under Sections 12.3, 13.1, 14.1, 15.1, 18.1(d), 18.2 and 24.1,
unless the Lessee has purchased such Leased Asset from the Lessor as
provided herein.
(b) Upon termination of the lease of any Aircraft, the Lessee shall
have the option of having the aircraft engines installed on such Aircraft
be engines of the same model as the original Engines or substitute engines
suitable and approved by the FAA for such Aircraft, free and clear of all
Liens, encumbrances or rights of others whatsoever and having a value and
utility at least equal to, and being in as good operation and condition,
ordinary wear and tear excepted, as such original Engines. "Ordinary wear
and tear" as used herein is intended to reflect the FAA regulations
pertaining to the requirement of a periodic overhauling of aircraft
engines. Thus, in returning the Engines, the Lessee, under normal
circumstances, shall be required to overhaul them only if the total flying
hours of such Engines would require an overhaul under the FAA regulations.
Upon the return of any Aircraft, the Lessee shall (i) deliver to the Lessor
or its designee, all logs, manuals, inspection data, modification and
overhaul records or copies thereof which are applicable to such Aircraft
and are of the type that the Lessee customarily retains or is required by
law to retain with respect to its own aircraft and (ii) at its own expense,
will cause such Aircraft, if not then registered in the name of the Lessor,
to be registered in the name of the Lessor or its designee. At the time of
such return such Aircraft shall be duly certified as airworthy by the FAA.
ARTICLE XIV
MODIFICATIONS, ETC.
14.1. Modifications, Substitutions and Replacements. After the date
of Substantial Completion for any Leased Asset consisting of Property and
after the Acquisition Date for any Other Asset, the Lessee, at its sole
cost and expense, may at any time and from time to time make alterations,
renovations, improvements and additions to such Leased Asset or any part
thereof and substitutions and replacements therefor (collectively,
"Modifications"); provided, however, that: (i) except for any Modification
required to be made pursuant to a Requirement of Law (a "Required
Modification"), no Modification shall impair the value, utility or useful
life of such Leased Asset or any part thereof from that which existed
immediately prior to such Modification; (ii) the Modification shall be done
expeditiously and in a good and workmanlike manner; (iii) the Lessee shall
comply with all Requirements of Law and Insurance Requirements applicable
to the Modification, including the obtaining of all permits and
certificates of occupancy, and the structural integrity of such Leased
Asset shall not be adversely affected; (iv) subject to the terms of Article
XVI relating to permitted contests, the Lessee shall pay all costs and
expenses and shall discharge (or cause to be insured or bonded over) within
sixty (60) days after the same shall be filed (or otherwise become
effective) any Liens arising with respect to the Modification; (v) such
Modifications shall comply with Section 13.1(a); and (vi) the Lessee shall
be required to obtain the prior written approval of the Lessor, which
approval shall not be unreasonably withheld, with respect to any
alterations (other than Required Modifications and/or alterations
authorized by the Construction Agency Agreement) that shall (A) materially
affect any structural element of the Improvements to any Property or major
building system therein, or (B) cost in excess of the Threshold Amount or
(C) materially change the nature of the Improvements to any Property or the
amount of usable area therein or the utility thereof for the purposes
contemplated by the Lessor and the Lessee as of the date hereof and the
date of the Lease Supplement therefor. All Modifications shall remain part
of such Leased Asset and shall be subject to this Lease and title thereto
shall immediately vest in the Lessor; provided, however, that Modifications
that meet each of the following conditions shall not be subject to this
Lease: (x) such Modifications are not Required Modifications, (y) such
Modifications were not financed by the Lessor and (z) such Modifications
are readily removable without impairing the value, utility or remaining
useful life of the related Leased Asset. So long as no Event of Default has
occurred and is continuing, the Lessee may place upon each Leased Asset any
trade fixtures, machinery, equipment or other property belonging to the
Lessee or third parties and may remove the same at any time during the
Lease Term, subject, however, to the terms of Section 13.1; provided that
such trade fixtures, machinery, equipment or other property do not
materially impair the value, utility or remaining useful life of such
Leased Asset; and provided, further, that the Lessee shall keep and
maintain at each Property and shall not remove from such Property any
Equipment financed or otherwise paid for (directly or indirectly) by the
Lessor pursuant to this Lease. Notwithstanding the foregoing proviso, the
Lessee may substitute other equipment for such Equipment, which substituted
equipment shall have a Fair Market Sales Value and remaining useful life at
least equivalent to the Equipment for which it was substituted and, without
further act, such substituted equipment shall be Equipment hereunder and be
part of the applicable Property.
ARTICLE XV
WARRANT OF TITLE; EASEMENTS
15.1. Warrant of Title. (a) The Lessee agrees that except as
otherwise provided herein and subject to the terms of Article XVI relating
to permitted contests, the Lessee shall not directly or indirectly create
or allow to remain, and shall promptly discharge at its sole cost and
expense, any Lien, defect, attachment, levy, title retention agreement or
claim upon any Leased Asset or any Modifications or any Lien, attachment,
levy or claim with respect to the Rent, other than Permitted Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition
of or to any Leased Asset or any part thereof. NOTICE IS HEREBY GIVEN THAT
THE LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING
ANY LEASED ASSET OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT
NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR, IN AND TO ANY LEASED
ASSET.
15.2. Grants and Releases of Easements; Lessor's Waivers. Provided
that no Default or Event of Default shall have occurred and be continuing
and subject to the provisions of Articles XII, XIII and XIV, the Lessor
hereby consents in each instance to the following actions by the Lessee,
but at the Lessee's sole cost and expense: (a) the granting of easements,
licenses, rights-of-way and other rights and privileges in the nature of
easements reasonably necessary or desirable for the use, repair, or
maintenance of any Property as herein provided and to give effect to the
state of title in effect for such Property as set forth in the title policy
therefor; (b) the release of existing easements or other rights in the
nature of easements which are for the benefit of any Property; (c) if
required by applicable Governmental Authority in connection with the
Construction, the dedication or transfer of unimproved portions of any Land
for road, highway or other public purposes; and (d) the execution of
amendments to any covenants and restrictions affecting any Property;
provided, however, that in each case (i) such grant, release, dedication,
transfer or amendment does not materially impair the value, utility or
remaining useful life of any Property, (ii) such grant, release,
dedication, transfer or amendment is reasonably necessary in connection
with the use, maintenance, alteration or improvement of any Property, (iii)
such grant, release, dedication, transfer or amendment will not cause any
Property or any portion thereof to fail to comply in any material respect
with the provisions of this Lease or any other Operative Documents and all
Requirements of Law (including, without limitation, all applicable zoning,
planning, building and subdivision ordinances, all applicable restrictive
covenants and all applicable architectural approval requirements); (iv) all
governmental consents or approvals required prior to such grant, release,
dedication, transfer or amendment have been obtained, and all filings
required prior to such action have been made; (v) such grant, release,
dedication, transfer or amendment will not result in any down-zoning of any
Property or any portion thereof or a material reduction in the maximum
density or development rights available to any Property under all
Requirements of Law; (vi) the Lessee shall remain obligated under this
Lease and under any Operative Document executed by the Lessee consenting to
the assignment of the Lessor's interest in this Lease as security for
Advances made by it to the Lessor, in each such case in accordance with
their terms, as though such grant, release, dedication, transfer or
amendment had not been effected; and (vii) the Lessee shall pay and perform
any obligations of the Lessor under such grant, release, dedication,
transfer or amendment. The Lessor acknowledges the Lessee's right to
finance and to secure under the Uniform Commercial Code, inventory,
furnishings, furniture, equipment, machinery, leasehold improvements and
other personal property located at any Property other than Equipment, and
Lessor agrees to execute Lessor waiver forms in favor of any purchase money
seller, lessor or lender which has financed or provided or may finance or
provide in the future such items. Without limiting the effectiveness of the
foregoing, provided that no Default or Event of Default shall have occurred
and be continuing, the Lessor shall, upon the request of the Lessee, and at
the Lessee's sole cost and expense, execute and deliver any instruments
necessary or appropriate to confirm any such grant, release, dedication,
transfer or amendment to any Person permitted under this Section 15.2,
including landlord waivers with respect to any of the foregoing.
ARTICLE XVI
PERMITTED CONTESTS
16.1. Permitted Contests in Respect of Applicable Law. If, to the
extent and for so long as (a) a test, challenge, appeal or proceeding for
review of any Applicable Law relating to any Leased Asset shall be
prosecuted diligently and in good faith in appropriate proceedings by the
Lessee or (b) compliance with such Applicable Law shall have been excused
or exempted by a valid nonconforming use, variance permit, waiver,
extension or forbearance, the Lessee shall not be required to comply with
such Applicable Law but only if and so long as any such test, challenge,
appeal, proceeding, waiver, extension, forbearance or noncompliance shall
not, in the reasonable opinion of the Lessor, involve (A) any risk of
criminal liability being imposed on the Lessor, or (B) any material risk of
(1) foreclosure, forfeiture or loss of any Leased Asset or any material
part thereof, or (2) the nonpayment of Rent or (C) any substantial danger
of (1) the sale of, or the creation of any Lien (other than a Permitted
Lien) on, any part of any Leased Asset, (2) civil liability being imposed
on the Lessor, or (3) enjoinment of, or interference with, the use,
possession or disposition of any Leased Asset in any material respect. The
Lessor will not be required to join in any proceedings pursuant to this
Section 16.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor; and in that event
the Lessor will join in the proceedings or permit them or any part thereof
to be brought in its name if and so long as (i) no Default or Event of
Default has occurred and is continuing, (ii) the Lessee has not elected the
Remarketing Option, and (iii) the Lessee pays all related expenses and
indemnifies the Lessor to its reasonable satisfaction.
ARTICLE XVII
INSURANCE
17.1. Public Liability and Workers' Compensation Insurance. (a)
Property. With respect to each Property, the Lessee shall procure and carry
commercial general liability insurance for claims for bodily injury or
death sustained by persons or damage to property while on such Property and
such other public liability coverages as are ordinarily procured by the
Lessee or its Affiliates who own or operate similar properties. Such
insurance shall be on terms and in amounts that are materially no less
favorable than insurance maintained by the Lessee or its Affiliates with
respect to similar properties that they own and that are in accordance with
normal industry practice in the state in which such Property is located.
The Lessee shall, in the construction of the Improvements (including in
connection with any Modifications thereof) and the operation of any
Property, comply with, or cause the applicable contractor to comply with,
all applicable workers' compensation laws. The insurance required by this
clause (a) may be subject to such deductibles and the Lessee may
self-insure with respect to the required coverage to the extent approved in
writing by the Lessor.
(b) Aircraft. With respect to each Aircraft, the Lessee shall procure
or cause to be procured and maintain or cause to be maintained public
liability insurance with respect to such Aircraft, covering both bodily
personal injury and damage to property (as to all Persons, including
employees of the Lessee or the Lessor). Policies covering bodily injury and
property damage shall provide for coverage in an amount which is not less
than the public liability and property damage insurance usually carried
with respect to aircraft similar to such Aircraft by corporations of a
similar size engaged in the same or similar business and similarly situated
with the Lessee and its Affiliates; provided, that such insurance shall at
all times be in an amount not less than $30,000,000 per occurrence.
(c) Other Assets. With respect to any Other Asset other than
Aircraft, the Lessee will carry public liability insurance and property
damage insurance with respect to such Other Asset (i) in amounts which are
not less than the public liability and property damage insurance applicable
to similar assets owned, leased or held by the Lessee and its Affiliates
and (ii) of the types usually carried by corporations engaged in the same
or a similar business, similarly situated with the Lessee and its
Affiliates, and owning or operating similar assets in the state in which
such Other Asset is located and which cover risk of the kind customarily
insured against by such corporations. The insurance required by this clause
(c) may be subject to such deductibles and the Lessee may self-insure with
respect to the required coverage to the extent approved in writing by the
Lessor.
17.2. Hazard and Other Insurance. (a) Property. With respect to each
Property, the Lessee shall keep, or cause to be kept, such Property insured
against loss or damage by fire, earthquake, flood and other risks on terms
and in amounts that are no less favorable than insurance covering other
similar properties owned by the Lessee or its Affiliates and that are in
accordance with normal industry practice, provided that such insurance
shall at all times be in an amount not less than the greater of the Lease
Balance of such Property or the replacement cost thereof. During the
construction of any Improvements the Lessee shall also maintain or cause to
be maintained builders' risk insurance or equivalent coverages. The
insurance required by this Clause (a) may be subject to such deductibles
and the Lessee may self-insure with respect to the required coverage to the
extent approved in writing by the Lessor.
(b) Aircraft. With respect to each Aircraft, the Lessee shall procure
or cause to be procured and maintain or cause to be maintained all risk
aircraft hull insurance with respect to such Aircraft, of the type and in
substantially the amounts usually carried by corporations engaged in the
same or similar business and similarly situated with the Lessee and its
Affiliates; provided that such insurance shall at all times be in an amount
not less than the Lease Balance of such Aircraft at such time.
(c) Other AssetsWith respect to any Other Asset other than Aircraft,
the Lessee will maintain in effect physical damage insurance with respect
to such Other Asset which is of the type usually carried by corporations
engaged in the same or similar business, similarly situated with the Lessee
and its Affiliates, and owning or operating similar equipment and which
covers risk of the kind customarily insured against by such corporations,
and in substantially the amount applicable to similar assets owned, leased
or held by the Lessee and its Affiliates; provided that such insurance
shall at all times be in an amount not less than the aggregate Lease
Balance of all such Other Assets. The insurance required by this clause (c)
may be subject to such deductibles and the Lessee may self-insure with
respect to the required coverage to the extent approved in writing by the
Lessor.
17.3. Insurance Coverage. (a) Upon request the Lessee shall furnish
the Lessor with certificates showing the insurance required under Sections
17.1 and 17.2 to be in effect and naming the Lessor, the Receivable
Purchaser, the Conduits and the Liquidity Providers as additional insureds
with respect to liability coverage (excluding worker's compensation
insurance), and naming the Lessor as loss payee with respect to property
coverage and showing the mortgagee endorsement required by Section 17.3(c)
with respect to such coverage. All such insurance shall be at the sole cost
and expense of the Lessee and shall be maintained with respect to each
Leased Asset from the Acquisition Date thereof through the Expiration Date
therefor. Such certificates shall include a provision for no less than ten
(10) days' advance written notice by the insurer to the Lessor in the event
of cancellation or reduction of such insurance. In addition, the Lessee
shall cause the Lessor, the Receivable Purchaser, the Conduits and the
Liquidity Providers to be named as additional insureds under the liability
policies maintained with respect to the Construction for each Property.
(b) The Lessee agrees that the insurance policy or policies required
by Sections 17.1 and 17.2, shall include an appropriate clause pursuant to
which such policy shall provide that it will not be invalidated should the
Lessee waive, in writing, prior to a loss, any or all rights of recovery
against any party for losses covered by such policy, and that the insurance
in favor of the Lessor and the other additional insureds and their rights
under and interests in said policies shall not be invalidated or reduced by
any act or omission or negligence of the Lessee or any other Person having
any interest in any Leased Asset. The Lessee and the Lessor each hereby
waives any and all rights against the other for loss or damage to or loss
of use of its property to the extent of payments made under its property
insurance so long as such waiver shall not affect its rights to recover
under such insurance.
(c) Except as otherwise permitted by clause (d), all such insurance
shall be written by reputable insurance companies that are financially
sound and solvent and otherwise reasonably appropriate considering the
amount and type of insurance being provided by such companies. Any
insurance company selected by the Lessee which is rated in Best's Insurance
Guide or any successor thereto (or if there be none, an organization having
a similar national reputation) shall have a general policyholder rating of
"A" and a financial rating of at least "VIII" or be otherwise acceptable to
the Lessor. All insurance policies required by Section 17.2 shall include a
standard form mortgagee endorsement in favor of the Lessor.
(d) The Lessor shall not carry separate insurance concurrent in kind
or form or contributing in the event of loss with any insurance required
under this Article XVII except that the Lessor may carry separate liability
insurance so long as (i) the Lessee's insurance is designated as primary
and in no event excess or contributory to any insurance the Lessor may have
in force which would apply to a loss covered under the Lessee's policy and
(ii) each such insurance policy will not cause the Lessee's insurance
required under this Article XVII to be subject to a coinsurance exception
of any kind. Each policy maintained by the Lessee shall specifically
provide that the policy shall be considered primary insurance which shall
apply to any loss or claim before any contribution by any insurance which
the Lessor may have in force.
(e) The Lessee shall pay as they become due all premiums for the
insurance required by Section 17.1 and Section 17.2, and shall renew or
replace each policy prior to the expiration date thereof. Throughout the
Base Term for any Leased Asset, at the time each of the Lessee's insurance
policies is renewed (but in no event less frequently than once each year),
the Lessee shall deliver to the Lessor certificates of insurance evidencing
that all insurance required by this Article XVII with respect to such
Leased Asset is being maintained by the Lessee and is in effect.
(f) All insurance proceeds in respect of any property damage loss or
occurrence for which the proceeds related thereto are (i) less than or
equal to the Threshold Amount, in the absence of the occurrence and
continuance of a Default or Event of Default, shall be adjusted by and paid
to the Lessee for application toward the reconstruction, repair or
refurbishment of the applicable Leased Asset and (ii) greater than the
Threshold Amount, shall be adjusted jointly by the Lessee and the Lessor
(unless a Default or Event of Default has occurred and is continuing, in
which case such proceeds shall be adjusted solely by the Lessor) and held
by the Lessor for application in accordance with Article XVIII hereof.
ARTICLE XVIII
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
18.1. Casualty and Condemnation. (a) Subject to the provisions of
this Article XVIII, if all or a portion of any Leased Asset is damaged or
destroyed in whole or in part by a Casualty or is the subject of a
Condemnation, then (i) in the case of a Casualty where the cost of
restoration of the affected Leased Asset in the reasonable judgment of the
Lessor is (x) less than or equal to the Threshold Amount, any insurance
proceeds payable with respect to such Casualty shall be paid directly to
the Lessee, or if received by the Lessor, shall be paid over to the Lessee
for the reconstruction, refurbishment and repair of such Leased Asset, (y)
greater than the Threshold Amount, any insurance proceeds payable with
respect to such Casualty shall be paid to the Lessor but may be obtained by
the Lessee and used for the purpose of reconstructing, refurbishing and
repairing the affected Leased Asset upon submission to the Lessor of a
Responsible Employee's Certificate to the effect that such Leased Asset can
be fully restored to the condition required under this Lease prior to the
end of the Base Term for such Leased Asset (after giving effect to any
extensions of such Base Term) and as to the cost of such restoration
(accompanied by, in the case of a Leased Asset consisting of Property, an
Architect's certificate as to the foregoing matters) plus a statement as to
the Lessee's affirmative ability to finance such restoration, and upon
receipt of such certificate(s) in form reasonably satisfactory to the
Lessor such amounts shall be made available to the Lessee in the manner
contemplated by the Construction Agency Agreement with respect to
Construction and if the foregoing certificate(s) are not delivered to the
Lessor such proceeds shall be applied toward the payment of the Lease
Balance for such Leased Asset and (ii) in the case of a Condemnation such
award or compensation shall be paid to the Lessor to be applied in its
reasonable discretion to the restoration of the affected Leased Asset or
toward the payment of the Lease Balance; provided, however, that if a
Default or Event of Default shall have occurred and be continuing, such
award, compensation or insurance proceeds shall be paid directly to the
Lessor or, if received by the Lessee, shall be held in trust for the
Lessor, and shall be paid over by the Lessee to the Lessor. If, contrary to
such provision, any such award, compensation or insurance proceeds are paid
to the Lessee rather than to the Lessor, the Lessee hereby agrees to hold
the same in trust for the benefit of the Lessor and to transfer promptly
any such payment to the Lessor. All amounts held by the Lessor when a
Default or Event of Default exists hereunder on account of any award,
compensation or insurance proceeds either paid directly to the Lessor or
turned over to the Lessor shall in its sole discretion either be (i) paid
to the Lessee for the repair of damage caused by such Casualty or
Condemnation in accordance with clause (d) of this Section 18.1, or (ii)
(A) if a Default exits, held by the Lessor until such Default is cured or
becomes an Event of Default or (B) if an Event of Default exists, applied
toward the payment of the Lease Balance of the affected Leased Asset.
(b) The Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or
insurance payment on account of any such Casualty or Condemnation and shall
pay all expenses thereof. At the Lessee's reasonable request, and at the
Lessee's sole cost and expense, the Lessor shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. The Lessor and
the Lessee agree that this Lease shall control the rights of the Lessor and
the Lessee in and to any such award, compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a Casualty or
of an actual, pending or threatened Condemnation of any Leased Asset or any
interest therein, the Lessor or the Lessee, as the case may be, shall give
notice thereof to the other promptly after the receipt of such notice.
(d) If pursuant to this Section 18.1 and Section 19.1 this Lease
shall continue in full force and effect following a Casualty or
Condemnation with respect to any Leased Asset, the Lessee shall, at its
sole cost and expense (and, without limitation, if any award, compensation
or insurance payment is not sufficient to restore such Leased Asset in
accordance with this paragraph, the Lessee shall pay the shortfall),
promptly and diligently repair any damage to such Leased Asset caused by
such Casualty or Condemnation in conformity with the requirements of
Sections 13.1 and 14.1 using, in the case of any Property, the as-built
plans and specifications for such Property (as modified to give effect to
any subsequent Modifications, any Condemnation affecting such Property and
all applicable Requirements of Law) so as to restore such Leased Asset to
at least the same condition, operation, function and value as existed
immediately prior to such Casualty or Condemnation with such Modification
as the Lessee may elect in accordance with Section 14.1. Upon completion of
such restoration, the Lessee shall furnish the Lessor a Responsible
Employee's Certificate and, in the case of any Property, an Architect's
certificate confirming that such restoration has been completed pursuant to
this Lease.
(e) In no event shall a Casualty or Condemnation affect the Lessee's
obligations to pay Rent pursuant to Section 7.1 or to perform its
obligations and pay any amounts due on any Expiration Date or pursuant to
Articles XXII and XXV.
(f) Any Excess Proceeds received by the Lessor in respect of a
Casualty or Condemnation affecting any Leased Asset shall be turned over to
the Lessee upon the full payment of the Lease Balance for such Leased Asset
and all other amounts then due and payable hereunder.
18.2. Environmental Matters. Promptly upon the Lessee's knowledge or
the existence of an Environmental Violation that could materially affect
the value of any Property, the Lessee shall notify the Lessor in writing of
such Environmental Violation. If the cost of remediation of such
Environmental Violation would not exceed the limits set forth in Section
19.1, the Lessee will promptly and diligently undertake any response,
cleanup, remedial or other action required by Applicable Law of the Lessor
or the Lessee to remove, cleanup or mediate such Environmental Violation of
the Lessee's sole cost and expense. If the cost of such remediation would
exceed the limits set forth in Section 19.1, the Lessor may elect to
terminate the Lease with respect to such Property pursuant to Section 19.1
or, alternatively, the Lessor may request that the Lessee undertake any
response, cleanup, remedial or other action required by Applicable Law of
the Lessor or Lessee to remove, clean up or remediate the Environmental
Violation in accordance with the terms of Section 12.3, at the Lessee's
sole cost and expense. If the Lessor does not deliver a Termination Notice
with respect to such Property pursuant to Section 19.1, then the Lessee
shall undertake such response, cleanup, remedial or other action, and the
Lessee shall, upon completion of remedial action by the Lessee, cause to be
prepared by an environmental consultant reasonably acceptable to the Lessor
a report describing the Environmental Violation and the actions taken by
the Lessee (or its agents) in response to such Environmental Violation,
along with a statement by the Lessee that the Environmental Violation has
been remedied to the satisfaction of the Government Authority exercising
jurisdiction, or in compliance in all material respects with applicable
Environmental Law. Nothing in this Section shall reduce or limit the
Lessee's obligations under the indemnity provisions hereof.
18.3. Notice of Environmental Matters. Promptly, but in any event
within thirty (30) days from the date the Lessee has actual knowledge
thereof, the Lessee shall provide to the Lessor written notice of any
pending or threatened claim, action or proceeding involving any
Environmental Law or any Release on or in connection with any Property. All
such notices shall describe in reasonable detail the nature of the claim,
action or proceeding and the Lessee's proposed response thereto. In
addition, the Lessee shall provide to the Lessor, within thirty (30) days
of receipt, copies of all written communications with any Governmental
Authority relating to any Environmental Violation in connection with any
Property. The Lessee shall also promptly provide such detailed reports of
any such environmental claims as may reasonably be requested by the Lessor.
In the event that the Lessor receives written notice of any pending or
threatened claim, action or proceeding involving any Environmental Law or
any Release on or in connection with any Property, the Lessor shall
promptly give notice thereof to the Lessee.
ARTICLE XIX
TERMINATION OF LEASE
19.1. Mandatory Termination upon Certain Events. If, with respect to
any Property, any of:
(i) a Significant Condemnation occurs; or
(ii) an Environmental Violation occurs or is discovered the
cost of remediation of which for the affected Property would exceed
20% of the then effective Lease Balance for such Property, but in no
event less than $5,000,000;
and the Lessor shall have given written notice to the Lessee that
this Lease as to the affected Property is to be terminated as a consequence
of the occurrence of such an event (a "Termination Notice"), then, the
Lessee shall be obligated to purchase the Lessor's interest in such
Property on or prior to the date occurring one hundred eighty (180) days
after the date of the Lessee's receipt of the Termination Notice by paying
the Lessor an amount equal to the Lease Balance therefor on such date of
payment; provided, however, that the Lessor shall not give such notice with
respect to any Environmental Violation if the Lessee (x) promptly submits
an approved corrective action plan for the remediation of such
Environmental Violation to the Lessor, (y) provides reasonable security to
the Lessor for the cost of the such remediation and (z) diligently pursues
such remediation in accordance with such plan.
19.2. Termination Procedures. On the date of the payment by the
Lessee of the Lease Balance for the affected Property in accordance with
the Termination Notice in accordance with Section 19.1 of this Lease, this
Lease shall terminate and, the provisions of Section 25.1 shall be
applicable.
ARTICLE XX
EVENTS OF DEFAULT; REMEDIES
20.1. Events of Default. The occurrence of any one or more of the
following events (whether such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) shall
constitute an "Event of Default":
(a) the Lessee shall fail to make payment of any Base Rent,
Supplemental Rent, Purchase Option Price, Lease Balance or any other
amount payable hereunder within three (3) Business Days after the due
date therefor, including, without limitation, amounts due pursuant to
Section 19.1, 22.1 or 22.2 or Article XXIV;
(b) the Lessee shall fail to maintain insurance as required by
Article XVII of this Lease;
(c) the Lessee shall fail to observe or perform any term,
covenant or condition of the Lessee under this Lease or the other
Operative Documents to which it is party other than those described
in Section 20.1(a) or (b) hereof, and, in each such case, such
failure shall have continued for thirty (30) days after the earlier
of (i) delivery to the Lessee of written notice thereof from the
Lessor or (ii) a Responsible Employee of the Lessee shall have
knowledge that such failure, if not cured, will constitute an Event
of Default;
(d) any representation or warranty made by the Lessee in any of
the Operative Documents to which it is a party shall prove to have
been inaccurate in any material respect at the time made;
(e) any representation or warranty made by the Guarantor in any
of the Operative Documents to which it is a party shall prove to have
been inaccurate in any material respect at the time made;
(f) the Guarantor or any Significant Subsidiary shall commence
a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(g) an involuntary case or other proceeding shall be commenced
against the Guarantor or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period
of 60 days; or an order for relief shall be entered against the
Guarantor or any Significant Subsidiary under the federal bankruptcy
laws as now or hereafter in effect;
(h) an event of default (as defined therein) under the Credit
Agreement occurs, unless (i) such event of default has been waived by
the requisite parties to the Credit Agreement and (ii) the Lessor and
the Liquidity Providers shall have received a pro rata share (based
on the respective commitments of the Lessor, Liquidity Providers and
parties to the Credit Agreement) of any consideration given by the
Guarantor or its Affiliates in connection with obtaining any such
waiver;
(i) a Construction Agency Agreement Event of Default shall
occur, or an Event of Default (as defined therein) shall occur under
any other Operative Document;
(j) the Lessee or the Guarantor shall directly or indirectly
contest the validity of any Operative Document in any manner in any
court of competent jurisdiction or any lien granted by any Operative
Document, or shall repudiate, or purport to discontinue or terminate,
the Construction Agency Agreement, this Lease or the Guaranty or the
Construction Agency Agreement, this Lease or the Guaranty shall cease
to be a legal, valid and binding obligation or shall cease to be in
full force and effect for any reason; or
(k) the Guarantor shall fail to observe or perform any term,
covenant or condition of, or incorporated by reference in, the
Guaranty beyond any grace period applicable thereto (it being agreed
that the Guarantor's failure to perform any obligation of the Lessee
or any covenant incorporated in the Guaranty shall not constitute an
Event of Default until any grace period applicable to the Lessee
under the Operative Documents or to the Guarantor under the Credit
Agreement, as the case may be, shall have expired).
20.2. Remedies. Upon the occurrence of any Event of Default and at
any time thereafter, the Lessor may, so long as such Event of Default is
continuing, do one or more of the following as the Lessor in its sole
discretion shall determine, without limiting any other right or remedy the
Lessor may have on account of such Event of Default (including, without
limitation, the obligation of the Lessee to purchase the Leased Assets as
set forth in Section 22.3):
(a) The Lessor may, by notice to the Lessee terminate this
Lease as of the date specified in such notice; provided, however, (i)
no reletting, reentry or taking of possession of any Leased Asset or
all of the Leased Assets (or any portion thereof) by the Lessor will
be construed as an election on the Lessor's part to terminate this
Lease unless a written notice of such intention is given to the
Lessee, (ii) notwithstanding any reletting, reentry or taking of
possession, the Lessor may at any time thereafter elect to terminate
this Lease for a continuing Event of Default and (iii) no act or
thing done by the Lessor or any of its agents, representatives or
employees and no agreement accepting a surrender of the Leased Asset
shall be valid unless the same be made in writing and executed by the
Lessor;
(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return any Leased Asset
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of Section 13.2
hereof as if the Leased Asset were being returned at the end of the
Base Term, and the Lessor shall not be liable for the reimbursement
of the Lessee for any costs and expenses incurred by the Lessee in
connection therewith and (ii) without prejudice to any other remedy
which the Lessor may have for possession of any Leased Asset, and to
the extent and in the manner permitted by Applicable Law, enter upon
such Leased Asset and take immediate possession of (to the exclusion
of the Lessee) such Leased Asset or any part thereof and expel or
remove the Lessee and any other Person who may be occupying such
Leased Asset, by summary proceedings or otherwise, all without
liability to the Lessee for or by reason of such entry or taking of
possession, whether for the restoration of damage to property caused
by such taking or otherwise and, in addition to the Lessor's other
damages, the Lessee shall be responsible for all costs and expenses
incurred by the Lessor in connection with any reletting, including,
without limitation, reasonable brokers' fees and all reasonable costs
of any alterations or repairs made by the Lessor;
(c) The Lessor may (i) sell all or any part of one or more
Leased Assets at public sale free and clear of any rights of the
Lessee and without any duty to account to the Lessee with respect to
such action or inaction or any proceeds in which event the Lessee's
obligation to pay Capitalized Interest or Base Rent hereunder for
periods commencing after the date of such sale shall be terminated or
proportionately reduced, as the case may be; and (ii) if the Lessor
shall so elect, demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (the
parties agreeing that the Lessor's actual damages would be difficult
to predict, but the aforementioned liquidated damages represent a
reasonable approximation of such amount), an amount equal to (A) the
excess, if any, of (1) the Lease Balance calculated as of the date of
such sale (including all Rent due and unpaid to and including such
date), over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by the Lessor incident to
such conveyance, including, without limitation, repossession costs,
brokerage commissions, prorations, transfer taxes, reasonable fees
and expenses for counsel, title insurance fees, survey costs,
recording fees, and any repair costs); plus (B) interest at the
Overdue Rate on the foregoing amount from such date until the date of
payment;
(d) The Lessor may, at its option, elect not to terminate this
Lease and continue to collect all Base Rent, Supplemental Rent, and
all other amounts due the Lessor (together with all costs of
collection) and enforce the Lessee's obligations under this Lease as
and when the same become due, or are to be performed, and at the
option of the Lessor, upon any abandonment of any Leased Asset by the
Lessee or re-entry of same by the Lessor, the Lessor may, in its sole
and absolute discretion, elect not to terminate this Lease and may
make the necessary repairs in order to relet any Leased Asset, and
relet any Leased Asset or any part thereof for such term or terms
(which may be for a term extending beyond the Base Term of this
Lease) and at such rental or rentals and upon such other terms and
conditions as the Lessor in its reasonable discretion may deem
advisable; and upon each such reletting all rentals actually received
by the Lessor from such reletting shall be applied to the Lessee's
obligations hereunder and the other Operative Documents in such
order, proportion and priority as the Lessor may elect in the
Lessor's sole and absolute discretion. If such rentals received from
such reletting during any period are less than the Rent with respect
to such Leased Asset to be paid during that period by the Lessee
hereunder, the Lessee shall pay any deficiency, as calculated by the
Lessor, to the Lessor on the next Payment Date;
(e) Unless all of the Leased Assets have been sold in their
entirety, the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights
under paragraph (b), (c) or (d) of this Section 20.2 with respect to
the Leased Assets or portions thereof, demand, by written notice to
the Lessee specifying a date not earlier than ten (10) days after the
date of such notice, that the Lessee purchase, on such date, all
unsold Leased Assets (or the remaining portion thereof) in accordance
with the provisions of Article XXII; provided, however, that no such
written notice shall be required upon the occurrence of any Event of
Default in clause (f) or (g) of Section 20.1;
(f) The Lessor may exercise any other right or remedy that may
be available to it under Applicable Law, or proceed by appropriate
court action (legal or equitable) to enforce the terms hereof or to
recover damages for the breach hereof. Separate suits may be brought
to collect any such damages for any period(s), and such suits shall
not in any manner prejudice the Lessor's right to collect any such
damages for any subsequent period(s), or the Lessor may defer any
such right to suit until after the expiration of the Base Term, in
which event such right to suit shall be deemed not to have accrued
until the expiration of the Base Term;
(g) To the maximum extent permitted by Applicable Law, the
Lessee hereby waives the benefit of any appraisement, valuation,
stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale of
any Leased Asset or any interest therein;
(h) The Lessor shall be entitled to enforce payment of the
indebtedness and performance of the obligations secured hereby and to
exercise all rights and powers under this instrument or under any of
the other Operative Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the obligations
secured hereby may now or hereafter be otherwise secured, whether by
mortgage, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall
prejudice or in any manner affect the Lessor's right to realize upon
or enforce any other security now or hereafter held by the Lessor, it
being agreed that the Lessor shall be entitled to enforce this
instrument and any other security now or hereafter held by the Lessor
in such order and manner as the Lessor may determine in its absolute
discretion. No remedy herein conferred upon or reserved to the Lessor
is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy
given by any of the Operative Documents to the Lessor or to which it
may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed
expedient by the Lessor. In no event shall the Lessor, in the
exercise of the remedies provided in this instrument (including,
without limitation, in connection with the assignment of rents to
Lessor, or the appointment of a receiver and the entry of such
receiver on to all or any part of the Leased Assets), be deemed a
"mortgagee in possession," and the Lessor shall not in any way be
made liable for any act, either of commission or omission, in
connection with the exercise of such remedies; or
(i) An action of mortgage foreclosure as now provided or
hereafter prescribed by law, may forthwith be commenced and
prosecuted to judgment, execution and sale, for the collection of the
whole amount of such Lease Balance, together with all fees, costs and
expenses of such proceedings, including a reasonable attorney's fees.
And all errors in such proceedings, together with any stays of or
exemptions from execution, or extensions of time of payment, which
may be given by any Applicable Law now in force, or which may be
enacted hereafter, are hereby forever waived and released.
If, pursuant to the exercise by the Lessor of its remedies pursuant to
this Section 20.2, the Lease Balance, all other amounts due and owing
from the Lessee under this Lease and the other Operative Documents have
been paid in full, the Lessor shall remit to the Lessee any excess
amounts received by the Lessor.
20.3. Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 20.2, the Lessee waives, to the fullest extent
permitted by law, (a) any notice of re-entry or the institution of legal
proceedings to obtain re-entry or possession; (b) any right of redemption,
re-entry or repossession; (c) the benefit of any laws now or hereafter in
force exempting property from liability for rent or for debt or limiting
the Lessor with respect to the election of remedies; and (d) any other
rights which might otherwise limit or modify any of the Lessor's rights or
remedies under this Article XX.
20.4. Power of Sale and Foreclosure. In addition to any other rights
herein, Lessor shall upon the occurrence of any Event of Default have the
option to exercise its rights under each Mortgage executed in connection
herewith, pursuant to which the trustee thereunder has the POWER OF SALE.
ARTICLE XXI
ASSIGNMENT
21.1. Assignment by Lessor. The Lessor may not assign, sell or
transfer all or any part of its rights and obligations hereunder or under
the other Operative Documents or the Leased Assets; provided, however, that
(i) the Lessor may sell Purchaser Interests to the Receivable Purchaser and
(ii) with the consent of the Lessee, the Conduits and the Liquidity
Providers, which consent shall not be unreasonably withheld, the Lessor may
assign, sell or transfer all or any part of such rights and obligations or
the Leased Assets to any financial institution, provided that the Lessor is
not thereby released from its obligations hereunder.
21.2. Assignment by Lessee. The Lessee may not assign this Lease or
any of its rights or obligations hereunder in whole or in part to any
Person without the consent of the Lessor; provided, however, that the
Lessee may assign all (and not less than all) of its rights hereunder
without such consent to one or more of its Affiliates so long as the Lessee
remains fully liable for all of the obligations of the "Lessee" hereunder
and under the other Operative Documents.
ARTICLE XXII
PURCHASE PROVISIONS
22.1. Purchase Option. Provided that the Lessee shall not have given
notice of its intention to exercise the Remarketing Option, the Lessee
shall have the option (exercisable by giving the Lessor irrevocable written
notice (the "Purchase Notice") of the Lessee's election to exercise such
option) to purchase all of the Leased Assets under any Lease Supplement
(unless provisions with respect to joinder of purchase options for the
Leased Assets under more than one Lease Supplement are set forth in a Lease
Supplement, in which case such exercise must comply with such provisions)
on any Scheduled Payment Date specified in such Purchase Notice at a price
equal to the Lease Balance for such Leased Assets (the "Purchase Option
Price"). The Lessee shall deliver the Purchase Notice to the Lessor not
less than thirty (30) days prior to such purchase. If the Lessee exercises
its option to purchase one or more Leased Assets pursuant to this Section
22.1 (the "Purchase Option"), the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
applicable Leased Assets as of the date specified in the Purchase Notice
upon receipt of the Purchase Option Price in accordance with Section
25.1(a). The Lessee may designate, in a notice given to the Lessor not less
than ten (10) Business Days prior to the closing of such purchases (time
being of the essence), the transferee or transferees to whom the conveyance
shall be made (if other than to the Lessee), in which case such conveyance
shall (subject to the terms and conditions set forth herein) be made to
such designee; provided, however, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially,
from any of its obligations under this Lease, including, without
limitation, the obligation to pay the Lessor the Lease Balance on the
applicable Expiration Date.
22.2. Acceleration of Purchase Obligation. (a) The Lessee shall be
obligated to purchase for an amount equal to the Lease Balance the Lessor's
interest in the Leased Assets (notwithstanding any prior election to
exercise its Purchase Option pursuant to Section 22.1) (i) automatically
and without notice upon the occurrence of any Event of Default specified in
clause (f) or (g) of Section 20.1 and (ii) as provided for at Section
20.2(e) immediately upon written demand of the Lessor upon the occurrence
of any other Event of Default.
(b) The Lessee shall be obligated to purchase the Lessor's interest
in the Leased Assets for an amount equal to the Lease Balance immediately
upon written demand of the Lessor at any time during the term when (i)
subject to Section 21.1, the Lessor ceases to have title as contemplated by
Section 15.1 or (ii) any related Security Document (other than this Lease)
to which the Lessee is a party shall cease to be in full force and effect,
or shall cease to give the Lessor the Liens, rights, powers and privileges
purported to be created thereby.
(c) Any purchase under this Section 22.2 shall be in accordance with
Section 25.1(a).
22.3. Purchase of Unimproved Land. Provided that no Default or Event
of Default has occurred and is continuing, the Lessee shall have the option
(exercisable by giving the Lessor irrevocable written notice of the
Lessee's exercise of such option) to purchase any unimproved portion of any
Land (and any related easements for utilities and access to be specified at
such time) not necessary or desirable for operations of the Improvements
constructed or to be constructed on such Land on any Scheduled Payment Date
specified in such notice at a price equal to the Fair Market Sales Value,
as determined by an Appraisal, of such unimproved portion and such
easements. The Lessee shall give such notice to the Lessor not less than
thirty (30) days prior to such purchase. If the Lessee exercises its option
pursuant to this Section 22.3, the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
applicable unimproved portion of Land and grant the related easements as of
the date specified in the Lessee's notice under procedures analogous to
those set forth in Section 25.1(a). The purchase price paid by the Lessee
shall be applied to reduce the Lease Balance for the related Property.
ARTICLE XXIII
RENEWAL TERMS
23.1. Renewal. (a) Subject to the conditions set forth herein, and
unless otherwise specified in the Lease Supplement applicable to any Leased
Assets, the Lessee shall have the option (the "Renewal Option"), to extend
the Base Term for such Leased Assets for up to three (3) additional
one-year periods (each, a "Renewal Term"), with each such Renewal Term to
commence on the first day following the Expiration Date then in effect. The
Renewal Option with respect to each Renewal Term shall automatically be
effective upon satisfaction of each of the following conditions:
(A) the Lessor and each Liquidity Provider shall have consented
to the renewal of the Lease after receipt of Lessee's request
therefor delivered to the Lessor and the Liquidity Agent not later
than ninety (90) days prior to each of the fourth, fifth and sixth
anniversaries of the Closing Date,
(B) (i) no Event of Default under this Lease shall have
occurred and be continuing, and (ii) by exercise of such Renewal
Option, the Lessee shall be deemed to represent to the Lessor as to
the matters set forth in clause (i) of this condition (B), and
(C) the Lessee shall not have exercised the Remarketing Option
or the Purchase Option for such Leased Assets under this Lease.
(b) Each extension of this Lease for a Renewal Term shall be subject
to this Lease. Each Renewal Term shall cause the remaining Base Term of
relevant Leased Assets to be extended by one additional year from the
Expiration Date in effect immediately prior to such extension; thus, if
this Lease is extended on each of the anniversaries referred to above, the
term of this Lease shall be for ten (10) years; provided, however, that in
no event shall the Base Term as extended by any Renewal Term extend beyond
the date identified in the applicable Lease Supplement.
(c) In the event that the Lessor and each Liquidity Provider have not
agreed to extend this Lease at least fifteen (15) days prior to each
applicable anniversary date, the Lessee's request for extension shall be
deemed to have been rejected.
ARTICLE XXIV
REMARKETING OPTION
24.1. Option to Remarket. Subject to the fulfillment of each of the
conditions set forth in this Section 24.1, the Lessee shall have the option
(the "Remarketing Option") to market and complete the sale of Lessor's
interest in one or more Leased Assets for the Lessor.
The Lessee's effective exercise and consummation of the Remarketing
Option as to one or more Leased Assets shall be subject to the due and
timely fulfillment of each of the following provisions as to such Leased
Assets as of the dates set forth below.
(a) Not later than six (6) months prior to the Expiration Date,
the Lessee shall give to the Lessor written notice of the Lessee's
exercise of the Remarketing Option under this Lease, which exercise
shall be irrevocable.
(b) Not later than one hundred twenty (120) days prior to the
Expiration Date, the Lessee shall deliver to the Lessor an
Environmental Audit for each Property included in such Leased Assets.
Such Environmental Audit shall be prepared by an environmental
consultant selected by the Lessee and approved in advance by the
Lessor and shall contain conclusions reasonably satisfactory to the
Lessor as to the environmental status of such Property. If any such
Environmental Audit indicates any exceptions, the Lessee shall have
also delivered a Phase Two environmental assessment by such
environmental consultant prior to the Expiration Date showing the
completion of the remedying of such exceptions in compliance with
Applicable Law.
(c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, no Event of Default
shall exist, and on the Expiration Date, no Event of Default or
Default shall exist. Any Permitted Liens (other than Lessor Liens) on
each Leased Asset that were contested by the Lessee shall have been
removed on or before the Expiration Date.
(d) The Improvements on each Property included in such Leased
Assets shall have been constructed in accordance with the Plans and
Specifications and shall have achieved Substantial Completion on or
before the date of the Lessee's notice to the Lessor of the Lessee's
exercise of the Remarketing Option. The Lessee shall have completed
in all material respects all Modifications, restoration and
rebuilding of such Leased Assets pursuant to Section 14.1 and 18.1
(as the case may be) and shall have fulfilled in all material
respects all of the conditions and requirements in connection
therewith pursuant to said Sections, in each case by the date of the
Lessee's notice to the Lessor of the Lessee's exercise of the
Remarketing Option (time being of the essence), regardless of whether
the same shall be within the Lessee's control. The Lessee shall have
also paid the cost of all Modifications commenced prior to the
Expiration Date. The Lessee shall not have been excused pursuant to
Section 16.1 from complying with any Applicable Law that involved the
extension of the ultimate imposition of such Applicable Law beyond
the last day of the Base Term.
(e) During the Marketing Period, the Lessee shall use best
efforts, in such manner as the Lessee shall reasonably determine, to
sell the Lessor's interest in the Leased Assets and will attempt to
obtain the highest purchase price therefor and for not less than the
Fair Market Sales Value of all of the Leased Assets. The Lessee will
be responsible for hiring brokers and making the Leased Assets
available for inspection by prospective purchasers. The Lessee shall
promptly upon request permit inspection of the Leased Assets and any
maintenance records relating to the Leased Assets by the Lessor and
any potential purchasers, and shall otherwise do all things necessary
to sell and deliver possession of the Leased Assets to any purchaser.
All such marketing of the Leased Assets shall be at the Lessee's sole
expense. The Lessee's agency under this clause shall, for the first
three months of the Marketing Period, be on an exclusive basis. In
the event the Lessee is unable to procure during such period a bona
fide bid from a non-Affiliated Person with demonstrable financial
capacity to consummate such bid for any Leased Asset, from and after
such third month, the agency hereunder shall be on a non-exclusive
basis.
(f) The Lessee shall submit all bids to the Lessor and the
Lessor will have the right to review the same and the right to submit
any one or more bids. All bids shall be on an all-cash basis unless
the Lessor shall otherwise agree in its sole discretion. No such
purchaser shall be the Lessee or an Affiliate of the Lessee. The
written offer must specify the Expiration Date as the closing date
unless the Lessor shall otherwise agree in its sole discretion.
(g) In connection with any such sale of Lessor's interest in
the Leased Assets, the Lessee will provide to the purchaser all
customary "seller's" indemnities, representations and warranties
regarding absence of Liens (except Lessor Liens) and the condition of
such Leased Assets, including, without limitation, an environmental
indemnity for any Property to the extent the same are required by the
purchaser. The Lessee shall have obtained, at its cost and expense,
all required governmental and regulatory consents and approvals and
shall have made all filings as required by Applicable Law in order to
carry out and complete the transfer of the Leased Assets. As to the
Lessor, any such sale of Lessor's interest in the Leased Assets shall
be made on an "as is, with all faults" basis without representation
or warranty by the Lessor other than the absence of Lessor Liens. Any
agreement as to such sale shall be made subject to the Lessor's
rights hereunder.
(h) The Lessee shall pay directly, and not from the sale
proceeds, all prorations, credits, costs and expenses of the sale of
Lessor's interest in the Leased Assets, whether incurred by the
Lessor or the Lessee, including without limitation, the cost of all
title insurance, surveys, environmental reports, appraisals, transfer
taxes, the Lessor's reasonable attorneys' fees, the Lessee's
attorneys' fees, commissions, escrow fees, recording fees, and all
applicable documentary and other transfer taxes.
(i) The Lessee shall pay to the Lessor on or prior to the
Expiration Date (or to such other Person as the Lessor shall notify
the Lessee in writing) an amount equal to the Contingent Rental
Adjustment for such Leased Assets, plus all Base Rent and all other
amounts hereunder which have accrued or will accrue with respect
thereto prior to or as of the Expiration Date, in the type of funds
specified in Section 7.5 hereof.
(j) The purchase of Lessor's interest in such Leased Assets
shall be consummated on the Expiration Date and the Gross Proceeds of
the sale of the Leased Assets shall be paid directly to the Lessor.
The Lessor shall remit to the Lessee from Gross Proceeds the
documented expenses incurred by the Lessee under clause (h) hereof in
connection with such sale. If the remaining Gross Proceeds plus the
aggregate Contingent Rental Adjustment received by Lessor, exceeds
the Lease Balance for such Leased Assets as of such date, then the
excess shall be paid to the Lessee on the Expiration Date.
Except as provided in the next sentence hereof or as may be otherwise
provided in a Lease Supplement, if one or more of the foregoing provisions
shall not be fulfilled as of the date set forth above with respect to the
Leased Assets under any Lease Supplement, then the Lessor shall declare by
written notice to the Lessee the Remarketing Option to be null and void
(whether or not it has been theretofore exercised by the Lessee), in which
event all of the Lessee's rights under this Section 24.1 shall immediately
terminate and the Lessee shall be obligated to purchase Lessor's interest
in such Leased Assets as if it had exercised its option under Section 22.1
on the Expiration Date. Notwithstanding the foregoing, the Lessee shall not
be required to purchase Lessor's interest in such Leased Assets pursuant to
the preceding sentence if Lessor's interest in such Leased Assets is not
sold on or prior to the Expiration Date and the Lessee has otherwise
fulfilled all of its obligations under clauses (a) through (i) hereof.
Except as expressly set forth herein, the Lessee shall have no right,
power or authority to bind the Lessor in connection with any proposed sale
of Lessor's interest in the any Leased Asset.
In the event that the sale of any Leased Asset is not consummated on
the Expiration Date, but such sale is consummated any time thereafter, the
Lessor shall remit to the Lessee, promptly after the consummation of the
sale of the such Leased Asset, any excess remaining after deducting the
then outstanding Lease Balance plus the Imputed Equity Return thereon
accruing from and after the Expiration Date from the Gross Proceeds.
24.2. Certain Obligations Continue. During the Marketing Period, the
obligation of the Lessee to pay Rent shall continue undiminished until
payment in full to the Lessor of the Contingent Rental Adjustment and all
other amounts due to the Lessor with respect to the Leased Assets under
each Lease Supplement under the Operative Documents to which the Lessee is
a party. The Lessor shall have the right, but shall be under no duty, to
solicit bids, to inquire into the efforts of the Lessee to obtain bids or
otherwise to take action in connection with any such sale of Lessor's
interest in the Leased Assets, other than as expressly provided in this
Article XXIV.
ARTICLE XXV
PROCEDURES RELATING TO PURCHASE OR REMARKETING
25.1. Provisions Relating to the Purchase and Conveyance Upon
Remarketing. (a) In connection with the Lessee's purchase of the Leased
Assets under any Lease Supplement pursuant to Section 22.1 or 22.2, or in
connection with a purchase of Lessor's interest in any Leased Asset under
Article XIX or the payment of all amounts due under Section 5.1 of the
Construction Agency Agreement:
(i) the Lessee shall pay the amounts set forth in Section 22.1,
Section 22.2, Article XIX, Section 5.1 of the Construction Agency
Agreement, as applicable, together with all accrued Rent relating to
such Leased Assets and any other amount then due and payable by the
Lessee to the Lessor under this Lease or the other Operative
Documents;
(ii) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a special
warranty deed with respect to the Improvements, a special warranty
deed or release of Ground Lease with respect to the Land, a bill of
sale with respect to the Equipment or any other Leased Asset and an
assignment of the Lessor's entire interest in the Leased Assets being
sold (which shall include an assignment of all of the Lessor's right,
title and interest in and to any Net Proceeds not previously received
by the Lessor and, if applicable, a termination notice pursuant to
the Ground Lease, in each case in recordable form and otherwise in
conformity with local custom and free and clear of the Lien of the
Mortgage and any Lessor Liens attributable to the Lessor;
(iii) the Leased Assets being sold shall be conveyed to the
Lessee "AS IS" and in their then present physical condition; and
(iv) the Lessor shall execute and deliver to Lessee and the
Lessee's title insurance company an affidavit as to the absence of
Lessor Liens.
(b) If the Lessee properly exercises the Remarketing Option with
respect to the Leased Assets under any Lease Supplement, then the Lessee
shall, on the Expiration Date, and at its own cost, transfer possession of
the Leased Assets to the Lessor or the independent purchaser(s) thereof, as
the case may be, in each case by surrendering the same into the possession
of the Lessor or such purchaser(s), as the case may be, free and clear of
all Liens other than Lessor Liens, in good condition (as modified by
Modifications permitted by this Lease), ordinary wear and tear excepted,
and in compliance with Applicable Law. The Lessee shall, on and within a
reasonable time before and up to one year after the Expiration Date,
cooperate reasonably with the Lessor and the independent purchaser(s) of
Lessor's interest in the Leased Assets in order to facilitate the purchase
by such purchaser's) of Lessor's interest in the Leased Assets, which
cooperation shall include the following, all of which the Lessee shall do
on or before the Expiration Date or as soon thereafter as is reasonably
practicable: providing copies of all books and records regarding the
maintenance and ownership of the Leased Assets and all data and technical
and all other information relating thereto, providing a current copy of the
Plans and Specifications for the Properties, granting or assigning all
licenses (to the extent such licenses are assignable under Applicable Law)
necessary for the operation and maintenance of the Leased Assets and
cooperating reasonably in seeking and obtaining all necessary Governmental
Action. The obligations of the Lessee under this paragraph shall survive
the expiration or termination of this Lease.
ARTICLE XXVI
INDEMNIFICATION
26.1. General Indemnification. The Lessee agrees, whether or not any
of the transactions contemplated hereby shall be consummated, to assume
liability for, and to indemnify, protect, defend, save and keep harmless
each Indemnitee from and against, any and all Claims that may be imposed
on, incurred by or asserted against such Indemnitee (whether because of
action or omission by such Indemnitee or otherwise), whether or not such
Indemnitee shall also be indemnified as to any such Claim by any other
Person and whether or not such Claim arises or accrues prior to the Closing
Date or after the Expiration Date, in any way relating to or arising out
of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in
respect thereof entered into or acknowledged by the Lessee;
(b) the Leased Assets or any part thereof or interest therein;
(c) the purchase, design, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance,
rejection, ownership, management, possession, operation, rental,
lease, sublease, repossession, maintenance, repair, alteration,
modification, addition or substitution, storage, transfer of title,
redelivery, use, financing, refinancing, disposition, operation,
condition, sale (including, without limitation, any sale pursuant to
any provision hereof), return or other disposition of all or any part
or any interest in any Leased Asset or the imposition of any Lien (or
incurring of any liability to refund or pay over any amount as a
result of any Lien) thereon, including, without limitation: (1)
Claims or penalties arising from any violation of law or in tort
(strict liability or otherwise), (2) latent or other defects, whether
or not discoverable, (3) any Claim based upon a violation or alleged
violation of the terms of any restriction, easement, condition or
covenant or other matter affecting title to any Leased Asset, (4) the
making of any Modifications in violation of any standards imposed by
any insurance policies required to be maintained by the Lessee
pursuant to this Lease which are in effect at any time with respect
to any Leased Asset or any part thereof, (5) any Claim for patent,
trademark or copyright infringement, (6) Claims which would otherwise
be covered by insurance policies of the Lessee, as required by
Article XVII, and (7) Claims arising from any public improvements
with respect to any Property resulting in any charge or special
assessments being levied against the Property or any plans to widen,
modify or realign any street or highway adjacent to any Property, or
any Claim for utility "tap-in" fees;
(d) the breach by the Lessee of any covenant, representation or
warranty made by it or deemed made by it in any Operative Document or
any certificate required to be delivered by any Operative Document;
(e) the retaining or employment of any broker, finder or
financial advisor by the Lessee to act on its behalf in connection
with the transactions contemplated hereby;
(f) the existence of any Lien on or with respect to any Leased
Asset, any Capitalized Interest or Base Rent or Supplemental Rent,
title thereto, or any interest therein including any Liens which
arise out of the possession, use, occupancy, construction, repair or
rebuilding of any Leased Asset or by reason of labor or materials
furnished or claimed to have been furnished to the Lessee, or any of
its contractors or agents or by reason of the financing of any
personalty or equipment purchased or leased by the Lessee or
Modifications constructed by the Lessee, except Lessor Liens and
Liens in favor of the Lessor; or
(g) subject to the accuracy of Lessor's representation
set forth in Section 6.1(a), the transactions contemplated by this
Lease or by any other Operative Document, in respect of the
application of Parts 4 and 5 of Subtitle B of Title I of ERISA and
any prohibited transaction described in Section 4975 (c) of the Code;
provided, however, the Lessee shall not be required to indemnify any
Indemnitee under this Section 26.1 for any of the following: (1) any
Claim to the extent resulting from the willful misconduct or gross
negligence of such Indemnitee (it being understood that the Lessee shall
be required to indemnify an Indemnitee even if the ordinary (but not
gross) negligence of such Indemnitee caused or contributed to such
Claim) or the breach of any representation, warranty or covenant of such
Indemnitee set forth in any Operative Document, (2) any Claim resulting
from Lessor Liens which the Lessor is responsible for discharging under
the Operative Documents, (3) any Claim to the extent attributable to
acts or events occurring after the expiration of the Base Term or the
return or remarketing of any Leased Asset so long as the Lessor is not
exercising remedies against the Lessee in respect of the Operative
Documents, (4) any Claim arising from a breach or alleged breach by the
Lessor of any agreement entered into in connection with the assignment
or participation of Rent and (5) any Claim arising from the Lessor's or
any other Indemnitee's violation of any state or federal law or
regulation relating to banking or the offer or sale of securities. It is
expressly understood and agreed that the indemnity provided for herein
shall survive the expiration or termination of and shall be separate and
independent from any remedy under this Lease or any other Operative
Document. Without limiting the express rights of any Indemnitee under
this Section 26.1, this Section 26.1 shall be construed as an indemnity
only and not a guaranty of residual value of any Leased Asset.
26.2. Environmental Indemnity. Without limitation of the other
provisions of this Article XXVI, the Lessee hereby agrees to indemnify,
hold harmless and defend each Indemnitee from and against any and all
claims (including without limitation third party claims for personal injury
or real or personal property damage), losses (including but not limited to,
to the extent the Lease Balance has not been fully paid, any loss of value
of any Property), damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings (including informal proceedings)
and orders, judgments, remedial action, requirements, enforcement actions
of any kind, and all reasonable and documented costs and expenses incurred
in connection therewith (including but not limited to reasonable and
documented attorneys' and/or paralegals' fees and expenses), including, but
not limited to, all costs incurred in connection with any investigation or
monitoring of site conditions or any clean-up, remedial, removal or
restoration work by any federal, state or local government agency, arising
in whole or in part, out of
(a) the presence on or under any Property of any Hazardous
Materials, or any releases or discharges of any Hazardous Materials
on, under, from or onto any Property for which any Indemnitee or
Lessee may be legally liable,
(b) any activity for which any Indemnitee or Lessee may be
legally liable, including, without limitation, construction, carried
on or undertaken on or off the Property, and whether by the Lessee or
any predecessor in title or any employees, agents, contractors or
subcontractors of the Lessee or any predecessor in title, or any
other Persons (including such Indemnitee), in connection with the
handling, treatment, removal, storage, decontamination, clean-up,
transport or disposal of any Hazardous Materials that at any time are
located or present on or under or that at any time migrate, flow,
percolate, diffuse or in any way move onto or under any Property,
(c) loss of or damage to any property or the environment
(including, without limitation, clean-up costs, response costs,
remediation and removal costs, cost of corrective action, costs of
financial assurance, fines and penalties and natural resource
damages), or death or injury to any Person, and all expenses
associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by or
under Environmental Laws for which any Indemnitee or Lessee may be
legally liable,
(d) any claim concerning any Indemnitee's or Lessee's lack of
compliance with Environmental Laws, or any act or omission by any
Indemnitee, the Lessee or any of their agents, employees or
contractors causing an environmental condition that requires
remediation or would allow any Governmental Authority to record a
Lien on the land records, or
(e) any residual contamination on or under the Land, or
affecting any natural resources, and to any contamination of any
property or natural resources arising in connection with the
generation, use, handling, storage, transport or disposal of any such
Hazardous Materials, and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable
laws, regulations, codes and ordinances for which any Indemnitee or
Lessee may be legally liable;
provided, however, the Lessee shall not be required to indemnify any
Indemnitee under this Section 26.2 for (1) any Claim to the extent
resulting from the willful misconduct or gross negligence of such
Indemnitee (it being understood that the Lessee shall be required to
indemnify an Indemnitee even if the ordinary (but not gross) negligence
of such Indemnitee caused or contributed to such Claim) or (2) any Claim
to the extent attributable to acts or events occurring after the
expiration of the Base Term or the return or remarketing of the
Properties so long as the Lessor is not exercising remedies against the
Lessee in respect of the Operative Documents. It is expressly understood
and agreed that the indemnity provided for herein shall survive the
expiration or termination of and shall be separate and independent from
any remedy under this Lease or any other Operative Document.
26.3. Proceedings in Respect of Claims. With respect to any amount
that the Lessee is requested by an Indemnitee to pay by reason of Section
26.1 or 26.2, such Indemnitee shall, if so requested by the Lessee and
prior to any payment, submit such additional information to the Lessee as
the Lessee may reasonably request and which is in the possession of such
Indemnitee to substantiate properly the requested payment.
In case any action, suit or proceeding shall be brought against any
Indemnitee, such Indemnitee shall notify the Lessee of the commencement
thereof, and the Lessee shall be entitled, at its expense, to participate
in, and, to the extent that the Lessee desires to, assume and control the
defense thereof; provided, however, that the Lessee shall have acknowledged
in writing its obligation to fully indemnify such Indemnitee in respect of
such action, suit or proceeding, and, the Lessee shall keep such Indemnitee
fully apprised of the status of such action, suit or proceeding and shall
provide such Indemnitee with all information with respect to such action,
suit or proceeding as such Indemnitee shall reasonably request, and
provided, further, that the Lessee shall not be entitled to assume and
control the defense of any such action, suit or proceeding if and to the
extent that, (A) in the reasonable opinion of such Indemnitee, (x) such
action, suit or proceeding involves any risk of imposition of criminal
liability or any risk of imposition of material civil liability on such
Indemnitee beyond that for which the Indemnitee is jointly and severally
liable with the Lessor or will involve a material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on any Leased Asset or any part thereof unless, in the case of civil
liability, the Lessee shall have posted a bond or other security
satisfactory to the relevant Indemnitees in respect to such risk or (y) the
control of such action, suit or proceeding would involve a material actual
conflict of interest, (B) such proceeding involves Claims not fully
indemnified by the Lessee which the Lessee and the Indemnitee have been
unable to sever from the indemnified claim(s), or (C) an Event of Default
has occurred and is continuing. The Indemnitee may participate in a
reasonable manner at its own expense and with its own counsel in any
proceeding conducted by the Lessee in accordance with the foregoing. The
Lessee shall not enter into any settlement or other compromise with respect
to any Claim which is entitled to be indemnified under Section 26.1 or 26.2
without the prior written consent of the Indemnitee which consent shall not
be unreasonably withheld in the case of a money settlement not involving an
admission of liability of such Indemnitee; provided, however, that in the
event that such Indemnitee withholds consent to any settlement or other
compromise, the Lessee shall not be required to indemnify such Indemnitee
under Section 26.1 or 26.2 to the extent that the applicable Claim (x) is
for legal fees and expenses incurred after the date of the proposed
settlement or (y) results in a judgment in excess of such offered money
settlement.
Each Indemnitee shall at the expense of the Lessee supply the Lessee
with such information and documents reasonably requested by the Lessee and
in the possession of such Indemnitee as are necessary or advisable for the
Lessee to participate in any action, suit or proceeding to the extent
permitted by Section 26.1 or 26.2. Unless an Event of Default shall have
occurred and be continuing under Section 20.1(a), (f) or (g) no Indemnitee
shall enter into any settlement or other compromise with respect to any
Claim for which it is entitled to be indemnified under Section 26.1 or 26.2
without the prior written consent of the Lessee, which consent shall not be
unreasonably withheld, unless such Indemnitee waives its right to be
indemnified under Section 26.1 or 26.2 with respect to such Claim.
Upon payment in full of any Claim by the Lessee pursuant to Section
26.1 or 26.2 to or on behalf of an Indemnitee, the Lessee, without any
further action, shall be subrogated to any and all claims that such
Indemnitee may have relating thereto (including claims in respect of
insurance policies maintained by such Indemnitee at its own expense), and
such Indemnitee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents,
instruments and agreements as may be necessary to preserve any such claims
and otherwise cooperate with the Lessee and give such further assurances as
are necessary or advisable to enable the Lessee vigorously to pursue such
claims.
Any amount required to be paid to an Indemnitee pursuant to Section
26.1 or 26.2 shall be paid to such Indemnitee promptly upon receipt of a
written demand therefor from such Indemnitee, accompanied by a written
statement describing in reasonable detail the basis for such indemnity and
the computation of the amount so payable and, if requested by the Lessee,
such determination shall be verified by a nationally recognized independent
accounting firm mutually acceptable to the Lessee and the Indemnitee at the
expense of the Lessee; provided, however, that if the Lessee has assumed
the defense of the related Claim or is paying the costs of the Indemnitee's
defense of the related Claim on an ongoing basis, the Lessee shall not be
required to pay such amount to the applicable Indemnitee until such time as
a judgment is entered with respect to such Claim, the enforcement of which
is not stayed or which judgment is not bonded over, or the Claim is
otherwise settled or lost.
26.4. General Tax Indemnity.
(a) Indemnification. The Lessee agrees to pay and assume
liability for, and to indemnify, protect, defend, save and keep
harmless each Indemnitee from and against, all Impositions.
(b) Contests. If any claim shall be made against any Indemnitee
or if any proceeding shall be commenced against any Indemnitee
(including a written notice of such proceeding) for any Imposition as
to which the Lessee may have an indemnity obligation pursuant to this
Section 26.4, or if any Indemnitee shall reasonably determine that
any Imposition to which the Lessee may have an indemnity obligation
pursuant to this Section 26.4 may be payable, such Indemnitee shall
promptly (and in any event, within thirty (30) days) notify the
Lessee in writing (provided that failure to so notify the Lessee
within thirty (30) days shall not alter such Indemnitee's rights
under this Section 26.4 except to the extent such failure precludes
or materially adversely affects the ability to conduct a contest of
any indemnified Taxes) and shall not take any action with respect to
such claim, proceeding or Imposition without the written consent of
the Lessee (such consent not to be unreasonably withheld or
unreasonably delayed) for thirty (30) days after the receipt of such
notice by the Lessee; provided, however, that in the case of any such
claim or proceeding, if such Indemnitee shall be required by law or
regulation to take action prior to the end of such 30-day period,
such Indemnitee shall in such notice to the Lessee, so inform the
Lessee, and such Indemnitee shall not take any action with respect to
such claim, proceeding or Imposition without the consent of the
Lessee (such consent not to be unreasonably withheld or unreasonably
delayed) for ten (10) days after the receipt of such notice by the
Lessee unless the Indemnitee shall be required by law or regulation
to take action prior to the end of such 10-day period.
The Lessee shall be entitled for a period of thirty (30) days
from receipt of such notice from the Indemnitee (or such shorter
period as the Indemnitee has notified the Lessee is required by law
or regulation for the Indemnitee to commence such contest), to
request in writing that such Indemnitee contest the imposition of
such Tax, at the Lessee's expense. If (x) such contest can be pursued
in the name of the Lessee and independently from any other proceeding
involving a Tax liability of such Indemnitee for which the Lessee has
not agreed to indemnify such Indemnitee, (y) such contest must be
pursued in the name of the Indemnitee, but can be pursued
independently from any other proceeding involving a Tax liability of
such Indemnitee for which the Lessee has not agreed to indemnify such
Indemnitee or (z) the Indemnitee so requests, then the Lessee shall
be permitted to control the contest of such claim, provided that in
the case of a contest described in clause (y), if the Indemnitee
determines in good faith that such contest by the Lessee could have a
material adverse impact on the business or operations of the
Indemnitee and provides a written explanation to the Lessee of such
determination, the Indemnitee may elect to control or reassert
control of the contest, and provided, that by taking control of the
contest, Lessee acknowledges that it is responsible for the
Imposition ultimately determined to be due by reason of such claim,
and provided, further, that in determining the application of clauses
(x) and (y) of the preceding sentence, each Indemnitee shall take any
and all reasonable steps to segregate claims for any Taxes for which
the Lessee indemnifies hereunder from Taxes for which the Lessee is
not obligated to indemnify hereunder, so that the Lessee can control
the contest of the former. In all other claims requested to be
contested by the Lessee, the Indemnitee shall control the contest of
such claim, acting through counsel reasonably acceptable to the
Lessee. In no event shall the Lessee be permitted to contest (or the
Indemnitee required to contest) any claim, (A) if such Indemnitee
provides the Lessee with a legal opinion of counsel reasonably
acceptable to the Lessee that such action, suit or proceeding
involves a risk of imposition of criminal liability or will involve a
material risk of the sale, forfeiture or loss of, or the creation of
any Lien (other than a Permitted Lien) on any Leased Asset or any
part of any thereof unless the Lessee shall have posted and
maintained a bond or other security satisfactory to the relevant
Indemnitee in respect to such risk, (B) if an Event of Default has
occurred and is continuing under Section 20.1(a), (f) or (g) unless
the Lessee shall have posted and maintained a bond or other security
satisfactory to the relevant Indemnitee in respect of the Taxes
subject to such claim and any and all expenses for which the Lessee
is responsible hereunder reasonably foreseeable in connection with
the contest of such claim, (C) unless the Lessee shall have agreed to
pay and shall pay, to such Indemnitee on demand all reasonable
out-of-pocket costs, losses and expenses that such Indemnitee may
incur in connection with contesting such Imposition including all
reasonable legal, accounting and investigatory fees and
disbursements, or (D) if such contest shall involve the payment of
the Tax prior to the contest, unless the Lessee shall provide to the
Indemnitee an interest-free advance in an amount equal to the
Imposition that the Indemnitee is required to pay (with no additional
net after-tax costs to such Indemnitee). In addition, for Indemnitee
controlled contests and claims contested in the name of the
Indemnitee in a public forum, no contest shall be required: (A)
unless the amount of the potential indemnity (taking into account all
similar or logically related claims that have been or could be raised
in any audit involving such Indemnitee for which the Lessee may be
liable to pay an indemnity under this Section 26.4(b)) exceeds
$50,000 and (B) unless, if requested by the Indemnitee, the Lessee
shall have provided to the Indemnitee an opinion of counsel selected
by the Lessee (which may be in-house counsel) (except, in the case of
income taxes indemnified hereunder which shall be an opinion of
independent tax counsel selected by the Indemnitee and reasonably
acceptable to the Lessee) that a reasonable basis exists to contest
such claim. In no event shall an Indemnitee be required to appeal an
adverse judicial determination to the United States Supreme Court.
The party conducting the contest shall consult in good faith
with the other party and its counsel with respect to the contest of
such claim for Taxes (or claim for refund) but the decisions
regarding what actions are to be taken shall be made by the
controlling party in its sole judgement, provided, however, that if
the Indemnitee is the controlling party and the Lessee recommends the
acceptance of a settlement offer made by the relevant Governmental
Authority and such Indemnitee rejects such settlement offer then the
amount for which the Lessee will be required to indemnify such
Indemnitee with respect to the Taxes subject to such offer shall not
exceed the amount which it would have owed if such settlement offer
had been accepted. In addition, the controlling party shall keep the
noncontrolling party reasonably informed as to the progress of the
contest, and shall provide the noncontrolling party with a copy of
(or appropriate excerpts from) any reports or claims issued by the
relevant auditing agents or taxing authority to the controlling party
thereof, in connection with such claim or the contest thereof.
Each Indemnitee shall at the Lessee's expense supply the Lessee
with such information and documents reasonably requested by the
Lessee as are necessary or advisable for the Lessee to participate in
any action, suit or proceeding to the extent permitted by this
Section 26.4(b). No Indemnitee shall enter into any settlement or
other compromise or fail to appeal an adverse ruling with respect to
any claim which is entitled to be indemnified under this Section 26.4
(and with respect to which contest is required under this Section
26.4(b)) without the prior written consent of the Lessee, unless such
Indemnitee waives its right to be indemnified under this Section 26.4
with respect to such claim.
Notwithstanding anything contained herein to the contrary, an
Indemnitee will not be required to contest (and the Lessee shall not
be permitted to contest) a claim with respect to the imposition of
any Tax if such Indemnitee shall waive its right to indemnification
under this Section 26.4 with respect to such claim (and any claim
with respect to such year or any other taxable year the contest of
which is materially adversely affected as a result of such waiver).
(c) Reimbursement for Tax Savings. If (x) an Indemnitee or any
Affiliate thereof actually realizes a deduction, offset, credit or
refund of any Taxes or any other savings or benefit as a result of
any indemnity paid by the Lessee pursuant to this Section 26.4 or (y)
by reason of the incurrence or imposition of any Tax (or the
circumstances or event giving rise thereto) for which an Indemnitee
is indemnified hereunder or any payment made to or for the account of
such Indemnitee by the Lessee pursuant to this Section 26.4 or any
payment made by an Indemnitee to the Lessee by reason of this Section
26.4(c), such Indemnitee at any time actually realizes a reduction in
any Taxes for which the Lessee is not required to indemnify such
Indemnitee pursuant to this Section 26.4, then such Indemnitee shall
promptly pay to the Lessee (xx) the amount of such deduction, offset,
credit, refund, or other savings or benefit together with the amount
of any interest received by such Indemnitee on account of such
deduction, offset, credit, refund or other savings or benefit or (yy)
an amount equal to such reduction in Taxes, as the case may be, in
either case together with an amount equal to any reduced Taxes
payable by such Indemnitee as a result of such payment. Each
Indemnitee agrees to take such actions as the Lessee may reasonably
request (provided in the good faith judgment of the Indemnitee, such
actions would not result in a material adverse effect on the
Indemnitee for which the Indemnitee is not entitled to
indemnification from the Lessee) and to otherwise act in good faith
to claim such refunds and other available Tax benefits, and take such
other actions as may be reasonable to minimize any payment due from
the Lessee pursuant to this Section 26.4 and to maximize the amount
of any Tax savings available to it. The disallowance or reduction of
any credit, refund or other tax savings with respect to which an
Indemnitee has made a payment to the Lessee under this Section
26.4(c) shall be treated as a Tax for which the Lessee is obligated
to indemnify such Indemnitee hereunder without regard to the
exclusions set forth in the definition of Impositions.
(d) Payments. Any Imposition identifiable under this Section
26.4 shall be paid directly when due to the applicable taxing
authority if direct payment is practicable and permitted. If direct
payment to the applicable taxing authority is not permitted or is
otherwise not made, any amount payable to an Indemnitee pursuant to
Section 26.4 shall be paid within thirty (30) days after receipt of a
written demand therefor from such Indemnitee accompanied by a written
statement describing in reasonable detail the amount so payable, but
not before two Business Days prior to the date that the relevant
Taxes are due. Any payments made pursuant to this Section 26.4 shall
be made directly to the Indemnitee entitled thereto or the Lessee, as
the case may be, in immediately available funds at such bank or to
such account as specified by the payee in written directions to the
payor, or, if no such direction shall have been given, by check of
the payor payable to the order of the payee by certified mail,
postage prepaid at its address. Upon the request of any Indemnitee
with respect to a Tax that the Lessee is required to pay, the Lessee
shall furnish to such Indemnitee the original or a certified copy of
a receipt for the Lessee's payment of such Tax or such other evidence
of payment as is reasonably acceptable to such Indemnitee.
(e) Reports. In the case of any report, return or statement
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 26.4 and of which the Lessee has
knowledge, the Lessee shall promptly notify the Indemnitee of such
requirement and, at the Lessee's expense (i) if the Lessee is
permitted (unless otherwise requested by the Indemnitee) by
Applicable Law, timely file such report, return or statement in its
own name or (ii) if such report, return or statement is required to
be in the name of or filed by such Indemnitee or the Indemnitee
otherwise requests that such report, return or statement for filing
by such Indemnitee in such manner as shall be satisfactory to such
Indemnitee and send the same to the Indemnitee for filing no later
than fifteen (15) days prior to the due date therefor. In any case in
which the Indemnitee will file any such report, return or statement,
the Lessee shall, upon written request of such Indemnitee, provide
such Indemnitee with such information as is reasonably necessary to
allow the Indemnitee to file such report, return or statement.
(f) Verification. At the Lessee's request, the amount of any
indemnity payment by the Lessee or any payment by an Indemnitee to
the Lessee pursuant to this Section 26.4 shall be verified and
certified by an independent public accounting firm mutually
acceptable to the Lessee and the Indemnitee. The Indemnitee shall
provide such independent public accounting firm, on a confidential
basis, the requisite financial information. The costs of such
verification shall be borne by the Lessee unless such verification
shall result in an adjustment in the Lessee's favor of the lesser of
(i) $10,000, and (ii) five percent of the payment as computed by the
Indemnitee, in which case such fee shall be paid by the Indemnitee.
In no event shall the Lessee have the right to review the
Indemnitee's tax returns or receive any other confidential
information from the Indemnitee in connection with such verification.
Any information provided to such accountants by any Person shall be
and remain the exclusive property of such Person and shall be deemed
by the parties to be (and the accountants will confirm in writing
that they will treat such information as) the private, proprietary
and confidential property of such Person, and no Person other than
such Person and the accountants shall be entitled thereto and all
such materials shall be returned to such Person. Such accounting firm
shall be requested to make its determination within thirty (30) days
of the Lessee's request for verifications and the computations of the
accounting firm shall be final, binding and conclusive upon the
Lessee and the Indemnitee. The parties agree that the sole
responsibility of the independent public accounting firm shall be to
verify the amount of a payment pursuant to this Lease and that
matters of interpretation of this Lease are not within the scope of
the independent accounting firm's responsibilities.
(g) Tax Ownership. The Lessor represents and warrants that it
will not, prior to the termination, claim ownership of (or any tax
benefits, including depreciation, with respect to) the Leased Assets
for any income tax purposes, it being understood that the Lessee is
and will remain the owner of the Leased Assets for such income tax
purposes until the termination of this Lease. If, notwithstanding the
income tax intentions of the parties as set forth herein, the Lessor
actually receives any income tax deductions, reductions in income tax
or other income tax benefit as a result of any claim for, or
recharacterization requiring such party to take, any tax benefits
attributable to ownership of the Leased Assets for income tax
purposes, the Lessor shall pay to the Lessee the amount of such
income tax savings actually realized by the Lessor (less the amount
of any anticipated increase in income tax which the Lessor determines
is currently payable as a result of such claim or
recharacterization), provided that the Lessee shall agree to
reimburse the Lessor for any subsequent increase in the Lessor's
income taxes resulting from such claim or recharacterization not
taken into account in the payment made to the Lessee, up to the
amount paid to the Lessee by the Lessor. The parties agree that this
Section 26.4(g) is intended to require a payment to the Lessee if and
only if the Lessor shall have actually received an unanticipated tax
savings with respect to the Leased Assets that would not have been
received if the Lessor had advanced funds to the Lessee in the form
of a loan secured by the Leased Assets in an amount equal to the
aggregate amount of Advances made with respect to such Leased Assets.
Nothing in this Section 26.4(g) shall be construed to require the
Lessor to take any affirmative action to realize any tax savings if
in its good faith judgment such action may have a material adverse
affect on the Lessor.
26.5. Funding Losses. If any payment of Base Rent or any portion of a
Lease Balance is made on any day other than the last day of an Interest
Period applicable thereto (other than as a result of the failure of the
Lessor and each Liquidity Provider to act in accordance with the provisions
of the Operative Documents), the Lessee shall reimburse the Lessor, each
Conduit and each Liquidity Provider within fifteen (15) days after demand
for any resulting loss or expense incurred by it, including (without
limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period
after any such payment or conversion or failure to borrow or prepay,
provided that the Lessor, such Conduit and such Liquidity Provider shall
have delivered to the Lessee a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest
error, and provided, further, that such loss shall in no event exceed the
then effective Lease Rate which would have been payable for the balance of
such Interest Period. In the event that the Lessee pays any portion of the
Lease Balance allocated to one or more CP Tranches prior to the maturity
date thereof, the Lessee shall pay to the Lessor for the account of each
Conduit the interest that would have accrued on its CP Tranches at the
applicable CP Rates to such maturity dates. Any amount paid to the Lessor
pursuant to the preceding sentence shall be invested in Permitted
Investments of the type described in clause (a) of the definition thereof,
which investments shall mature as close as possible to, but not later than,
the date such CP Tranche(s) mature. All earnings on such Permitted
Investments shall be paid over to the Lessee provided that no Event of
Default has occurred and is continuing. The Lessor will, at the request of
the Lessee, furnish such additional information concerning the
determination of such loss as the Lessee may reasonably request.
26.6. Regulation D Compensation. For so long as the Lessor (or an
Affiliate thereof) or any Liquidity Provider is required to maintain
reserves against "Eurocurrency Liabilities" (or any other category of
liabilities which include deposits by reference to which the Base Rent is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Liquidity Provider to
United States residents), and, as a result, the cost to the Lessor of
making or maintaining its Advances or to any Liquidity Provider of making
or maintaining its Loans or Liquidity Purchases which bear interest by
reference to the Eurodollar Rate is increased, then the Lessor or such
Liquidity Provider, as the case may be, may require the Lessee to pay,
contemporaneously with each payment of Base Rent, an additional amount at a
rate per annum up to but not exceeding the excess of (i) (A) the applicable
Eurodollar Rate divided by (B) one minus the Eurocurrency Reserve
Requirements over (ii) the applicable Eurodollar Rate. In the event that
the Lessor or a Liquidity Provider wishes to require payment of such
additional amount, the Lessor (x) shall so notify the Lessee, in which case
such additional Rent shall be payable to the Lessor or such Liquidity
Provider, as the case may be, at the place indicated in such notice and (y)
shall furnish to the Lessee at least five (5) Business Days prior to each
date on which Rent is payable a certificate setting forth the amount to
which it is then entitled under this Section (which shall be consistent
with its good faith estimate of the level at which the required related
reserves are maintained by it). Each such certificate shall be accompanied
by such information as the Lessee may reasonably request as to the
computation set forth therein.
26.7. Basis for Determining Eurodollar Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period:
(a) deposits in dollars (in the applicable amounts) are not
being offered to the Lessor (or its Affiliates) or any Liquidity
Provider in the relevant market for such Interest Period, or
(b) the Lessor advises the Lessee that the Eurodollar Rate as
determined by the Lessor will not adequately and fairly reflect the
cost to the Lessor and the Liquidity Providers of funding Advances,
Loans or Liquidity Purchases, as the case may be, for such Interest
Period,
the Lessor shall forthwith give notice thereof to the Lessee, whereupon
until the Lessor notifies the Lessee that the circumstances giving rise
to such suspension no longer exist, (i) the obligation of the Lessor to
make Advances based on the Eurodollar Rate shall be suspended and
Advances shall be made on the basis of the Alternate Base Rate and (ii)
each outstanding Advance shall begin to bear interest at the Alternate
Base Rate on the last day of the then current Interest Period applicable
thereto.
26.8. Illegality. If, on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lessor (or
its Affiliates) or any Liquidity Provider with any request or directive
(whether or not having the force of law) of any such authority, central
bank or comparable agency shall make it unlawful or impossible for the
Lessor (or its Affiliates) or any Liquidity Provider to make, maintain or
fund its Advances, Loans or Liquidity Purchases, as the case may be, based
on the Eurodollar Rate and the Lessor shall so notify the Lessee, whereupon
until the Lessor notifies the Lessee that the circumstances giving rise to
such suspension no longer exist, the obligation to make Advances based on
the Eurodollar Rate shall be suspended and Advances shall be made on the
basis of the Alternate Base Rate. The Lessor, with the consent of the
Lessee (which consent shall not unreasonably be withheld), will designate a
different Funding Office if such designation will avoid the need for giving
such notice and will not, in the judgment of the Lessor, be otherwise
disadvantageous to the Lessor. If such notice is given (i) the Lessee shall
be entitled, upon its request, to a reasonable explanation of the factors
underlying such notice and (ii) each Advance then outstanding shall begin
to bear interest at the Alternate Base Rate either (a) on the last day of
the then current Interest Period applicable thereto, if the Lessor may
lawfully continue to maintain and fund such Advance to such day or (b)
immediately, if the Lessor or any Liquidity Provider shall determine that
it may not lawfully continue to maintain and fund such Advance, Loan or
Liquidity Purchase, as the case may be, to such day.
26.9. Increased Cost and Reduced Return. (a) In the event that the
adoption of any applicable law, rule or regulation, or any change therein
or in the interpretation or application thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by the Lessor or any
Liquidity Provider with any request or directive after the date hereof
(whether or not having the force of law) of any such authority, central
bank or comparable agency:
(i) does or shall subject the Lessor or any Liquidity Provider
to any additional tax of any kind whatsoever with respect to the
Operative Documents or any Advance, Loan or Liquidity Purchase, as
the case may be, made by it, or change the basis or the applicable
rate of taxation of payments to the Lessor or any Liquidity Provider
of principal, interest or any other amount payable hereunder or under
any other Operative Document (except for the imposition of or change
in any tax on or measured by the overall net income of the Lessor or
any Liquidity Provider (other than any such tax imposed by means of
withholding));
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, insurance assessment, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office
of the Lessor or any Liquidity Provider which are not otherwise
included in determination of the rate of interest on Advances
hereunder; or
(iii) does or shall impose on the Lessor or any Liquidity
Provider any other condition;
and the result of any of the foregoing is to increase the cost to the
Lessor or any Liquidity Provider of making or maintaining Advances,
Loans or Liquidity Purchases, as the case may be, or to reduce any
amount receivable hereunder, then in any such case, the Lessee shall
promptly pay to the Lessor or any Liquidity Provider, upon demand, any
additional amounts necessary to compensate the Lessor and each Liquidity
Provider for such increased cost or reduced amount receivable.
(b) If the Lessor or any Liquidity Provider shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, or if any Liquidity
Provider shall have determined that a change in the risk weighting of its
Commitment is necessary, and any of the foregoing has or would have the
effect of reducing the rate of return on capital of the Lessor or any
Liquidity Provider (or any entity directly or indirectly controlling the
Lessor or any Liquidity Provider) as a consequence of the Lessor's or any
Liquidity Provider's obligations under the Operative Documents to a level
below that which the Lessor or any Liquidity Provider (or any entity
directly or indirectly controlling the Lessor or any Liquidity Provider)
could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy),
then from time to time, within fifteen (15) days after demand by the Lessor
or any Liquidity Provider, the Lessee shall pay to the Lessor such
additional amount or amounts as will compensate the Lessor and the
Liquidity Providers (or their respective controlling entities) for such
reduction.
(c) The Lessor will promptly notify the Lessee of any event of which
it has knowledge, occurring after the date hereof, which will entitle the
Lessor to compensation pursuant to this Section and will, if practicable,
with the consent of the Lessee (which consent shall not unreasonably be
withheld), designate a different Funding Office or take any other
reasonable action if such designation or action will avoid the need for, or
reduce the amount of, such compensation and will not, in the judgment of
the Lessor, be otherwise disadvantageous to the Lessor. A certificate of
the Lessor or any Liquidity Provider claiming compensation under this
Section and setting forth in reasonable detail its computation of the
additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount, the Lessor
and each Liquidity Provider may use any reasonable averaging and
attribution methods.
ARTICLE XXVII
ESTOPPEL CERTIFICATES
27.1. Estoppel Certificates. At any time and from time to time upon
not less than twenty (20) days' prior request by the Lessor or the Lessee
(the "Requesting Party"), the other party (whichever party shall have
received such request, the "Certifying Party") shall furnish to the
Requesting Party (but in the case of the Lessor, as Certifying Party, not
more than four times per year unless required to satisfy the requirements
of any sublessees and only to the extent that the required information has
been provided to the Lessor by the Lessee) a certificate signed by an
individual having the office of vice president or higher in the Certifying
Party certifying that this Lease is in full force and effect (or that this
Lease is in full force and effect as modified and setting forth the
modifications); the dates to which the Base Rent and Supplemental Rent have
been paid; to the best knowledge of the signer of such certificate, whether
or not the Requesting Party is in default under any of its obligations
hereunder (and, if so, the nature of such alleged default); and such other
matters under this Lease as the Requesting Party may reasonably request.
Any such certificate furnished pursuant to this Article XXVII may be relied
upon by the Requesting Party, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to the
Requesting Party (or any Affiliate thereof).
ARTICLE XXVIII
ACCEPTANCE OF SURRENDER
28.1. Acceptance of Surrender. No surrender to the Lessor of this
Lease or of all or any portion of any Leased Asset or of any part of any
thereof or of any interest therein shall be valid or effective unless
agreed to and accepted in writing by the Lessor, and no act by the Lessor
or any representative or agent of the Lessor, other than a written
acceptance, shall constitute an acceptance of any such surrender.
ARTICLE XXIX
NO MERGER OF TITLE
29.1. No Merger of Title. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in
part, (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate, (b) the fee or ground leasehold
estate in any Leased Asset, except as may expressly be stated in a written
instrument duly executed and delivered by the appropriate Person or (c) a
beneficial interest in the Lessor.
ARTICLE XXX
INTENT OF THE PARTIES
30.1. Ownership of the Properties. (a) It is the intent of the
parties hereto that: (i) this Lease constitutes an operating lease from the
Lessor to the Lessee for the purposes of the Lessee's financial reporting,
(ii) the Lease and other transactions contemplated hereby preserve
ownership in the Leased Assets in the Lessee for Federal and state income
tax and bankruptcy purposes, (iii) each Lease Supplement grants to the
Lessor a Lien on the Leased Assets covered thereby, and (iv) the
obligations of the Lessee to pay Base Rent and any part of the Lease
Balance shall be treated as payments of interest and principal,
respectively, for Federal and state income tax and bankruptcy purposes. The
Lessor shall be deemed to have a valid and binding security interest in and
Lien on the Leased Assets, free and clear of all Liens other than Permitted
Liens, as security for the obligations of the Lessee under the Operative
Documents (it being understood and agreed that the Lessee does hereby grant
a security interest in and Lien on, and convey, transfer, assign, mortgage
and warrant to the Lessor and its successors, transferees and assigns, the
leased Assets and any proceeds or products thereof, to have and hold the
same as collateral security for the payment and performance of the
obligations of the Lessee under the Operative Documents), and each of the
parties hereto agrees that it will not, nor will it permit any Affiliate to
at any time, take any action or fail to take any action with respect to the
preparation or filing of any income tax return, including an amended income
tax return, to the extent that such action or such failure to take action
would be inconsistent with the intention of the parties expressed in this
Section 30.1.
(b) Specifically, without limiting the generality of clause (a)
of the Section 30.1, the parties hereto intend and agree that in the event
of any insolvency or receivership proceedings or a petition under the
United States bankruptcy laws or any other applicable insolvency laws or
statute of the United States of America or any State or Commonwealth
thereof affecting the Lessee, the Guarantor, the Lessor, any other Person
or any collective actions, the transactions evidenced by the Operative
Documents shall be regarded as loans made by the Lessor to the Lessee.
ARTICLE XXXI
PAYMENT OF CERTAIN EXPENSES
31.1. Transaction Expenses. (a) The Lessee shall pay, or cause to be
paid, from time to time all Transaction Expenses in respect of the
transactions taking place on the Closing Date and on each Funding Date on
such respective date; provided, however, that, if the Lessee has not
received written invoices therefor five (5) days prior to such date, such
Transaction Expenses shall be paid on the earlier of (i) the next Funding
Date and (ii) the date thirty-five (35) days after the Lessee has received
written invoices therefor.
(b) The Lessee shall pay or cause to be paid (i) the reasonable fees
and expenses of the Paying Agent or any successor Paying Agent, (ii) all
reasonable Transaction Expenses from time to time incurred by the Lessor in
entering into any future amendments or supplements with respect to any of
the Operative Documents, whether or not such amendments or supplements are
ultimately entered into, or giving or withholding of waivers of consents
hereto or thereto, in each case which have been requested by or approved by
the Lessee, (iii) all reasonable Transaction Expenses incurred by the
Lessor in connection with any purchase of any Leased Asset by the Lessee or
other Person pursuant to this Lease and (iv) all Transaction Expenses
incurred by the Lessor, the Receivable Purchaser, the Collateral Agent, the
Conduits, the Liquidity Agent and the Liquidity Providers in respect of
enforcement of any of their rights or remedies against the Lessee or the
Guarantor in respect of the Operative Documents.
31.2. Brokers' Fees and Stamp Taxes. The Lessee shall pay or cause to
be paid any brokers' fees and any and all stamp, transfer and other similar
taxes, fees and excises, if any, including any interest and penalties,
which are payable in connection with the transactions contemplated by this
Lease and the other Operative Documents. The Lessor and the Lessee each
represent to the other that it has not employed any brokers in connection
with the transactions contemplated by the Operative Documents.
31.3. State Financing and Grants. Notwithstanding anything to the
contrary contained herein, financing and grants, which do not create a Lien
on the Leased Assets, from the State of Maryland or any local Governmental
Authority thereof to the Lessee or any Affiliate of the Lessee shall not in
any way reduce the amount of Advances to be made by the Lessor to the
Lessee with respect to any Leased Asset.
ARTICLE XXXII
OTHER COVENANTS AND AGREEMENTS OF LESSEE
32.1. Information. The Lessee will deliver to the Lessor:
(a) within five (5) days after a Responsible Employee of the
Lessee or any Affiliate of the Lessee obtains knowledge of the
occurrence of each Event of Default or each event that, with the
giving of notice or time elapse, or both, would constitute an Event
of Default continuing on the date of such statement, a statement of
the authorized officer setting forth details of such Event of Default
or event and the action that the Lessee proposes to take with respect
thereto;
(b) within five (5) days of any change of the Guarantor's or
the Lessee's independent public accountants, notification thereof;
(c) promptly upon becoming aware thereof, written notice of any
material adverse change in the business, financial position or
results of operations of the Guarantor and its Subsidiaries,
considered as a whole;
(d) as soon as possible and in any event within five (5) days
after knowledge of (or such time as a Responsible Employee of Lessee
or any Affiliate of the Lessee reasonably should have had knowledge
of) the occurrence of any material violation or alleged violation of
an Environmental Law relating to any Property, a statement of an
authorized officer setting forth the details of such violation and
the action which the Lessee proposes to take with respect thereto;
(e) from time to time such additional information regarding the
business, properties, condition or operations, financial or
otherwise, of the Guarantor and its Significant Subsidiaries, or
regarding the Leased Assets or the status of any construction
thereon, as the Lessor may reasonably request;
(f) not later than five (5) Business Days after request, copies
of all amendments to and waivers of the Credit Agreement requested by
the Guarantor; and
(g) not later than five (5) Business days after delivery,
copies of all amendments to and waivers of the Credit Agreement.
32.2. Financial Statements.
(a) The Lessee will furnish or cause to be furnished to the
Lessor and each Liquidity Provider, as and when required by Section
5.01(a)-(d) of the Credit Agreement, all the reports, schedules,
certificates and statements required of the Guarantor and its
Subsidiaries to be delivered pursuant to Section 5.01(a)- (d) of the
Credit Agreement; provided, however, that the Lessee shall not be
required to furnish any such document to any such Person pursuant to
this Lease if such Person or its Affiliate is a party to the Credit
Agreement and receives such document pursuant to the terms thereof.
(b) The Lessee will furnish to the Lessor and each Liquidity
Provider, not later than ninety (90) days after the end of each of
its fiscal years, unaudited financial statements of the Lessee,
together with a Responsible Employee Certificate of the Lessee
certifying that, to the best knowledge of such Responsible Employee,
no Default has occurred and is continuing or, if a Default or Event
of Default has occurred and is continuing, the nature thereof and the
action the Lessee is taking with respect thereto.
32.3. Other Covenants. If any covenants are set forth in any Lease
Supplement, then the Lessee will observe and perform such covenants
according to the terms thereof with the same force and effect as if set
forth in full
herein.
ARTICLE XXXIII
MISCELLANEOUS
33.1. Survival; Severability; Etc. If any term or provision of this
Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of
such term or provision shall not be affected thereby. If any right or
option of the Lessee provided in this Lease would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being
in violation of the rule against perpetuities or any other rule of law
relating to the vesting of an interest in or the suspension of the power of
alienation of property, then such right or option shall be exercisable only
during the period which shall end twenty-one (21) years after the date of
death of the last survivor of the descendants of Franklin D. Roosevelt, the
former President of the United States, and John D. Rockefeller, the founder
of the Standard Oil Company, known to be alive on the date of the
execution, acknowledgement and delivery of this Lease.
33.2. Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by
an instrument in writing in recordable form signed by the Lessor and the
Lessee.
33.3. No Waiver. No failure by the Lessor or the Lessee to insist
upon the strict performance of any term hereof or to exercise any right,
power or remedy upon a default hereunder, and no acceptance of full or
partial payment of Rent during the continuance of any such default, shall
constitute a waiver of any such default or of any such term. To the fullest
extent permitted by law, no waiver of any default shall affect or alter
this Lease, and this Lease shall continue in full force and effect with
respect to any other then existing or subsequent default.
33.4. Notices. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing (including by
facsimile), and directed to the address of the appropriate party as set
forth in Schedule I hereto.
33.5. Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
33.6. Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
33.7. Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
33.8. GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS
RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER WITH RESPECT TO
ANY PROPERTY (AS DEFINED IN THIS LEASE) AND THE EXERCISE OF RIGHTS AND
REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE WHERE SUCH PROPERTY IS LOCATED.
WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO
CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS
EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND THE
ENFORCEMENT OF SAID LIEN WITH RESPECT TO ANY PROPERTY (AS DEFINED IN THIS
LEASE) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE WHERE SUCH PROPERTY IS LOCATED.
33.9. Original Lease. The single executed original of this Lease
containing the receipt of the Lessor therefor on or following the signature
page thereof shall be the Original Executed Counterpart of this Lease (the
"Original Executed Counterpart"). To the extent that this Lease constitutes
chattel paper, as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction, no security interest in this Lease
may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.
33.10.WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS LEASE AND/OR ANY OF THE OTHER OPERATIVE
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF SUCH PARTIES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY
HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE
LEASE AND EACH SUCH OTHER OPERATIVE DOCUMENTS.
33.11 TRUTH IN LEASING REQUIREMENT IN COMPLIANCE WITH FEDERAL
AVIATION REGULATION ss.91.23. THE LESSEE HEREBY ADVISES THE LESSOR THAT
FROM THE DATE OF ITS MANUFACTURE TO THE DATE OF THIS LEASE, THE AIRCRAFT
LEASED UNDER THIS LEASE HAS BEEN MAINTAINED AND INSPECTED IN ACCORDANCE
WITH ss.91.409(f)(3) OF THE FEDERAL AVIATION REGULATIONS.
THE LESSEE CERTIFIES THAT IT IS RESPONSIBLE FOR THE STATUS OF
COMPLIANCE OF THE AIRCRAFT WITH APPLICABLE MAINTENANCE AND INSPECTION
REQUIREMENTS AS SET FORTH UNDER FAA REGULATIONS APPLICABLE TO THE LESSEE'S
USE AND OPERATION OF THE AIRCRAFT. IN ADDITION, UPON THE LESSOR'S REQUEST,
THE LESSEE AGREES TO ADVISE THE LESSOR WHICH OF THE REQUIRED FAA
MAINTENANCE PROGRAMS THE LESSEE HAS SELECTED AND AGREES TO PROVIDE THE
LESSOR WITH WRITTEN INSPECTION REPORTS FOR INSPECTIONS ACCOMPLISHED UNDER
SAID PROGRAM.
THE LESSEE IS SOLELY RESPONSIBLE FOR OPERATIONAL CONTROL OF THE
AIRCRAFT UNDER THIS LEASE AND CERTIFIES AND AGREES TO COMPLY WITH ALL
APPLICABLE FAA REGULATIONS ISSUED DURING THE TERM OF THIS LEASE. THE LESSEE
IS HEREBY ADVISED THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL
CONTROL AND PERTINENT FAA REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE OF AIR
CARRIER DISTRICT OFFICE.
THE LESSEE AGREES TO KEEP A COPY OF THIS LEASE IN THE AIRCRAFT AT ALL
TIMES DURING THE TERM OF THIS LEASE.
THE LESSEE AGREES TO COMPLY WITH ALL REQUIREMENTS OF FEDERAL AVIATION
REGULATION ss. 91.23.
IN WITNESS WHEREOF, the parties have caused this Lease be duly
executed and delivered as of the date first above written.
RITE AID REALTY CORP.,
as Lessee
By:
Name:
Title:
SUMITOMO BANK LEASING AND
FINANCE, INC., as Lessor
By:
Name:
Title:
Funding Office:
277 Park Avenue
New York, New York 10172
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
SUMITOMO BANK LEASING AND
FINANCE, INC.
By:
Name:
Title:
APPENDIX 1
TO MASTER LEASE AND SECURITY AGREEMENT
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns
are permitted by the Operative Documents, and, unless otherwise
provided or the context otherwise requires, reference to a Person in
a particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms of
the other Operative Documents and reference to any promissory note
includes any promissory note which is an extension or renewal thereof
or a substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law
as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and
regulations promulgated thereunder, and reference to any section or
other provision of any Applicable Law means that provision of such
Applicable Law from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Operative Document to any Article,
Section, Appendix, Schedule or Exhibit means such Article or Section
thereof or Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to an Operative Document as a whole
and not to any particular Article, Section or other provision
thereof;
(viii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
(ix) "or" is not exclusive; and
(x) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding".
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted,
and accounting determinations and computations shall be made, in accordance
with GAAP.
C. Conflict in Operative Documents. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to
the extent (and only to the extent) of such conflict, the Lease shall
prevail and control.
D. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any
rule of construction or interpretation otherwise requiring the Operative
Document to be construed or interpreted against any party shall not apply
to any construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document. All capitalized terms used in the Operative Documents
but not otherwise defined in this Appendix 1 shall have the meanings, where
applicable, given to such terms in the Credit Agreement (as defined
herein).
"Acquisition Date" means (i) with respect to any Property, the
Funding Date on which the Lessor acquires title to, or a leasehold interest
in, the Land constituting a part of such Property, (ii) with respect to any
Equipment and Systems, the first Funding Date on which the Lessor acquires
any asset constituting such Equipment and Systems and (iii) with respect to
any Other Asset not constituting Equipment and Systems, the Funding Date on
which the Lessor acquires title to such Other Asset.
"Additional Payment Date" means any of the following: each Base Date,
the last day of each Interest Period which does not end on a Scheduled
Payment Date, and each Expiration Date.
"Advance" means an advance of funds by the Lessor pursuant to Article
III of the Lease.
"Advance Amount" is defined in Article I of each Liquidity Asset
Purchase Agreement.
"Affiliate" means, when used with respect to any Person, any other
Person directly or indirectly Controlling or Controlled by or under direct
or indirect common Control with such Person.
"Aircraft" means any Other Asset which consists of aircraft, as more
particularly described in the Lease Supplement relating thereto, together
with the Engines and any and all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature, from time to time incorporated or installed in or attached to such
aircraft.
"Alternate Base Rate" means, for any day, an interest rate equal to
the sum of the Federal Funds Effective Rate for such day plus 0.50% per
annum.
"Applicable Law" means all existing and future applicable laws,
rules, regulations, statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by, any
Governmental Authority, and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other
administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including Environmental Laws) and those pertaining to the
construction, use or occupancy of each Leased Asset) and any restrictive
covenant or deed restriction or easement of record affecting any Property.
"Appraisal" means (i) with respect to any Property or any portion
thereof, an appraisal, prepared by a reputable appraiser selected by the
Lessor, of such Property or such portion as if improved in accordance with
the Plans and Specifications, which in the judgment of counsel to the
Lessor, complies with all of the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, the rules and
regulations adopted pursuant thereto, and all other applicable Requirements
of Law and, in the case of the Appraisal delivered on or prior to the
Acquisition Date for such Property, will appraise the Fair Market Sales
Value of such Property as built in accordance with the Plans and
Specifications as of Substantial Completion for such Property and as of the
seventh, eighth, ninth and tenth anniversaries of the date of the Lease,
and (ii) with respect to any Other Asset, an appraisal, prepared by a
reputable appraiser selected by the Lessor, of such Other Asset and, in the
case of the Appraisal delivered on or prior to the Acquisition Date for
such Other Asset, will appraise the Fair Market Sales Value of such Other
Asset as of the Base Date for such Other Asset and as of the seventh,
eighth, ninth and tenth anniversaries of the date of the Lease.
"Appurtenant Rights" means (i) all agreements, easements, rights of
way or use, rights of ingress or egress, privileges, appurtenances,
tenements, hereditaments and other rights and benefits at any time
belonging or pertaining to any Land or the related Improvements, including
the use of any streets, ways, alleys, vaults or strips of land adjoining,
abutting, adjacent or contiguous to such Land and (ii) all permits,
licenses and rights, whether or not of record, appurtenant to such Land.
"Architect" means the independent architect employed by Lessee in
connection with the transactions contemplated by the Lease.
"Assignment Agreement" means an agreement substantially in the form
of Exhibit A to each Liquidity Asset Purchase Agreement.
"Available Commitment" means, at any time, an amount equal to the
excess, if any, of (a) the amount of the Total Commitment of the Lessor
over (b) the aggregate original principal amount of all Advances prior to
such time.
"Base Date" with respect to each Leased Asset is defined in the Lease
Supplement for that Leased Asset.
"Base Rate Tranche" means a portion of a Lease Balance funded by a
Debt Contribution which bears interest at a fluctuating rate equal to the
Alternate Base Rate.
"Base Rent" means the amount determined under Appendix 2 to
the Lease.
"Base Term" with respect to each Leased Asset is defined in the Lease
Supplement for that Leased Asset and is subject to extension as provided in
Section 23.1 of the Lease.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Borrower Material Adverse Effect" is defined in Section 4.1(b) of
the Committed Loan Agreement and Section 4.1(b) of the Uncommitted Loan
Agreement.
"Break Costs" means an amount equal to the amount, if any, required
to compensate the Lessor, the Lenders and the Liquidity Providers for any
additional losses (including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or funds
acquired by the Lessor, the Lenders or the Liquidity Providers to fund
their respective obligations under the Operative Documents) they may
reasonably incur as a result of (x) the Lessee's payment of Rent or all or
any portion of the Lease Balance for any Property other than on a Payment
Date, (y) any Advance not being made on the date specified therefor in the
applicable Funding Request (other than as a result of a breach by the
Lessor of its obligation under Section 3.1 of the Lease to make an
Advance), or (z) as a result of any conversion of the Eurodollar Rate in
accordance with Section 26.7 or 26.8 of the Lease on any day other than a
Scheduled Payment Date. A statement as to the amount of such loss, cost or
expense, prepared in good faith and in reasonable detail and submitted by
the Lessor, a Lender or a Liquidity Provider, as applicable, to the Lessee,
shall be conclusive and binding for all purposes absent manifest error.
"Business Day" means each day which is not a day on which banks in
New York, New York or London are generally authorized or obligated, by law
or executive order, to close and is not a day on which The Depository Trust
Company is closed.
"Capitalized Commitment Fees" means, with respect to any Property or
Equipment and Systems prior to the Base Date therefor, an amount equal to
the accrued and unpaid Commitment Fees with respect to such Property or
Equipment and Systems,
respectively.
"Capitalized Interest" means, with respect to any Interest Period for
any Property or Equipment and Systems prior to the Base Date therefor, an
amount equal to the Lease Rate for such Interest Period multiplied by the
Lease Balance for such Property or Equipment and Systems, respectively,
outstanding during such Interest Period.
"Cash Collateral Account" is defined in Section 3.6 of the
Intercreditor Agreement.
"Casualty" means any damage or destruction of all or any portion of a
Leased Asset as a result of a fire or other casualty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., as
amended by the Superfund Amendments and Reauthorization Act of 1986.
"Certifying Party" is defined in Section 27.1 of the Lease.
"Claims" means any and all obligations, liabilities, losses, actions,
suits, judgments, penalties, fines, claims, demands, settlements, costs and
expenses (including, without limitation, reasonable legal fees and
expenses) of any nature whatsoever.
"Closing Date" is defined in Section 4.1 of the Lease.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto.
"Collateral" is defined in Section 2.2 of the Intercreditor
Agreement.
"Collateral Agent" means The Sumitomo Bank, Limited, New York Branch,
in its capacity as collateral agent under the Intercreditor Agreement.
"Commercial Paper" means the promissory notes of any Conduit in
physical or book-entry form issued by such Conduit in connection with the
Uncommitted Loan Agreement to which it is a party.
"Commitment" means (i) with respect to the Lessor and each Leased
Asset, the obligation of the Lessor to make Advances to the Lessee in an
aggregate principal amount not to exceed (x) the amount set forth opposite
such Leased Asset on Annex I to the Lease or (y) such other amount as is
set forth opposite the Lessor's name on its signature page for the Lease
Supplement for such Leased Asset and (ii) with respect to a Lender, the
obligation of such Lender to make Committed Loans to the Receivable
Purchaser pursuant to Section 2 of the Committed Loan Agreement.
"Commitment Fee" means the Lessor Commitment Fee and the Liquidity
Commitment Fee.
"Commitment Percentage" with respect to any Lender means the
percentage listed opposite such Lender's signature to the Committed Loan
Agreement or to an Assignment Agreement, as the case may be.
"Committed Loan Agreement" means the Committed Loan Agreement, dated
as of May 30, 1997, among the Receivable Purchaser, the financial
institutions parties thereto as lenders and the Liquidity Agent.
"Committed Loans" is defined in Section 2.1 of the Committed
Loan Agreement.
"Condemnation" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy, easement
rights or title to any Leased Asset or any part thereof, wholly or
partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any
Person having the power of eminent domain, including an action by a
Governmental Authority to change the grade of, or widen the streets
adjacent to, any Property or alter the pedestrian or vehicular traffic flow
to such Property so as to result in change in access to such Property, or
by or on account of an eviction by paramount title or any transfer made in
lieu of any such proceeding or action. A "Condemnation" shall be deemed to
have occurred on the earliest of the dates that use, occupancy or title
vests in the condemning authority.
"Conduit" means each of Madison and the Other Conduit.
"Conduit Loans" is defined in Section 2.1 of each Uncommitted Loan
Agreement.
"Conduit Note" is defined in Section 2.2 of each Uncommitted
Loan Agreement.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Guarantor in its consolidated financial statements if such statements were
prepared as of such date.
"Construction" means, with respect to each Property, the construction
and installation of all Improvements on such Property contemplated by the
Plans and Specifications for such Property.
"Construction Agency Agreement" means the Master Construction Agency
Agreement, dated as of May 30, 1997, between the Lessor and the
Construction Agent.
"Construction Agency Agreement Event of Default" is defined in
Section 5.1 of the Construction Agency Agreement.
"Construction Agency Agreement Supplement" means, with respect to
each Property, a supplement to Construction Agency Agreement substantially
in the form of Exhibit A to the Construction Agency Agreement completed as
to such Property.
"Construction Agent" means Rite Aid Realty Corp., as construction
agent under the Construction Agency Agreement.
"Construction Documents" is defined in Section 2.4 of the
Construction Agency Agreement.
"Construction Period" means, with respect to each Property, the
period set forth in the Lease Supplement therefor.
"Contingent Rental Adjustment" means the guaranteed portion of the
Lease Balance determined in accordance with the "90%" test set forth in
FASB No. 13 which, with respect to each Leased Asset, is set forth in, or
determined pursuant to, the Lease Supplement therefor.
"Control" means (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to
any Person, the possession directly or indirectly, of the power to direct
or cause the direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Credit Agreement" means the Credit Agreement dated as of July 19,
1996, as amended, supplemented or restated from time to time, among the
Guarantor, the lenders from time to time parties thereto and Morgan
Guaranty Trust Company of New York, as agent, and any other agreement
succeeding to, superseding or replacing such agreement.
"CP Rate" means, with respect to any Interest Period, the rate
equivalent to the rate (or if more than one rate, the weighted average of
the rates) at which Commercial Paper was sold during the applicable
Interest Period (which rate shall include any fees payable to the placement
agent or dealer for such Commercial Paper); provided, however, that if the
rate (or rates) as agreed between any such agent or dealer and any Conduit
is a discount rate (or rates), the "CP Rate" for such Interest Period shall
be the rate (or if more than one rate, the weighted average of the rates)
resulting from such Conduit's converting such discount rate (or rates) to
an interest-bearing equivalent rate per annum.
"CP Tranche" means a portion of a Lease Balance funded by a Debt
Contribution made by a separate issuance of Commercial Paper, for which
there shall be no more than four different Interest Periods at any one time
outstanding.
"Debt Contribution" means that amount of Advances made by the Lessor
funded by the sale of the Purchaser's Interest to the Receivable Purchaser.
"Debt Rate" means with respect to each Interest Period (i) with
respect to CP Tranches, the CP Rate, (ii) with respect to Eurodollar
Tranches, the Eurodollar Rate plus the Liquidity Applicable Margin and
(iii) with respect to Base Rate Tranches, the Alternate Base Rate plus the
Liquidity Applicable Margin.
"Deed" means each special warrant deed with respect to Land, in
conformity with Applicable Law and appropriate for recording with the
applicable Governmental Authorities, conveying fee simple title to such
Land to the Lessor subject only to Permitted Exceptions.
"Default" means any event or condition which, with the lapse of time
or the giving of notice, or both, would constitute an Event of Default.
"Dollars" and "$" mean dollars in lawful currency of the
United States of
America.
"End Date" is defined in Section 5.1 of the Receivable
Purchase Agreement.
"Engine" means (i) each of the engines installed in any Aircraft on
such Aircraft's Acquisition Date and (ii) any aircraft engine leased
hereunder, together in either case with any and all appliances, parts,
instruments, appurtenances, accessories and other equipment of whatever
nature from time to time incorporated or installed in or attached to an
Engine.
"Environmental Audit" means, with respect to any Property, a Phase
One environmental site assessment (the scope and performance of which meets
or exceeds ASTM Standard Practice E1527-93 Standard Practice for
Environmental Site Assessments: Phase One Environmental Site Assessment
Process) of such Property.
"Environmental Law" means, whenever enacted or promulgated, any
applicable Federal, state, county or local law, statute, ordinance, rule,
regulation, license, permit, authorization, approval, covenant, criteria,
guideline, administrative or court order, judgment, decree, injunction,
code or requirement or any agreement with a Governmental Authority:
(x) relating to pollution (or the cleanup, removal, remediation
or encapsulation thereof, or any other response thereto), or the
regulation or protection of human health, safety or the environment,
including air, water, vapor, surface water, groundwater, drinking
water, land (including surface or subsurface), plant, aquatic and
animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous
Substance, Hazardous Condition or Hazardous Activity.
in each case as amended and as now or hereafter in effect, and any
common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations
for injuries (whether personal or property) or damages due to or
threatened as a result of the presence of, exposure to, or ingestion of,
any Hazardous Substance, whether such common law or equitable doctrine
is now or hereafter recognized or developed. Applicable laws include,
but are not limited to, CERCLA; the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. ss. 6901 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1251 et seq.; the Clean Air Act, 42 U.S.C.
ss.ss. 7401 et seq.; the National Environmental Policy Act, 42 U.S.C.
ss. 4321; the Refuse Act, 33 U.S.C. ss.ss. 401 et seq.; the Hazardous
Materials Transportation Act of 1975, 49 U.S.C. ss.ss. 1801-1812; the
Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136 et
seq.; the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f et seq., each
as amended and as now or hereafter in effect, and their state and local
counterparts or equivalents, including any regulations promulgated
thereunder.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance with any Environmental Law in
any material respect.
"Equipment" means equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired by the Lessee using the proceeds of Advances and now or
subsequently attached to, contained in or used or usable in any way in
connection with any operation or letting of a Property, including but
without limiting the generality of the foregoing, all screens, awnings,
shades, blinds, curtains, draperies, carpets, rugs, storm doors and
windows, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilation, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators,
elevators, cleaning systems (including window cleaning apparatus),
sprinkler systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes, pumps,
tanks, conduits, fittings and fixtures of every kind and description,
provided that the term "Equipment" shall not include any of the foregoing
to the extent the same constitutes Equipment and Systems under any Lease
Supplement.
"Equipment and Systems" means, with respect to any Property, such
furniture, fixtures, equipment and computer hardware and software relating
to such Property as the Lessor and the Lessee with the approval of the
Lessor, such approval not to be unreasonably withheld, may elect to make
subject to the Lease, as evidenced by the execution and delivery of a Lease
Supplement relating thereto. The Equipment and Systems listed on any one
Lease Supplement shall collectively constitute an Other Asset and a Leased
Asset for purposes of the Lease.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor Federal statute.
"ERISA Affiliate" means each entity required to be aggregated with
the Lessee pursuant to the requirements of Section 414(b) or (c) of the
Code.
"ERISA Group" means the Lessee and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Lessee, are treated as a
single employer under Section 414 of the Code.
"Estimated Improvement Costs" means, with respect to any Property as
of the related Acquisition Date, an amount equal to the aggregate amount
which the Construction Agent in good faith expects to be expended in order
to achieve Substantial Completion with respect to Improvements for such
Property (including (i) Capitalized Interest and Capitalized Commitment
Fees and (ii) Transactions Expenses in each case allocated with respect to
such Property during its Construction Period).
"Eurocurrency Reserve Requirements" means, for any day, the aggregate
(without duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations
of the Board or other Governmental Authority having jurisdiction with
respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System.
"Eurodollar Rate" means, with respect to each Interest Period, the
rate determined by the Lessor to be the rate at which Dollar deposits are
offered to the Liquidity Agent by prime banks in the London interbank
market or, if such rate is not available, the average of the rates at which
Dollar deposits are offered to the four major commercial banks last listed
on the Reuters Screen LIBO Page (or any successor page) (rounded upward, if
necessary, to the nearest multiple of one-sixteenth of one percent), in
each case at or about 11:00 a.m. (London time) two Business Days prior to
the beginning of such Interest Period for delivery on the first day of such
Interest Period for the number of days comprised therein.
"Eurodollar Tranche" means a portion of a Lease Balance funded by a
Debt Contribution made with reference to the Eurodollar Rate.
"Event of Bankruptcy" shall be deemed to have occurred with respect
to a Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding
up, or composition or readjustment of debts of such Person, the
appointment of a trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or all or substantially all
of its assets, or any similar action with respect to such Person
under any law relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, and such case or
proceeding shall continue undismissed, or unstayed and in effect, for
a period of sixty (60) consecutive days; or an order for relief in
respect of such Person shall be entered in an involuntary case under
the federal bankruptcy laws or other similar laws now or hereafter in
effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar law
now or hereafter in effect, or shall consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) for, such Person
or for any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall be
adjudicated insolvent.
"Event of Default" is defined in Section 20.1 of the Lease.
"Excess Proceeds" means, with respect to any Leased Asset, the
excess, if any, of the aggregate of all awards, compensation or insurance
proceeds payable in connection with a Casualty or Condemnation over the sum
of the Lease Balance paid by the Lessee pursuant to Articles XVIII and XIX
of the Lease with respect to such Casualty or Condemnation and all proceeds
received by the Lessor in connection with any sale of such Leased Asset
pursuant to the Lessor's exercise of remedies under Section 20.2 of the
Lease or the Lessee's exercise of the Remarketing Option under Article XXIV
of the Lease.
"Expiration Date" means, with respect to each Leased Asset, the later
of the date (x) set forth in the Lease Supplement for such Leased Asset, or
(y) the scheduled expiration of the then current Renewal Term, if any;
provided, however, that if such Leased Asset is purchased pursuant to
Section 22.2 of the Lease or the Lease Balance therefor is paid pursuant to
Section 20.2 of the Lease, then the Expiration Date shall be the date of
such purchase or payment, as the case may be.
"FAA" means the Federal Aviation Administration.
"Fair Market Sales Value" means, with respect to any Leased Asset,
the amounts, which in any event shall not be less than zero, that would be
paid in cash in an arm's-length transaction between an informed and willing
purchaser and an informed and willing seller, neither of whom is under any
compulsion to purchase or sell, respectively, for the ownership of such
Leased Asset. The Fair Market Sales Value of the Leased Assets shall be
determined based on the assumption that, except for purposes of Article XX,
the Leased Assets are in the condition and state of repair required under
Section 13.1 of the Lease and the Lessee is in compliance with the other
requirements of the Operative Documents.
"Fee Letter" means the letter agreement between the Lessor and the
Lessee dated May 30, 1997.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is
a Business Day, the average of quotations for such day on such transaction
received by the Lessor from three Federal funds brokers of recognized
standing selected by it.
"Final Payment Date" is defined in Section 5.1 of the Committed Loan
Agreement and Section 5.1 of the Uncommitted Loan Agreements.
"Fixtures" means all fixtures relating to any Improvements, including
all components thereof, located in or on such Improvements, together with
all replacements, modifications, alterations and additions thereto.
"Force Majeure Event" means any event (the existence of which was not
known and could not have been discovered through the exercise of due
diligence by the Construction Agent prior to the relevant Acquisition Date)
beyond the control of the Construction Agent, including, but not limited
to, strikes, lockouts, adverse soil conditions, acts of God, adverse
weather conditions, inability to obtain labor or materials, government
activities, civil commotion and enemy action; but excluding any event,
cause or condition that results from the Construction Agent's financial
condition or failure to pay or any event, cause or condition which could
have been avoided or which could be remedied through the exercise of
commercially reasonable efforts or the commercially reasonable expenditure
of funds.
"Funded Amount" means, with respect to any Liquidity Provider, the
sum of such Liquidity Provider's outstanding Committed Loans under the
Committed Loan Agreement plus such Liquidity Provider's outstanding Advance
Amount under each Liquidity Asset Purchase Agreement.
"Funding Date" is defined in Section 3.2(a) of the Lease.
"Funding Office" means the office of the Lessor identified on its
signature page to the Lease as its Funding Office.
"Funding Request" is defined in Section 3.2(a) of the Lease.
"GAAP" means United States generally accepted accounting principles
(including principles of consolidation), in effect from time to time.
"Governmental Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions,
publications, filings, notices to and declarations of or with, or required
by, any Governmental Authority, or required by any Applicable Law, and
shall include, without limitation, all environmental and operating permits
and licenses that are required for the full use, occupancy, zoning and
operation of any Property.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Gross Proceeds" means, with respect to any Leased Asset, all amounts
paid in connection with any Casualty or Condemnation or any sale of such
Leased Asset pursuant to Lessor's exercise of remedies under Section 20.2
of the Lease or the Lessee's exercise of the Remarketing Option under
Article XXIV of the Lease, and all interest earned thereon, less the
expense of claiming and collecting such amounts, including all costs and
expenses in connection therewith for which the Lessor is entitled to be
reimbursed pursuant to the Lease.
"Ground Lease" means each Ground Lease pursuant to which the Lessor
acquires a leasehold interest in any Land, substantially in the form of
Exhibit B to the Lease, or in such other form as Lessor and Lessee may
otherwise mutually agree.
"Guarantor" means Rite Aid Corporation.
"Guaranty" means the Guaranty, dated as of May 30, 1997, from the
Guarantor to the Lessor.
"Hazardous Activity" means any activity, process, procedure or
undertaking that directly or indirectly (i) produces, generates or creates
any Hazardous Substance; (ii) causes or results in (or threatens to cause
or result in) the Release of any Hazardous Substance into the environment
(including air, water vapor, surface water, groundwater, drinking water,
land (including surface or subsurface), plant, aquatic and animal life);
(iii) involves the containment or storage of any Hazardous Substance; or
(iv) would be regulated as hazardous waste treatment, storage or disposal
within the meaning of any Environmental Law.
"Hazardous Condition" means any condition that materially violates or
threatens to materially violate, or that results in or threatens material
noncompliance with, any Environmental Law.
"Hazardous Substance" means any of the following: (i) any petroleum
or petroleum product, explosives, radioactive materials, asbestos,
ureaformaldehyde, polychlorinated biphenyls, lead and radon gas; (ii) any
substance, material, product, derivative, compound or mixture, mineral,
chemical, waste, gas, medical waste, or pollutant, in each case whether
naturally occurring, man-made or the by-product of any process, that is
toxic, harmful or hazardous to the environment or human health or safety,
as defined under any Environmental Law; or (iii) any substance, material,
product, derivative, compound or mixture, mineral, chemical, waste, gas,
medical waste or pollutant that would support the assertion of any claim
under any Environmental Law, whether or not defined as hazardous as such
under any Environmental Law.
"Impositions" means any and all liabilities, losses, expenses and
costs of any kind whatsoever for fees, taxes, levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever ("Taxes")
(including, without limitation, (i) real and personal property taxes,
including personal property taxes on any property covered by the Lease that
is classified by Governmental Authorities as personal property, and real
estate or ad valorem taxes in the nature of property taxes; (ii) sales
taxes, use taxes and other similar taxes (including rent taxes and
intangibles taxes); (iii) any excise taxes; (iv) real estate transfer
taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and
documentary recording taxes and fees; (v) taxes that are or are in the
nature of franchise, income, value added, gross receipts, privilege and
doing business taxes, license and registration fees; and (vi) assessments
on any Leased Asset, including all assessments for public improvements or
benefits, whether or not such improvements are commenced or completed prior
to the relevant Expiration Date), and in each case all interest, additions
to tax and penalties thereon, which at any time may be levied, assessed or
imposed by any foreign or Federal, state or local authority upon or with
respect to (a) any Indemnitee by reason of a Leased Asset or any Operative
Document, any Leased Asset or any part thereof or interest therein, or the
Lessee or any sublessee or user of any Leased Asset by reason of such
sublease or use; (b) the financing, refinancing, demolition, construction,
substitution, subleasing, assignment, control, condition, occupancy,
servicing, maintenance, repair, ownership, possession, purchase, rental,
lease, activity conducted on, delivery, insuring, use, operation,
improvement, transfer, return or other disposition of such Leased Asset or
any part thereof or interest therein; (c) indebtedness with respect to any
Leased Asset or any part thereof or interest therein or transfer thereof;
(d) the rentals, receipts or earnings arising from any Leased Asset or any
part thereof or interest therein; (e) the Operative Documents or any
payment made or accrued pursuant thereto; (f) the income or other proceeds
received with respect to any Leased Asset or any part thereof or interest
therein upon the sale or disposition thereof; (g) any contract (including
the Construction Agency Agreement) relating to the construction,
acquisition or delivery of the Improvements or any part thereof or interest
therein; or (h) otherwise in connection with the transactions contemplated
by the Operative Documents.
Notwithstanding anything in the first paragraph of this definition
(except as provided in the final paragraph of this definition) the term
"Imposition" shall not mean or include:
(i) Taxes and impositions (other than Taxes that are, or are in
the nature of, sales, use, rental, transfer or property taxes) that
are imposed under the Code, the Maryland income tax on corporations
or by any Governmental Authority and that are based upon or measured
by net income;
(ii) any Tax or imposition to the extent, but only to such
extent, it relates to any act, event or omission that occurs, or
relates to a period, after the termination of the Lease (but not any
Tax or imposition that relates to any period prior to the termination
of the Lease with respect to the Leased Asset to which such
Imposition relates);
(iii) any Tax or imposition for so long as, but only for so
long as, it is being contested in accordance with the provisions of
Section 26.4(b) of the Lease, provided that the foregoing shall not
limit the Lessee's obligation under Section 26.4(b) of the Lease to
advance to such Indemnitee amounts with respect to Taxes that are
being contested in accordance with Section 26.4(b) of the Lease or
any expenses incurred by such Indemnitee in connection with such
contest;
(iv) any interest or penalties imposed on an Indemnitee as a
result of a breach by such Indemnitee of its obligations under
Section 26.4(e) of the Lease or otherwise as a result of an
Indemnitee's failure to file any return or other documents timely and
as prescribed by applicable law; provided that this clause (iv) shall
not apply (x) if such interest or penalties arise as a result of a
position taken (or requested to be taken) by the Lessee in a contest
controlled by the Lessee under Section 26.4(b) of the Lease or (y) if
such failure is attributable to a failure by the Lessee to fulfill
its obligations under the Lease with respect to any such return;
(v) any Taxes or impositions imposed upon an Indemnitee with
respect to any voluntary transfer, sale or other voluntary
disposition of any interest in any Leased Asset or any part thereof,
or from any sale, assignment, transfer or other disposition of any
interest in an Indemnitee or any Affiliate thereof, (other than any
transfer in connection with (1) the exercise by the Lessee of its
Purchase Option or any termination option or other purchase of any
Leased Asset by the Lessee, (2) the occurrence of an Event of
Default, (3) a Casualty or Condemnation affecting any Leased Asset or
(4) any sublease, modification or addition to any Leased Asset by the
Lessee);
(vi) any Taxes or impositions imposed on an Indemnitee, to the
extent such Indemnitee actually receives a credit (or otherwise has a
reduction in a liability for Taxes) in respect thereof against Taxes
that are not indemnified under the Lease;
(vii) any Taxes imposed against or payable by an Indemnitee
resulting from, or that would not have been imposed but for, the
gross negligence or willful misconduct of such Indemnitee;
(viii)Taxes imposed on or payable by an Indemnitee to the
extent such Taxes would not have been imposed but for a breach by
such Indemnitee or any Affiliate thereof of any representations,
warranties or covenants set forth in the Operative Documents (unless
such breach is caused by the Lessee's breach of its representations,
warranties or covenants set forth in the Operative Documents);
(ix) Taxes to the extent resulting from such Indemnitee's
failure to comply with the provisions of Section 26.4(b) of the
Lease, which failure precludes or materially adversely affects the
ability to conduct a contest pursuant to Section 26.4(b) of the Lease
(unless such failure is caused by the Lessee's breach of its
obligations);
(x) Taxes which are included in Property Improvements Cost,
Land Acquisition Cost or Other Asset Acquisition Cost if and to the
extent actually paid;
(xi) Taxes that would have been imposed in the absence of the
transactions contemplated by the Operative Documents and Taxes
imposed on or with respect to or payable as a result of activities of
an Indemnitee or Affiliate thereof unrelated to the transactions
contemplated by the Operative Documents;
(xii) Taxes imposed on or with respect to or payable by an
Indemnitee resulting from, or that would not have been imposed but
for the existence of, any Lessor Lien created by or through such
Indemnitee or an Affiliate thereof and not caused by acts or
omissions of the Lessee, unless required to be removed by the Lessee;
(xiii)Any Tax imposed against or payable by an Indemnitee to
the extent that the amount of such Tax exceeds the amount of such Tax
that would have been imposed against or payable by such Indemnitee
(or, if less, that would have been subject to indemnification under
Section 26.4 of the Lease) if such Indemnitee were not a direct or
indirect successor, transferee or assign of one of the original
Indemnitees; provided, however, that this exclusion (xiii) shall not
apply if such direct or indirect successor, transferee or assign
acquired its interest as a result of a transfer while an Event of
Default shall have occurred and is continuing.
"Improvements" means, with respect to each Property, all buildings,
structures, Fixtures, Equipment, and other improvements of every kind
existing at any time and from time to time (including those constructed
pursuant to the Construction Agency Agreement and those purchased with
amounts advanced by the Lessor pursuant to the Lease) on or under the Land
comprising a part of such Property, together with any and all appurtenances
to such buildings, structures or improvements, including sidewalks, utility
pipes, conduits and lines, parking areas and roadways, and including all
Modifications and other additions thereto or changes therein at any time.
"Imputed Equity Return" means, with respect to any Leased Asset, the
cost to the Lessor of maintaining its investment in such Leased Asset after
the Expiration Date applicable thereto determined by multiplying (i) the
average daily Lease Balance of such Leased Asset outstanding, (ii) the
number of days from and excluding the Expiration Date to and including the
date of sale of such Leased Asset, (iii) the Overdue Rate and (iv) 1/360.
"Indemnitee" means the Lessor, the Liquidity Agent, each Liquidity
Provider, each Conduit, the Receivable Purchaser, each Lender, the
Collateral Agent and each of their respective successors, assigns,
directors, shareholders, partners, officers, employees and agents.
"Insurance Requirements" means all terms and conditions of any
insurance policy either required by the Lease to be maintained by the
Lessee or required by the Construction Agency Agreement to be maintained by
the Construction Agent, and all requirements of the issuer of any such
policy.
"Intercreditor Agreement" means the Intercreditor and Security
Agreement, dated as of May 30, 1997, among the Lessee, the Guarantor, the
Lessor, the Receivable Purchaser, the Conduits, the Liquidity Agent, the
Paying Agent and the Collateral Agent.
"Interest Period" means, with respect to any Advance:
(1) With respect to the Lessor Contribution and Eurodollar
Tranches of the Debt Contribution,
(a) initially, the period commencing on the Funding Date with
respect to any Advance and ending on the next following Scheduled
Payment Date; and
(b) thereafter, each period commencing on one Scheduled Payment
Date and ending on the next following Scheduled Payment Date;
(2) With respect to each CP Tranche of the Debt Contribution, the
period obtained by a Conduit for such CP Tranche;
provided that, the foregoing provisions relating to Interest
Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, in the case of Eurodollar
Tranches, the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
and
(ii) any Interest Period that would otherwise extend beyond the
Expiration Date for the Leased Asset funded by such Advance shall end
on such Expiration Date.
"Land" means each parcel of real property described on a Lease
Supplement executed and delivered under the Lease and all Appurtenant
Rights attached thereto.
"Land Acquisition Cost" means, with respect to any Property, the
amount of the Advance funded for the purpose of acquiring title to the Land
comprising a part of such Property and paying Transaction Expenses relating
to such acquisition.
"Lease" means the Master Lease and Security Agreement, dated as of
May 30, 1997, between the Lessor and the Lessee.
"Lease Balance" means, with respect to each Leased Asset, as of any
date of determination, the sum of all Advances for such Leased Asset made
under the Lease on or before such date less the sum of all Monthly
Amortization paid by the Lessee with respect thereto on or before such
date.
"Lease Rate" means the weighted average of the Lessor Rate plus the
Debt Rate.
"Lease Receivable" is defined in Section 2.1 of the Receivable
Purchase Agreement.
"Lease Supplement" means, with respect to each Leased Asset, a lease
supplement substantially in the form of Exhibit G-1, G-2 or G-3 to the
Lease duly completed as to such Leased Asset.
"Leased Asset" means each Property and each Other Asset subject to
the Lease.
"Lender" is defined in the preamble of the Committed Loan
Agreement.
"Lender Note" is defined in Section 2.2 of the Committed Loan
Agreement.
"Lessee" means Rite Aid Realty Corp.
"Lessor" means Sumitomo Bank Leasing and Finance, Inc., as lessor
under the Lease.
"Lessor Applicable Margin" is set forth and determined in accordance
with Appendix 2 to the Lease.
"Lessor Commitment Fee" is set forth and determined in accordance
with Appendix 2 to the Lease.
"Lessor Contribution" means that amount of outstanding Advances made
by the Lessor and funded by the Lessor otherwise than through the sale of
the Purchaser's Interest to the Receivable Purchaser.
"Lessor Lien" means any Lien, true lease or sublease or disposition
of title arising as a result of (a) any claim against the Lessor not
resulting from the transactions contemplated by the Operative Documents,
(b) any act or omission of the Lessor which is not required by the
Operative Documents or is in violation of any of the terms of the Operative
Documents, (c) any claim against the Lessor with respect to Taxes or
Transaction Expenses against which Lessee is not required to indemnify
Lessor pursuant to the Lease or (d) any claim against the Lessor arising
out of any transfer by the Lessor of all or any portion of the interest of
the Lessor in any Leased Asset or the Operative Documents other than the
transfer of title to or possession of any Property by the Lessor pursuant
to and in accordance with the Lease or pursuant to the exercise of the
remedies set forth in Article XX of the Lease.
"Lessor Rate" means, with respect to each Interest Period, the
Eurodollar Rate plus the Lessor Applicable Margin and, to the extent that
the Eurodollar Rate is unavailable for any reason during such Interest
Period, the Alternate Base Rate plus the Lessor Applicable Margin.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, easement, servitude or charge of any kind, including,
without limitation, any irrevocable license, conditional sale or other
title retention agreement, any lease in the nature thereof, or any other
right of or arrangement with any creditor to have its claim satisfied out
of any specified property or asset with the proceeds therefrom prior to the
satisfaction of the claims of the general creditors of the owner thereof,
whether or not filed or recorded, or the filing of, or agreement to execute
as "debtor", any financing or continuation statement under the Uniform
Commercial Code of any jurisdiction or any federal, state or local lien
imposed pursuant to any Environmental Law.
"Liquidity Agent" means The Sumitomo Bank, Limited, New York Branch,
in its capacity as agent under the Committed Loan Agreement and the
Liquidity Asset Purchase Agreement.
"Liquidity Applicable Margin" is set forth and determined in
accordance with Appendix 2 to the Lease.
"Liquidity Asset Purchase Agreement" means each of (i) the Liquidity
Asset Purchase Agreement, dated as of May 30, 1997, among Madison, the
Liquidity Providers and the Liquidity Agent and (ii) any other liquidity
asset purchase agreement, substantially in the form of such Liquidity Asset
Purchase Agreement, entered into among the Other Conduit, the Liquidity
Providers and the Liquidity Agent with respect to the transactions
contemplated by the Receivable Purchase Agreement.
"Liquidity Commitment Fee" is set forth and determined in accordance
with Appendix 2 to the Lease.
"Liquidity Providers" means each party identified as such in a
Liquidity Asset Purchase Agreement and each party that becomes a liquidity
provider pursuant to an Assignment Agreement (it being understood that the
term "Liquidity Providers" as used in the Lease shall include such Persons
in their capacity as Lenders).
"Loan" means a Committed Loan or a Conduit Loan.
"Loan Commitment Period" means the period from the Closing Date until
May 28, 1998, as such period may be extended from time to time pursuant to
the Committed Loan Agreement and each Liquidity Asset Purchase Agreement
(provided that in no event shall the Loan Commitment Period extend beyond
the last expiring Base Term).
"Loan Event of Default" is defined in Section 6.1 of the Committed
Loan Agreement and Section 6.1 of the Uncommitted Loan Agreement.
"Loan Potential Event of Default" is defined in Section 7.5 of the
Committed Loan Agreement.
"Madison" means Madison Funding Corporation.
"Marketing Period" means, with respect to any Leased Asset, the
period commencing on the date six months prior to the Expiration Date for
such Leased Asset and ending on the Expiration Date for such Leased Asset.
"Maximum Amount" is defined in Section 3.6 of the Intercreditor
Agreement.
"Modifications" is defined in Section 14.1(a) of the Lease.
"Monthly Amortization" means, with respect to any month during the
Base Term of any Leased Asset, the amount of amortization specified for
such month in the Lease Supplement for such Leased Asset.
"Mortgage" means, with respect to any Property, a memorandum of Lease
and deed of trust, substantially in the form of Exhibit C to the Lease,
sufficient to create in the opinion of the lessor a first priority lien on
such Property.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"Operative Documents" means the following:
(a) the Lease;
(b) the Construction Agency Agreement;
(c) the Guaranty;
(d) each Lease Supplement;
(e) each Construction Agency Agreement Supplement;
(f) each Deed;
(g) each Ground Lease, if any;
(h) each Mortgage, if any;
(i) the Receivable Purchase Agreement;
(j) each Uncommitted Loan Agreement;
(k) the Conduit Notes;
(l) the Committed Loan Agreement;
(m) the Lender Note;
(n) each Liquidity Asset Purchase Agreement;
(o) the Intercreditor Agreement; and
(p) each Funding Request.
"Other Asset" means any asset, other than Property, which the Lessor
and the Lessee mutually agree is to be acquired by the Lessor and leased to
the Lessee under the Lease.
"Other Asset Acquisition Cost" means (i) with respect to any
Equipment and Systems, the aggregate amount of (x) Advances made for the
purpose of acquiring title to assets constituting such Equipment and
Systems and paying the Transaction Expenses relating to such acquisition
and (y) Advances made for Capitalized Interest or for Capitalized
Commitment Fees relating to such Equipment and Systems during the
Construction Period for the related Property and (ii) with respect to any
Other Asset not constituting Equipment and Systems, the amount of the
Advance funded for the purpose of acquiring title to such Other Asset and
paying Transaction Expenses relating to such acquisition.
"Other Conduit" means a commercial paper conduit which (i) is
sponsored by The Sumitomo Bank, Limited, (ii) has been approved by the
Lessee and (iii) has agreed to be bound by all the terms and provisions of
the Intercreditor Agreement.
"Outside Completion Date" with respect to each Property is defined in
the Lease Supplement therefor.
"Overdue Rate" means the Lease Rate plus 2.00%.
"Participant" means each Lender, each Conduit and the Lessor.
"Paying Agent" means Sumitomo Bank of New York Trust Company, a New
York limited purpose trust company.
"Payment Date" means each Scheduled Payment Date and each Additional
Payment Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means any one or more of the following types
of investments:
(a) marketable obligations of, or obligations guaranteed as to
principal and interest by, the United States or an agency or
instrumentality thereof when such obligations are backed by the full
faith and credit of the United States, in each case having a maturity
of not more than thirty (30) days from the date of acquisition;
(b) bankers' acceptances and certificates of deposit and other
interest-bearing obligations denominated in Dollars and issued by any
bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term unsecured senior debt obligations of
which are rated by Standard & Poor's and Moody's Investors Service,
Inc. (the "Rating Agencies") at least as highly as the Commercial
Paper, in each case having a maturity of not more than thirty (30)
days from the date of acquisition;
(c) repurchase obligations with a term of not more than one
year for underlying securities of the types described in clauses (a)
and (b) above entered into with any counterparty whose short-term
unsecured senior debt obligations are rated by the Rating Agencies at
least as highly as the Commercial Paper;
(d) commercial paper having a maturity of not more than thirty
(30) days rated by the Rating Agencies at least as highly as the
Commercial Paper; and
(e) freely redeemable shares in money market funds which invest
solely in obligations, bankers' acceptances, certificates of deposit,
repurchase agreements and commercial paper of the types described in
clauses (a) through (d), without regard to the limitations as to the
maturity of such obligations, bankers' acceptances, certificates of
deposit, repurchase agreements or commercial paper set forth in such
clauses, rated by the Rating Agencies at least as highly as the
Commercial Paper.
"Permitted Liens" means, with respect to any Leased Asset:
(i) the respective rights and interests of the parties
to the Operative Documents as provided in the Operative Documents;
(ii) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease;
(iii) Liens for Taxes that either are not yet payable or are
being contested in accordance with the provisions of Section 16.1 of
the Lease.
(iv) Liens arising by operation of law, materialmen's,
mechanics', workers', repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of
the Improvements or in connection with any Modifications or arising
in the ordinary course of business for amounts that either are not
more than sixty (60) days past due or are being diligently contested
in good faith by appropriate proceedings, so long as such proceedings
satisfy the conditions for the continuation of proceedings to contest
Taxes set forth in Section 16.1 of the Lease;
(v) Liens of any of the types referred to in clause (iv) above
that have been bonded for not less than the full amount in dispute
(or as to which other security arrangements satisfactory to the
Lessor have been made), which bonding (or arrangements) shall comply
with applicable Requirements of Law, and has effectively stayed any
execution or enforcement of such Liens;
(vi) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have
been made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest set forth in Section 16.1
of the Lease;
(vii) easements, rights of way and other encumbrances on title
to real property pursuant to Section 15.2 of the Lease;
(viii) Lessor Liens;
(ix) Liens created by the Lessee with the consent of
the Lessor; and
(x) Liens described on each title insurance policy delivered
pursuant to the Lease other than Liens described in clause (iv) or
(vi) above that are not removed within sixty (60) days of their
origination.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, governmental authority, limited liability company or any
other entity.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and either (i)
is maintained, or contributed to, by any member of the ERISA Group for
employees of any member of the ERISA Group or (ii) has at any time within
the preceding five (5) years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"Plans and Specifications" means, with respect to any Property, the
plans and specifications for the Construction of the Improvements to such
Property, as more particularly described in Schedule 2 to the Construction
Agency Agreement Supplement for such Property, as such may be amended from
time to time in accordance with the Construction Agency Agreement.
"Prime Construction Contract" means, with respect to each Property,
each contract between the Construction Agent and the Prime Contractor for
such Property, as it may be amended from time to time in accordance with
the Construction Agency Agreement.
"Prime Contractor" means, with respect to each Property, the
contractor designated as such in each Prime Construction Contract for such
Property or such other Person who shall, with the prior consent of the
Lessor, have been designated by the Lessee to act as the general contractor
for purposes of the Construction of the Improvements to such Property.
"Pro Rata Basis" means, with respect to any Participant, the ratio,
expressed as a percentage, of (i) such Participant's outstanding Committed
Loans, in the case of a Lender, outstanding Conduit Loans, in the case of a
Conduit, or outstanding Lessor Contribution, in the case of the Lessor, to
(ii) the sum of all outstanding Advances.
"Property" means (i) the Lessor's interest in any Land subject to the
Lease and (ii) all of the Improvements at any time located on or under such
Land.
"Property Improvement Costs" means, with respect to any Property, the
aggregate amount of (i) Advances funded to the Construction Agent for such
Property for the purpose of constructing Improvements on such Property and
paying the Transaction Expenses relating to such funding and construction
and (ii) Advances made for Capitalized Interest or for Capitalized
Commitment Fees relating to such Property during the Construction Period
for such Property.
"Purchase Notice" is defined in Section 22.1 of the Lease.
"Purchase Option" is defined in Section 22.1 of the Lease.
"Purchase Option Price" is defined in Section 22.1 of the
Lease.
"Purchase Price" is defined in Section 1.2(b) of the Receivable
Purchase Agreement.
"Purchaser's Interest" is defined in Section 2.1 of the Receivable
Purchase Agreement.
"Receivable Purchaser" means RA Funding Corporation, a Delaware
corporation;
"Receivable Purchase Agreement" means the Lease Receivable Purchase
Agreement dated as of May 30, 1997 between the Receivable Purchaser and the
Lessor.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
"Release Date" is defined in Section 2.3 of the Intercreditor
Agreement.
"Relevant Percentage" means, with respect to any Advance, the
percentage of such Advance to be funded by the sale of the Purchaser's
Interest pursuant to the Receivable Purchase Agreement, as designated in
the Lease Supplement for the Leased Asset to which such Advance relates.
"Remarketing Option" is defined in Section 24.1 of the Lease.
"Renewal Option" is defined in Section 23.1 of the Lease.
"Renewal Term" has the meaning set forth in Section 23.1 of
the Lease.
"Rent" means, collectively, Capitalized Interest, the Base Rent and
the Supplemental Rent, in each case payable under the Lease.
"Requesting Party" is defined in Section 27.1 of the Lease.
"Required Lenders" is defined in Section 8.1 of the Committed
Loan Agreement.
"Required Participants" means Participants with an aggregate
Voting Percentage in excess of 66 %.
"Required Modification" is defined in Section 14.1 of the
Lease.
"Requirement of Law" means all Federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting any Leased asset or the
demolition, construction, use or alteration thereof, whether now or
hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to such Leased Asset or in any way limit
the use and enjoyment thereof (including all building, zoning and fire
codes and the Americans with Disabilities Act of 1990, 42 U.S.C. ss. 1201
et seq. and any other similar Federal, state or local laws or ordinances
and the regulations promulgated thereunder) and any that may relate to
environmental requirements (including all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and
regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instruments which are either of record or
known to the Lessee affecting any Property, the Appurtenant Rights and any
easements, licenses or other agreements entered into pursuant to Section
15.2 of the Lease.
"Responsible Employee" means, with respect to any Person, the
Chairman, the President, any Vice President, the Controller or the
Treasurer of such Person.
"Responsible Employee's Certificate" means, with respect to any
Person, a certificate signed by any Responsible Employee of such Person,
which certificate shall certify as true and correct the subject matter
being certified to in such certificate.
"Scheduled Payment Date" means the fifteenth (15th) day of each
calendar month.
"Secured Obligations" is defined in Section 2.2 of the
Intercreditor Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Documents" means the collective reference to the Mortgage
and all other security documents now or hereafter delivered to the Lessor
granting a Lien on any asset or assets of any Person to secure the
obligations and liabilities of the Lessee under the Lease and the other
Operative Documents.
"Significant Condemnation" means (a) a Condemnation that involves a
taking of Lessor's entire leasehold interest in or to any Land or Lessee's
entire title to such Land, or (b) a Condemnation that in the reasonable,
good faith judgment of the Lessor either (i) renders any Property
unsuitable for continued use as property of the type of such Property
immediately prior to such Condemnation or (ii) is such that restoration of
any Property (other than Land) to substantially its condition as existed
immediately prior to such Condemnation would be impracticable or impossible
to effect.
"Significant Subsidiary" means at any time (i) the Lessee and (ii)
any Subsidiary or any group of Subsidiaries having consolidated assets,
individually or in the aggregate, equal to or greater than 8% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries at
such time.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Guarantor.
"Substantial Completion" means, with respect to any Property, such
time as the conditions set forth in Article V of the Lease are satisfied
for such Property.
"Supplemental Rent" means all amounts, liabilities and obligations
(other than Capitalized Interest and Base Rent) which Lessee assumes or
agrees to pay to Lessor or any other Person under the Lease or under any of
the other Operative Documents, including, without limitation, Break Costs
(but without duplication of amounts due under Section 26.5 of the Lease).
"Taxes" is defined in the definition of Impositions.
"Termination Event" is defined in Section 6.1 of the Receivable
Purchase Agreement.
"Termination Notice" is defined in Section 19.1 of the Lease.
"Title Company" means, with respect to each Property, the
Person designated in the Lease Supplement therefor.
"Threshold Amount" means, with respect to each Leased Asset, an
amount equal to or greater than 10% of the Lease Balance for such Leased
Asset, but in no event less than the then effective per occurrence
deductible under the lessee's casualty insurance program.
"Total Commitment" means the aggregate of the Lessor's Commitments
for all Leased Assets.
"Transaction Expenses" means all costs and expenses incurred in
connection with the preparation, execution and delivery of the Operative
Documents and the transactions contemplated by the Operative Documents
including without limitation:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel for each of the Lessor, the Lessee and the
Guarantor in negotiating the terms of the Operative Documents and the
other transaction documents, preparing for the closing under, and
rendering opinions in connection with, such transactions and in
rendering other services customary for counsel representing parties
to transactions of the types involved in the transactions
contemplated by the Operative Documents, in each case subject to any
agreed upon cap on such fees;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of any law firm or other external counsel, and (without
duplication) the reasonable allocated cost of internal legal services
and all disbursements of internal counsel of the Lessor, the
Receivable Purchaser, the Collateral Agent, the Conduits, the
Liquidity Agent, the Lenders and the Liquidity Providers in
connection with (1) any amendment, supplement, waiver or consent with
respect to any Operative Documents requested or approved by the
Lessee and (2) any enforcement of any rights or remedies against the
Lessee or the Guarantor in respect of the Operative Documents;
(c) any other reasonable fees, out-of-pocket expenses,
disbursements or cost of the Lessor, the Receivable Purchaser, the
Collateral Agent, the Conduits, the Liquidity Agent, the Lenders and
the Liquidity Providers related to the Operative Documents or any of
the other transaction documents;
(d) any and all Taxes and fees incurred in recording,
registering or filing any Operative Document or any other transaction
document, any deed, declaration, mortgage, security agreement, notice or
financing statement with any public office, registry or governmental
agency in connection with the transactions contemplated by the Operative
Documents;
(e) any title fees, premiums and escrow costs and other
expenses relating to title insurance and the closings contemplated by
the Operative Documents;
(f) all expenses relating to all Environmental Audits;
and
(g) all expenses relating to all Appraisals.
"UCC Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the applicable
jurisdiction in order to perfect the Lessor's interest under the Lease to
the extent the Lease is a security agreement.
"Uncommitted Loan Agreement" means each of (i) the Uncommitted Loan
Agreement, dated as of May 30, 1997, between the Receivable Purchaser and
Madison and (ii) any other uncommitted loan agreement, substantially in the
form of such Uncommitted Loan Agreement, entered into between the
Receivable Purchaser and the Other Conduit.
"Uniform Commercial Code" and "UCC" mean the Uniform Commercial Code
as in effect in any applicable jurisdiction.
"Unused Lessor Commitment" means, with respect to any Leased Asset at
any time, (i) the portion of the Lessor's Commitment for such Leased Asset
expected to be funded by the Lessor Contribution less (ii) the amount of
the Lessor Contribution outstanding at such time.
"Unused Liquidity Commitment" is defined in Article I of each
Liquidity Asset Purchase Agreement; provided, however, that for purposes of
Appendix 2 to the Lease, "Unused Liquidity Commitment" means, with respect
to any Leased Asset at any time, (i) the portion of the Lessor's Commitment
for such Leased Asset expected to be funded by the Debt Contribution less
(ii) the amount of the Debt Contribution outstanding at such time funded by
Eurodollar Tranches or Base Rate Tranches.
"Voting Percentage" with respect to a Lender or the Lessor means the
ratio, expressed as a percentage, of (i) in the case of a Lender, (x) such
Lender's Commitment to (y) the Total Commitment and (ii) in the case of the
Lessor, (x) the amount by which the Total Commitment exceeds the aggregate
Commitments of all of the Lenders to (y) the Total Commitment.
FINCO, INC.
SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
WAIVER NO. 1 TO NOTE AGREEMENT
RITE AID CORPORATION
WAIVER NO. 1 TO GUARANTY AGREEMENT
As of January 10, 2000
The Prudential Insurance Company of America
1114 Avenue of the Americas -- 30th Floor
New York, New York 10036
Pruco Life Insurance Company
One Gateway Center, 11th Floor
7-45 Raymond Boulevard West
Newark, New Jersey 07102-5311
Ladies and Gentlemen:
FINCO, INC. (hereinafter "FINCO"), a Delaware corporation, and RITE
AID CORPORATION (hereinafter "RITE AID", and, together with Finco,
collectively, the "COMPANIES") (together with their successors and assigns)
agree with you as follows:
1. PRELIMINARY STATEMENTS.
1.1. NOTE ISSUANCE, ETC.
Finco issued and sold $79,560,908.91 aggregate principal amount of
its Senior Secured Notes due February 28, 2002 (as may be amended, restated
or otherwise modified from time to time, the "NOTES") pursuant to a Note
Agreement dated September 30, 1996 (as previously amended pursuant to
Amendment No. 1 to Note Agreement dated as of October 25, 1999, and
Amendment No. 2 to Note Agreement dated as of December 2, 1999, the "NOTE
AGREEMENT"). Rite Aid has entered into a Guaranty Agreement, also dated as
of September 30, 1996 (as previously amended pursuant to Amendment No. 1 to
Guaranty Agreement dated as of October 25, 1999, and Amendment No. 2 to
Guaranty Agreement dated as of December 2, 1999, the "RITE AID GUARANTY")
with the Noteholders, whereby in consideration of the purchase of the Notes
it unconditionally and absolutely guaranteed Finco's performance of its
obligations under the Note Agreement.
2. DEFINED TERMS.
The following term, as used herein, has the following meaning:
"PUBLIC DEBT" means debt securities of Rite Aid issued pursuant
to an indenture qualified under (or in form suitable for qualification
under) the Trust Indenture Act of 1939, as amended.
All other capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Note Agreement.
3. WAIVERS.
Subject to Sections 4 and 5 hereof, the Noteholders hereby waive
certain provisions of each of the Note Agreement and the Rite Aid Guaranty
as provided for by this Waiver No. 1 to Note Agreement and Waiver No. 1 to
Guaranty Agreement (collectively, this "WAIVER AGREEMENT") in the manner
specified in Exhibit A. The waivers referred to herein are referred to
herein, collectively, as the "WAIVERS".
4. CONDITIONS TO WAIVERS.
The Waivers granted pursuant to Section 3 hereof are subject to the
following conditions:
(a) Rite Aid shall deliver to the Noteholders the following
items on or prior to the dates specified below:
(i) a monthly forecast of cash receipts and disbursements for
each month, commencing with February, 2000, no later than the first
day of each month in respect of such forecast;
(ii) a monthly reconciliation of actual cash receipts and
disbursements to the forecast for such month delivered pursuant to
clause (i) of this Section 4(a), no later than the 25th day of the
next succeeding month;
(iii) a weekly sales report for each week, commencing with the
week ending January 8, 2000, no later than the 4th day following the
last day of the week in respect of which such sales
report is to be delivered;
(iv) an operating forecast for each month in the fiscal year
ending on or closest to February 28, 2001, no later than March
31, 2000; and
(v) a monthly reconciliation of actual operating results for
each month specified in the operating forecast delivered pursuant to
clause (iv) of this Section 4(a) to the budget for such month, no
later than the 30th day of the next succeeding month, and
(b) Rite Aid shall not directly or indirectly, make or agree to make
any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF THE
COMPANIES.
To induce you to enter into this Waiver Agreement and to consent to
the Waivers, the Companies, jointly and severally, represent and
warrant as follows:
5.1. ORGANIZATION, POWER AND AUTHORITY, ETC.
The Companies are corporations duly incorporated and validly existing
in good standing under the laws of their respective jurisdictions of
incorporation and have all requisite corporate power and authority to enter
into and perform their respective obligations under this Waiver Agreement.
5.2. LEGAL VALIDITY.
The execution and delivery of this Waiver Agreement by each of the
Companies and compliance by them with their obligations hereunder: (a) are
within the corporate powers of the respective Companies; and (b) are legal
and do not conflict with, result in any breach of, constitute a default
under, or result in the creation of any Lien upon any Property of either
Company under the provisions of: (i) any charter instrument or bylaw to
which either Company is a party or by which either Company or any of its
Property may be bound; (ii) any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority applicable to either Company or
its Property; or (iii) any agreement or instrument to which either Company
is a party or by which either Company or any of its Property may be bound
or any statute or other rule or regulation of any Governmental Authority
applicable to either Company or its Property, except where such conflict,
breach or default could not reasonably be expected to have a Material
Adverse Effect.
This Waiver Agreement has been duly authorized by all necessary
action on the part of the Companies, has been executed and delivered by a
duly authorized officer of the Companies, and constitutes a legal, valid
and binding obligation of each of the Companies enforceable in accordance
with its terms, except that enforceability may be limited by applicable
bankruptcy, reorganization, arrangement, insolvency, moratorium, or other
similar laws affecting the enforceability of creditors' rights generally
and subject to the availability of equitable remedies.
6. EFFECTIVENESS OF WAIVERS.
The Waivers shall become effective on such date (the "EFFECTIVE
DATE") as
(i) the Companies and the Noteholders shall have indicated their
written consent to the Waivers by executing and delivering to each other
counterparts of this Waiver Agreement, and
(ii) the Noteholders shall have received evidence satisfactory to
them that substantially identical waivers to any covenant requiring
delivery of financial statements or reports set forth in any other
agreement obligations under which are secured by the Collateral (as such
term is defined in the Amended and Restated Credit Agreement dated as of
October 25, 1999 and amended as of December 2, 1999) shall have become or
shall simultaneously herewith become effective.
7. EXPENSES.
Whether or not the Waivers become effective, the Companies will
promptly (and in any event within thirty days of receiving any statement or
invoice therefor) pay all fees, expenses and costs relating to this Waiver,
including, but not limited to, the reasonable fees of your special counsel,
Bingham Dana LLP, incurred in connection with the preparation, negotiation
and delivery of the Waiver Agreement and any other documents related
thereto. Nothing in this Section shall limit the Companies' obligations
pursuant to paragraph 10B of the Note Agreement and Section 6.1 of the Rite
Aid Guaranty.
8. MISCELLANEOUS.
8.1. COUNTERPARTS.
This Waiver Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may
consist of a number of copies hereof, each signed by less than all,
but together signed by all, of the parties hereto.
8.2. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW
OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE
IS SIGNATURE PAGE.]
If you are in agreement with the foregoing, please so indicate
by signing the acceptance below on the accompanying counterpart of this
agreement and returning it to the Companies, whereupon it will become a
binding agreement among you and the Companies.
FINCO, INC.
BY:__________________________
NAME:
TITLE:
RITE AID CORPORATION
BY:__________________________
NAME:
TITLE:
The foregoing Waiver Agreement is hereby accepted as of the
date first above written.
THE PRUDENTIAL
INSURANCE COMPANY
OF AMERICA
BY:__________________________
NAME:
TITLE:
PRUCO LIFE
INSURANCE COMPANY
BY:__________________________
NAME:
TITLE:
EXHIBIT A
WAIVERS
1. LIMITED WAIVERS TO RITE AID GUARANTY.
The Noteholders hereby waive, for the limited period provided
herein, any default arising under the Rite Aid Guaranty as a result of Rite
Aid's failure to comply with the requirements under Section 5.1(a), Section
5.1(b), Section 5.1(c) or Section 5.1(d) of the Rite Aid Guaranty that Rite
Aid deliver to the Noteholders the financial statements referred to in
Section 5.1(a) or Section 5.1(b) of the Rite Aid Guaranty and the related
officer's certificate and statement of Rite Aid's independent accountants
referred to in Sections 5.1(c) and 5.1(d) of the Rite Aid Guaranty, such
Waivers to be effective solely for the period commencing on January 11,
2000 and ending on July 11, 2000. This Waiver shall be limited precisely as
written, and shall not extend to any delivery requirement under Section
5.1(a), Section 5.1(b), Section 5.1(c) or Section 5.1(d) of the Rite Aid
Guaranty during any other period.
2. WAIVERS TO NOTE AGREEMENT.
The Noteholders hereby waive any Default that would arise under
(a) Section 6(iv) due solely to Rite Aid's failure to deliver to the
Noteholders the financial statements referred to in Section 5.1(a) or
Section 5.1(b) of the Rite Aid Guaranty and the related officer's
certificate and statement of Rite Aid's independent accountants referred to
in Sections 5.1(c) and 5.1(d) of the Rite Aid Guaranty and (b) Section
6(vi) of the Note Agreement solely by reason of a default under any Public
Debt as a result of the failure of Rite Aid to file or deliver financial
statements or reports substantially the same as those described in Section
5.1(a), Section 5.1(b), Section 5.1(c) or Section 5.1(d) of the Rite Aid
Guaranty, such waivers to be effective solely for the period commencing on
January 11, 2000 and ending on July 11, 2000; provided, however, that the
Waiver in clause (b) of this paragraph shall terminate on the earlier of
(i) July 11, 2000 or (ii) the date that is 10 days prior to the earliest
date on which any holder of Public Debt or any trustee or other
representative of any such holder shall have a present right to accelerate
the maturity thereof by reason of any such default waived hereunder. This
Waiver shall be limited precisely as written, and shall not extend to any
Default under any other provision of the Note Agreement during any other
period.
Exhibit 4.26
FINCO, INC.
7.30% SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
AMENDMENT NO. 2 TO NOTE AGREEMENT
RITE AID CORPORATION
AMENDMENT NO. 2 TO GUARANTY AGREEMENT
As of December 2, 1999
TO EACH OF THE CURRENT NOTEHOLDERS
NAMED IN ANNEX 1 HERETO:
Ladies and Gentlemen:
FINCO, INC. (hereinafter "FINCO"), a Delaware corporation and RITE
AID CORPORATION (hereinafter "RITE AID", and, together with Finco,
collectively, the "COMPANIES") (together with their successors and assigns)
agree with you as follows:
1. PRELIMINARY STATEMENTS.
1.1 Note Issuance, etc.
Finco issued and sold $79,560,908.91 aggregate principal amount of
its 7.30% Senior Secured Notes due February 28, 2002 (as may be amended,
restated or otherwise modified from time to time, the "NOTES") pursuant to
a Note Agreement dated September 30, 1996 (as previously amended pursuant
to Amendment No. 1 to Note Agreement dated as of October 25, 1999, and as
in effect immediately prior to giving effect to the Amendments provided for
by this Amendment Agreement, the "EXISTING NOTE AGREEMENT"). Rite Aid has
entered into a Guaranty Agreement, also dated as of September 30, 1996 (as
previously amended pursuant to Amendment No. 1 to Guaranty Agreement dated
as of October 25, 1999, and as in effect immediately prior to giving effect
to the Amendments provided for by this Amendment Agreement, the "EXISTING
RITE AID GUARANTY") with the Noteholders, whereby in consideration of the
purchase of the Notes it unconditionally and absolutely guaranteed Finco's
performance of its obligations under the Existing Note Agreement. The
register for the registration and transfer of the Notes indicates that the
Persons named in Annex 1 hereto (collectively, the "CURRENT NOTEHOLDERS")
are currently the holders of the entire outstanding principal amount of the
Notes.
2. DEFINED TERMS.
Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them in the Existing Note Agreement.
3. AMENDMENTS.
Subject to Section 5, the Existing Note Agreement and the Existing
Rite Aid Guaranty are amended as provided for by this Amendment No. 2 to
Note Agreement and Amendment No. 2 to Guaranty Agreement (collectively,
this "AMENDMENT AGREEMENT") in the manner specified in Exhibit A. The
amendments referred to herein are referred to herein, collectively, as the
"AMENDMENTS".
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce you to enter into this Amendment Agreement and to consent
to the Amendments, the Companies, jointly and severally, represent and
warrant as follows:
4.1 Organization, Power and Authority, etc.
The Companies are corporations duly incorporated and validly existing
in good standing under the laws of their respective jurisdictions of
incorporation and have all requisite corporate power and authority to enter
into and perform their respective obligations under this Amendment
Agreement.
4.2 Legal Validity.
The execution and delivery of this Amendment Agreement by each of the
Companies and compliance by them with their obligations hereunder: (a) are
within the corporate powers of the respective Companies; and (b) are legal
and do not conflict with, result in any breach of, constitute a default
under, or result in the creation of any Lien upon any Property of either
Company under the provisions of: (i) any charter instrument or bylaw to
which either Company is a party or by which either Company or any of its
Property may be bound; (ii) any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority applicable to either Company or
its Property; or (iii) any agreement or instrument to which either Company
is a party or by which either Company or any of its Property may be bound
or any statute or other rule or regulation of any Governmental Authority
applicable to either Company or its Property, except where such conflict,
breach or default could not reasonably be expected to have a Material
Adverse Effect.
This Amendment Agreement has been duly authorized by all necessary
action on the part of the Companies, has been executed and delivered by a
duly authorized officer of the Companies, and constitutes a legal, valid
and binding obligation of each of the Companies enforceable in accordance
with its terms, except that enforceability may be limited by applicable
bankruptcy, reorganization, arrangement, insolvency, moratorium, or other
similar laws affecting the enforceability of creditors' rights generally
and subject to the availability of equitable remedies.
4.3 No Defaults.
No event has occurred and no condition exists that, upon the
execution and delivery of this Amendment Agreement, would constitute a
Default or an Event of Default.
The Current Noteholders understand that the Morgan Credit Agreement
Amendment (as hereinafter defined) is amending the Amended and Restated
Credit Agreement, dated as of October 25, 1999, among the Guarantor, the
banks from time to time parties thereto, and Morgan Guaranty Trust Company
of New York, as agent (the "EXISTING CREDIT AGREEMENT"). Pursuant to
Section 6.2 of the Rite Aid Guaranty, the provisions of Sections 5.7 to
5.13, inclusive (the "GUARANTY COVENANTS") of the Rite Aid Guaranty, and
the definitions of defined terms used therein, are automatically amended to
be identical to the equivalent covenants and definitions in the Existing
Credit Agreement upon the effectiveness of any amendment to the Existing
Credit Agreement. The Current Noteholders acknowledge and agree that all of
the Guaranty Covenants, and the definitions of defined terms used therein,
are being so automatically amended by the Morgan Credit Agreement
Amendment. The Current Noteholders and the Companies acknowledge and agree
that, pursuant to Section 5.16 of the Existing Guaranty Agreement, all
covenants in Section 5 of the Amended Morgan Credit Agreement (as
hereinafter defined) are incorporated into the Existing Rite Aid Guaranty,
as amended hereby.
5. EFFECTIVENESS OF AMENDMENTS.
The Amendments shall become effective on such date (the "EFFECTIVE
DATE") as
(i) the Companies and the Current Noteholders shall have
indicated their written consent to the Amendments by executing and
delivering to each other counterparts of this Amendment Agreement,
(ii) Amendment No. 1 to Amended and Restated Credit Agreement,
dated as of December 2, 1999, among Rite Aid, the banks from time to time
parties thereto, and Morgan Guaranty Trust Company of New York, as Agent
shall have been executed and delivered by the parties thereto in the form
attached hereto as Exhibit B (the "MORGAN CREDIT AGREEMENT AMENDMENT")
(such Amended and Restated Credit Agreement, as so amended, being referred
to herein as the "AMENDED MORGAN CREDIT AGREEMENT"), and
(iii)the Companies shall have made payment of the fee payable
to the Noteholders pursuant to Section 6 of this Amendment Agreement and
the expenses to be paid on behalf of the Noteholders pursuant to Section 7
of this Amendment Agreement (to the extent a statement therefor has been
presented to the Companies on or prior to the Effective Date).
6. FEE.
In consideration of the consent by the Noteholders to the Amendments,
the Companies shall pay a combined fee to the Noteholders on the Effective
Date in an amount equal to .25% of the aggregate principal amount of the
Notes outstanding on such date. Such combined fee shall be paid to the
Noteholders ratably in accordance with the respective principal amounts of
Notes held by them and in the manner and to the accounts specified in the
Existing Note Agreement for payments of principal and interest on the
Notes.
7. EXPENSES.
Whether or not the Amendments become effective, the Companies will
promptly (and in any event within thirty days of receiving any statement or
invoice therefor) pay all fees, expenses and costs relating to this
Amendment, including, but not limited to, the reasonable fees of your
special counsel, Bingham Dana LLP, incurred in connection with the
preparation, negotiation and delivery of the Amendment Agreement and any
other documents related thereto. Nothing in this Section shall limit the
Companies' obligations pursuant to paragraph 10B of the Existing Note
Agreement and Section 6.1 of the Rite Aid Guaranty.
8. MISCELLANEOUS.
8.1 Part of Existing Note Agreement, Future References, etc.
This Amendment Agreement shall be construed in connection with and as
a part of the Existing Note Agreement, the Notes and the Existing Rite Aid
Guaranty and, except as expressly amended by this Amendment Agreement, all
terms, conditions and covenants contained in the Existing Note Agreement,
the Notes and the Existing Rite Aid Guaranty are hereby ratified and shall
be and remain in full force and effect. Any and all notices, requests,
certificates and other instruments executed and delivered after the
execution and delivery of this Amendment Agreement may refer to the
Existing Note Agreement, the Notes and the Existing Rite Aid Guaranty
without making specific reference to this Amendment Agreement, but
nevertheless all such references shall include this Amendment Agreement
unless the context otherwise requires.
8.2 Counterparts.
This Amendment Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed by all,
of the parties hereto.
8.3 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF
NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT
WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN NEW
YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE
IS SIGNATURE PAGE.]
If you are in agreement with the foregoing, please so indicate by
signing the acceptance below on the accompanying counterpart of this
agreement and returning it to the Companies, whereupon it will become a
binding agreement among you and the Companies.
FINCO, INC.
BY:________________________________________
Name:
Title:
RITE AID CORPORATION
BY:________________________________________
Name:
Title:
The foregoing Amendment Agreement is hereby accepted as of the date
first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
BY:______________________________________
Name:
Title:
PRUCO LIFE INSURANCE COMPANY
BY:______________________________________
Name:
Title:
EXHIBIT A
AMENDMENTS
1. Amendments to Existing Note Agreement.
(a) The definition of "Morgan Credit Agreement" in paragraph 9B is
hereby amended and restated in its entirety as follows:
"MORGAN CREDIT AGREEMENT" the Amended and Restated Credit
Agreement, dated as of October 25, 1999, as amended by Amendment No.
1 to Amended and Restated Credit Agreement, dated as of December 2,
1999, among the Guarantor, the banks from time to time parties
thereto, and Morgan Guaranty Trust Company of New York, as Agent, as
in effect on the Effective Date of the Note/Guaranty Agreement.
(b) The definition of "Note/Guaranty Agreement" in paragraph 9B is
hereby amended and restated in its entirety as follows:
"NOTE/GUARANTY AGREEMENT" means Amendment No. 2 to Note
Agreement and Amendment No. 2 to Guaranty Agreement, dated as
of December [__], 1999, among the Company, the Guarantor and the
holders of the Notes.
2. Amendments to Existing Rite Aid Guaranty Agreement.
(a) The definition of "Morgan Credit Agreement" in Section 3.1 of the
Existing Rite Aid Guaranty is hereby amended and restated in its entirety
as follows:
"MORGAN CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement, dated as of October 25, 1999, as amended by Amendment No.
1 to Amended and Restated Credit Agreement, dated as of December 2,
1999, among the Guarantor, the banks from time to time parties
thereto, and Morgan Guaranty Trust Company of New York, as Agent, as
in effect on the Effective Date of the Note/Guaranty Agreement (as
defined in the Note Agreement).
EXHIBIT B
Exhibit 4.27
FINCO, INC.
7.30% SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
AMENDMENT NO. 1 TO NOTE AGREEMENT
RITE AID CORPORATION
AMENDMENT NO. 1 TO GUARANTY AGREEMENT
As of October 25, 1999
TO EACH OF THE CURRENT NOTEHOLDERS
NAMED IN ANNEX 1 HERETO:
Ladies and Gentlemen:
FINCO, INC. (hereinafter "FINCO"), a Delaware corporation and RITE
AID CORPORATION (hereinafter "RITE AID") (together with their successors
and assigns) agree with you as follows:
1. PRELIMINARY STATEMENTS.
1.1. NOTE ISSUANCE, ETC.
Finco issued and sold $79,560,908.91 aggregate principal amount of
its 7.30% Senior Secured Notes due February 28, 2002 (as may be amended,
restated or otherwise modified from time to time, the "NOTES") pursuant to
a Note Agreement dated September 30, 1996 (the "NOTE AGREEMENT"). Rite Aid
has entered into a Guaranty Agreement (the "Guaranty") with the
Noteholders, also dated September 30, 1996, whereby in consideration of the
purchase of the Notes it unconditionally and absolutely guaranteed Finco's
performance of its obligations under the Note Agreement. The aggregate
principal amount of the Notes currently outstanding is $49,189,662. The
register for the registration and transfer of the Notes indicates that each
of the Persons in named Annex 1 hereto (collectively, the "CURRENT
NOTEHOLDERS") is currently a holder of the aggregate principal amount of
Notes indicated in such Annex.
2. DEFINED TERMS.
Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them in the Note Agreement.
3. REQUEST FOR CONSENT TO AMENDMENTS.
Finco and Rite Aid (collectively the "COMPANIES") request that each
of you consent to the amendments to the Note Agreement (the "AMENDMENTS")
provided for by this Amendment No. 1 to Note Agreement and Amendment No. 1
to Guaranty Agreement (collectively, this "AMENDMENT AGREEMENT").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce you to enter into this Amendment Agreement and to consent
to the Amendments, the Companies, jointly and severally, represent and
warrant as follows:
4.1. ORGANIZATION, POWER AND AUTHORITY, ETC.
The Companies are corporations duly incorporated and validly existing
in good standing under the laws of their respective jurisdictions of
incorporation.
4.2. LEGAL VALIDITY.
The execution and delivery of this Amendment Agreement by each of the
Companies and compliance by them with their obligations hereunder: (a) are
within the corporate powers of the respective Companies; and (b) are legal
and do not conflict with, result in any breach of, constitute a default
under, or result in the creation of any Lien upon any Property of either
Company under the provisions of: (i) any charter instrument or bylaw to
which either Company is a party or by which either Company or any of its
Property may be bound; (ii) any order, judgement, decree or ruling of any
court, arbitrator or Governmental Authority applicable to either Company or
its Property; or (iii) any agreement or instrument to which either Company
is a party or by which either Company or any of its Property may be bound
or any statute or other rule or regulation of any Governmental Authority
applicable to either Company or its Property, except where such conflict,
breach or default could not reasonably be expected to have a Material
Adverse Effect.
This Amendment Agreement has been duly authorized by all necessary
action on the part of the Companies, has been executed and delivered by a
duly authorized officer of the Companies, and constitutes a legal, valid
and binding obligation on each of the Companies enforceable in
accordance with its terms, except that enforceability may be limited by
applicable bankruptcy, reorganization, arrangement, insolvency, moratorium,
or other similar laws affecting the enforceability of creditors' rights
generally and subject to the availability of equitable remedies.
4.3. NO DEFAULTS.
No event has occurred and no condition exists that, upon the
execution and delivery of this Amendment Agreement, would constitute a
Default or Event of Default.
5. AMENDMENTS.
The Note Agreement, each of the Notes outstanding on the
Effective Date and the Rite Aid Guaranty are hereby amended in the manner
specified in Exhibit A.
5.1. EFFECTIVENESS OF AMENDMENTS.
The Amendments shall become effective on such date (the "EFFECTIVE
DATE") as
(i) the Companies and the Current Noteholders shall have indicated
their written consent to the Amendments by executing and delivering to each
other counterparts of this Agreement,
(ii) the Amended and Restated Credit Agreement, dated as of October
25, 1999, among Rite Aid, the banks from time to time parties thereto, and
Morgan Guaranty Trust Company of New York, as Agent (the "MORGAN CREDIT
AGREEMENT") shall have been executed and delivered by the parties thereto,
(iii) the Loan Documents (as defined in the Morgan Credit Agreement)
shall have been executed and delivered by the parties thereto, and
(iv) the Companies shall have made payment of the fee payable to the
Noteholders pursuant to Section 6 of this Amendment Agreement and the
expenses to be paid on behalf of the Noteholders pursuant to Section 7 of
this Amendment Agreement (to the extent a statement therefor has been
presented to the Companies on or prior to the Effective Date).
6. FEE.
In consideration of the consent by the Noteholders to the Amendments,
the Companies shall pay a combined fee to the Noteholders on the Effective
Date in the aggregate amount of $555,586. Such combined fee shall be paid
to the Noteholders ratably in accordance with the respective principal
amounts of Notes held by them and in the manner and to the accounts
specified in the Note Agreement for payments of principal and interest on
the Notes.
7. EXPENSES.
Whether or not the Amendments become effective, the Companies will
promptly (and in any event within thirty days of receiving any statement or
invoice therefor) pay all fees, expenses and costs relating to this
Amendment, including, but not limited to, the reasonable fees of your
special counsel, Bingham Dana LLP, incurred in connection with the
preparation, negotiation and delivery of the Amendment Agreement and any
other documents related thereto. Nothing in this Section shall limit the
Companies' obligations pursuant to paragraph 10B of the Note Agreement.
8. MISCELLANEOUS.
8.1. PART OF NOTE AGREEMENT, FUTURE REFERENCES, ETC.
This Amendment Agreement shall be construed in connection with
and as a part of the Note Agreement and, except as expressly amended
by this Amendment Agreement, all terms, conditions and covenants
contained in the Note Agreement and Notes are hereby ratified and
shall be and remain in full force and effect. Any and all notices,
requests, certificates and other instruments executed and delivered
after the execution and delivery of this Amendment Agreement may
refer to the Note Agreements and the Notes without making specific
reference to this Amendment Agreement, but nevertheless all such
references shall include this Amendment Agreement unless the context
otherwise requires.
8.2. COUNTERPARTS.
This Amendment Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may
consist of a number of copies hereof, each signed by less than all,
but together signed by all, of the parties hereto.
8.3. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW
OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN NEW YORK.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
NEXT PAGE IS SIGNATURE PAGE.]
If you are in agreement with the foregoing, please so indicate
by signing the acceptance below on the accompanying counterpart of this
agreement and return it to the Companies, whereupon it will become a
binding agreement among you and the Companies.
FINCO, INC.
BY:
NAME:
TITLE:
RITE AID CORPORATION
BY:
NAME:
TITLE:
The foregoing Agreement is hereby accepted as of the date first above
written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
BY:
NAME:
TITLE:
PRUCO LIFE INSURANCE COMPANY
BY:
NAME:
TITLE:
EXHIBIT A
AMENDMENTS
1. CHANGE IN INTEREST RATE.
(a) Paragraph 1 of the Note Agreement is hereby amended and
restated in its entirety as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will
authorize the issue and sale of its senior promissory ntoes
(the "NOTES") in the aggregate principal amount of Seventy-Nine
Million, Five Hundred Sixty Thousand Nine Hundred Eight and
91/100 Dollars ($79,560,908.91) to be dated the date of issue
thereof, to mature on February 28, 2002, to bear interest on
the unpaid balance thereof from February 28, 1997 (or such
later day as any Note shall be dated upon an exchange of Notes)
until the principal thereof shall have become due and payable
at the rate specified below in this Section 1, payable monthly
on the last day of each month commencing on March 31, 1997 and
at maturity, and on overdue principal, Yield-Maintenance Amount
and accrued interest at the rate specified therein, and to be
substantially in the form of Exhibit A attached hereto with
such changes therefrom, if any, as may be approved by the
Purchasers and the Company. Interest on the Notes shall be
computed on the basis of a 360-day year of twelve 30-day
months. The term "Notes" as used herein shall include each Note
delivered pursuant to any provision hereof and each Note
delivered in substitution or exchange for any such Note
pursuant to any such provision. The interest rate applicable to
the Notes shall be nine and two-tenths percent (9.20%) per
annum from and including the Effective Date of the First
Amendment to, but not including, the same date of the sixth
month thereafter (the "SIX MONTH ANNIVERSARY DATE"). Subject to
the last sentence of this Section 1, commencing on the Six
Month Anniversary Date, the interest rate applicable to the
Notes at any time shall be the rate set forth below opposite
the lowest Credit Rating of either Rating Agency in effect for
any Senior Public Obligations of the Guarantor at such time:
[TABLE OMITTED]
(b) The first paragraph of the form of Note attached to the
Note Agreement as Exhibit A is hereby amended and restated in its
entirety as set forth below in this paragraph (b), and a portion of
the first paragraph of each Note that is outstanding on the Effective
Date of the First Amendment, commencing with clause (a) thereof and
continuing through the end of such paragraph, shall also be deemed to
have been amended and restated in its entirety as set forth below in
this paragraph (b), without any surrender and exchange of any such
Note, any notation of such amendment thereon, or any other action
whatsoever. References to the "Note Agreement" in the form of Note
and such outstanding Notes shall be deemed to mean the Note Agreement
as amended by this Amendment Agreement.
- -------------
1/ The interest rate is stated to be 9.20% for six months. SHOULD THE RATE
GO UP BY 50 BASIS POINTS IF THE ASSET SALE TARGET IS NOT REACHED BY THE
TARGET DATE (WHICH IS LESS THAN 6 MONTHS FROM THE EFFECTIVE DATE OF THE
FIRST AMENDMENT).
FOR VALUE RECEIVED, the undersigned, FINCO, INC. (herein
called the "COMPANY"), a corporation organized and existing
under the State of Delaware, hereby promises to pay to
_____________ or registered assigns, the principal sum of
___________ DOLLARS ($___) on February 28, 2002 with interest
(computed on the basis of a 360-day year of twelve 30- day
months) (a) on the unpaid balance thereof at the rate of seven
and three tenths percent (7.30%) per annum until the Effective
Date of the First Amendment (as defined in the Note Agreement
referred to below) and thereafter at the rate specified in the
first paragraph of the Note Agreement referred to below, such
rate to be effective from the later of (i) the date hereof or
(ii) February 28, 1997, payable monthly on the last day of each
month commencing on March 31, 1997, until the principal hereof
shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any
overdue payment of Yield-Maintenance Amount (as defined in the
Note Agreement referred to below) and, to the extent permitted
by applicable law, any overdue payment of interest, payable on
demand, at a rate per annum from time to time equal to the
lesser of (A) the highest rate allowed by applicable law, or
(B) the greater of (1) two percent (2.00%) over the rate of
interest then applicable to this Note and (2) two percent
(2.00%) over the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New
York City as its Prime Rate.
2. PUT OPTION FOLLOWING A RATING DECLINE.
(a) Clause (i) of paragraph 4B of the Note Agreement is
hereby amended and restated in its entirety as follows:
(I) RATING DECLINE. In the event that any Senior
Obligations of the Guarantor shall not be rated Investment
Grade by at least two (2) Rating Agencies at any time on or
after November 1, 2000, each Noteholder will have the right to
elect, prior to the Restoration Date, to require the Company to
redeem such Note in whole (but not in part) on the Redemption
Date at a price equal to the Redemption Price.
3. Asset Sale Prepayments. A new paragraph 4H is
hereby added to the Note Agreement to read as follows:
4H SALE OF ASSETS. The Company shall prepay a
principal amount of the Notes equal to the Prudential Pro Rata
Exposure in the amounts and at the times specified in Section 2.10 of
the Morgan Credit Agreement, together with interest on such principal
amount accrued to the date of prepayment and the Yield- Maintenance
Amount, if any.2/
4. DEFINED TERMS. The following defined terms are hereby added
to paragraph 9B of the Note Agreement:
"CREDIT RATING" means the rating accorded to Senior Public
Obligations of the Guarantor by a Rating Agency.
"EFFECTIVE DATE" has the meaning set forth in
the First Amendment.
"FIRST AMENDMENT" means Amendment No. 1 to Note Agreement and
Amendment No. 1 to Guaranty Agreement, dated as of October 25, 1999,
among the Company, the Guarantor and the holders of the Notes.
"MORGAN CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement, dated as of October 25, 1999, among the Guarantor, the
banks from time to time parties thereto, and Morgan Guaranty Trust
Company of New York, as Agent, as in effect on the Effective Date of
the First Amendment.
"NET CASH PROCEEDS" has the meaning set forth
in the Morgan Credit Agreement.
"PRUDENTIAL PRO RATA EXPOSURE" has the meaning set forth
in the Morgan Credit Agreement.
- --------
2 /Paragraph 4H requires the Company to apply the entire amount of the
asset sale proceeds allocable to the Notes to prepay the principal amount
of the Notes. Funds for payment of interest and Yield-Maintenance Amount
must be found elsewhere. IS THIS THE DEAL, OR SHOULD PRINCIPAL, INTEREST
AND YIELD-MAINTENANCE AMOUNT ALL BE PAYABLE OUT OF ASSET SALE PROCEEDS
ALLOCABLE TO THE NOTES?
"REDUCTION EVENT" has the meaning set forth in the Morgan
Credit Agreement.
"SENIOR PUBLIC OBLIGATIONS" means, with respect to the
Guarantor, Senior Obligations of the Guarantor that have been
registered with the Securities and Exchange Commission pursuant to an
effective registration statement under the Securities Act.
5. AMENDMENTS TO GUARANTY AGREEMENT.
(a) Section 6.2 of the Rite Aid Guaranty is hereby amended and
restated in its entirety as follows:
6.2 AMENDMENT.
(a) This Guarantee may be amended only in a writing
executed by the Guarantor and the Required Holders. Subject to
the next succeeding sentence, the covenants set forth in
Sections 5.7 through 5.13, inclusive, hereof, and the
definitions of defined terms used therein, shall be deemed to
be automatically amended to be identical to the equivalent
covenants and definitions in the Morgan Credit Agreement
effective upon the effectiveness of any amendment thereto in
the Morgan Credit Agreement. Any such deemed amendment shall
automatically cease to be effective upon the termination of the
Morgan Credit Agreement or any repayment of all or
substantially all of the indebtedness outstanding thereunder,
if such termination or repayment shall occur within one hundred
eighty (180) days after the effectiveness of such deemed
amendment. In addition, any such deemed amendment shall not
annul or otherwise have any effect on any acceleration of the
Notes pursuant to paragraph 6 of the Note Agreement if such
amendment shall become effective after such acceleration shall
have occurred.
(b) The Guarantor shall provide to each holder of Notes a
copy of each draft of any amendment to the Morgan Credit
Agreement, and the final executed copy thereof, if any portion
of such proposed amendment would result in an automatic
amendment hereof pursuant to Section 6.2(a). Such drafts and
final executed copy will be furnished to the holders of the
Notes either within one Business Day after the Guarantor's
receipt thereof (if another party shall have prepared the draft
or final executed copy) or simultaneously with the delivery
thereof to any party to the Morgan Credit Agreement (if the
Guarantor, the Issuer or any of their respective affiliates
shall have prepared such draft or final executed copy).
(c) Neither the Guarantor nor the Issuer, nor any of
their respective affiliates, will directly or indirectly pay or
cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant
any security , to any party to the Morgan Credit Agreement as
consideration for or as an inducement to the entering into by
any such party of any waiver or amendment of any of the terms
and provisions of the Morgan Credit Agreement which would
result in an automatic amendment of the provisions hereof
pursuant to Section 6.2(a) hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the
same terms ratably to each holder of Notes then outstanding.3/
(b) The definition of "Credit Agreement" is deleted from
Section 3.1 of the Guaranty and the following definition is hereby added to
such Section:
"MORGAN CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement, dated as of October 25, 1999, among the Guarantor, the
banks from time to time parties thereto, and Morgan Guaranty Trust
Company of New York, as Agent, as in effect on the Effective Date of
the First Amendment.
- --------
3/ The draft does not provide for the Noteholders to receive
any fee or security if there is an amendment to the Morgan
Credit Agreement which does not result in an automatic
amendment to the Guaranty (e.g., a change in an interest rate).
RITE AID CORPORATION
GUARANTY AGREEMENT
--------------------------------------------
--------------------------------------------
DATED AS OF SEPTEMBER 30, 1996
RE: $79,560,908.91 7.30% SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
ISSUED BY:
FINCO, INC.
TABLE OF CONTENTS
(Not a Part of the Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. PRELIMINARY STATEMENT..........................................................................1
2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS.....................................................2
2.1 Guaranteed Obligations..............................................................2
2.2 Performance Under the Guaranteed Agreements.........................................2
2.3 Releases............................................................................3
2.4 Waivers.............................................................................3
2.5 Certain Waivers of Subrogation, Reimbursement and Indemnity.........................6
2.6 Invalid Payments................................................................... 6
2.7 Marshaling..........................................................................6
2.8 Subordination...................................................................... 6
2.9 Setoff, Counterclaim or Other Deductions............................................7
2.10 Election by Guarantor to Perform Obligations........................................7
2.11 No Election of Remedies by Noteholders..............................................7
2.12 Separate Action, Other Enforcement Rights ..........................................7
2.13 Noteholder Setoff...................................................................8
2.14 Delay or Omission; No Waiver........................................................8
2.15 Restoration of Rights and Remedies..................................................8
2.16 Cumulative Remedies................................................................ 8
2.17 Maintenance of Office...............................................................8
2.18 Further Assurances..................................................................8
3. INTERPRETATION OF THIS GUARANTY................................................................9
3.1 Terms Defined...................................................................... 9
3.2 Section Headings and Construction..................................................15
4. WARRANTIES AND REPRESENTATION.................................................................15
4.1 Condition of the Issuer............................................................15
4.2 Organization.......................................................................15
4.3 Financial Statements...............................................................16
4.4 Actions Pending....................................................................16
4.5 Outstanding Debt...................................................................16
4.6 Title to Properties................................................................16
4.7 Taxes..............................................................................16
4.8 Conflicting Agreements and Other Matters...........................................16
4.9 Regulation G, etc..................................................................17
4.10 ERISA..............................................................................17
4.11 Compliance With Law................................................................17
4.12 Governmental Consent...............................................................18
4.13 Disclosure.........................................................................18
4.14 Certain Laws.......................................................................18
5. COVENANTS.....................................................................................19
5.1 Information........................................................................19
5.2 Payment of Obligations.............................................................21
5.3 Maintenance of Property; Insurance.................................................21
5.4 Conduct of Business and Maintenance of Existence...................................21
5.5 Compliance with Laws...............................................................22
5.6 Inspection of Property, Books and Records..........................................22
5.7 Restriction on Debt of Subsidiaries................................................22
5.8 Restriction on Sales with Leases Back..............................................22
5.9 Restriction on Liens...............................................................23
5.10 Leverage Ratio.....................................................................25
5.11 Fixed Charge Coverage..............................................................25
5.12 Limitation on Minority Investments.................................................25
5.13 Consolidations, Mergers and Sales of Assets........................................25
5.14 Master Lease.......................................................................25
5.15 Retirement of Notes................................................................25
6. MISCELLANEOUS.................................................................................26
6.1 Expenses...........................................................................26
6.2 Amendment..........................................................................26
6.3 Survival of Representations and Warranties.........................................26
6.4 Successors and Assigns.............................................................27
6.5 Communications.....................................................................27
6.6 Descriptive Headings, etc..........................................................28
6.7 Satisfaction Requirement...........................................................28
6.8 Partial Invalidity.................................................................28
6.9 Governing Law......................................................................28
6.10 Effective Date.....................................................................28
6.11 Benefits of Guaranty Restricted to Noteholders.....................................28
6.12 Consent to Jurisdiction: Appointment of Agent......................................28
6.13 Survival...........................................................................29
6.14 Entire Agreement...................................................................29
6.15 Duplicate Originals, Execution in Counterpart......................................29
Annex 1 - Address of Guarantor
</TABLE>
GUARANTY
THIS GUARANTY, dated as of September 30,1996 (as amended or
restated from time to time, this "Guaranty"), by RITE AID CORPORATION, a
Delaware corporation (together with its successors and assigns, the
"Guarantor"), in favor of each of the Noteholders (as such term is
hereinafter defined).
1. PRELIMINARY STATEMENT.
1.1 Certain operating subsidiaries of the Guarantor (the
"Operating Subsidiaries') entered into certain Bills of Sale and Purchase
and Sale Agreements, all dated February 29, 1996 (such Bills of Sale and
Purchase and Sale Agreement being collectively referred to here-in as the
"Sales Agreements"), with Realty Leasing Consultants, Inc., a Delaware
corporation ("RLC"), pursuant to which the Operating Subsidiaries
transferred, assigned and sold to RLC all of their right, title and
interest in and to various improvements located in approximately two
thousand one hundred (2, 100) retail stores operated by the Operating
Subsidiaries (the "Improvements'), and, in payment therefor, RLC delivered
certain promissory notes (the "RLC Notes") to an agent for the Operating
Subsidiaries.
1.2 RLC entered into the RLC/RA Master Lease Agreement, dated
February 29, 1996 (as amended from time to time, the "Master Lease"), with
Rite Aid of Florida, Inc., a Subsidiary of the Guarantor and a Florida
corporation ('Rite Aid Florida"), pursuant to which RLC leased the
Improvements to Rite Aid Florida. T:Zite Aid Florida has entered into
subleases (the "Subleases') with the Operating Subsidiaries pursuant to
which Rite Aid Florida subleases the Improvements to the Operating
Subsidiaries.
1.3 In connection with the foregoing, the Guarantor issued the
RLC/RA Guarantee Agreement, dated as of February 29, 1996, in favor of RLC
and its successors and assigns, pursuant to which the Guarantor, among
other things, guaranteed the obligations of the Operating Subsidiaries
under the Sales Agreements and the Subleases and the obligations of Rite
Aid Florida under the Master Lease.
1.4 RLC is entering into the Rent Purchase Agreement, dated as of
September 30, 1996 (the "Rent Purchase Agreement), with Finco, Inc., a
Delaware corporation (together with its successors and assigns, the
"Issuer"), pursuant to which RLC is transferring, assigning and selling to
the Issuer all of its right, We and interest -in and to rental payments
(the "Rental Payments') owed by Rite Aid Florida under, together with
certain related rights under, the Master Lease in respect of the period
commencing on March 1, 1997 and concluding on (and including) February 28,
2002. RLC will use the proceeds of such transaction to pay, in part, its
obligations under the RLC Notes.
1.5 To finance such purchase of Rental Payments under the Rent
Purchase Agreement, the Issuer has authorized the issuance of its 7.30%
Senior Secured Notes due February 28, 2002 (as may be amended or restated
from time to time, the "Notes"), in the aggregate principal amount of
Seventy-Nine Million Five Hundred Sixty Thousand Nine Hundred Eight and
91/100 Dollars ($79,560,908.91), pursuant to the Note Agreement (as may be
amended or restated from time to time, the "Note Agreement'), dated as of
September 30, 1996, entered into among the Issuer and each of the
purchasers named on Annex 1 thereto (the "Purchasers").
1.6 The Guarantor is issuing this Guaranty to induce the
Purchasers to purchase the Notes so that the Issuer will have funds
available to pay RLC for the Rental Payments and RLC, in turn, will have
funds available to pay:, in part, its obligations under the RLC Notes.
1.7 All acts and proceedings required by law and by the
certificate of incorporation and bylaws of the Guarantor necessary to
constitute this Guaranty a valid and binding agreement for the uses and
purposes set forth herein in accordance with its terms have been done and
taken, and the execution and delivery hereof has been in all respects duly
authorized.
2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS
2.1 Guaranteed Obligations.
The Guarantor, in consideration of the execution and delivery of
the Note Agreement and the purchase of the Notes by the Purchasers, hereby
irrevocably, unconditionally, and absolutely guarantees, on a continuing
basis, to each Noteholder, as and for the Guarantor's own debt, until final
and indefeasible payment has been made:
(a) the due and punctual payment by the Issuer of the principal
of, and accrued interest and the Yield-Maintenance Amount (if any) on,
the Notes at any time outstanding and the due and punctual payment of
all other amounts payable, and all other indebtedness owing, by the
Issuer under the Notes and the Note Agreement (the "Guaranteed
Agreements"), in each case when and -as the same shall become due and
payable, whether at maturity, pursuant to mandatory or optional
prepayment (by means of a put to the Issuer or otherwise), by
acceleration or otherwise, all in accordance with the terms and
provisions hereof and thereof, it being the intent of the Guarantor
that the guaranty set forth herein shall be a continuing guaranty of
payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping, observance,
and fulfillment by the Issuer of all duties. agreements, covenants and
obligations of the Issuer contained' in the Guaranteed Agreements.
All of the obligations set forth in subsection (a) and subsection (b) of
this Section 0 are referred to herein as the "Guaranteed Obligations" and
the guaranty thereof contained herein is referred to herein as the
"Unconditional Guaranty". This Unconditional Guaranty is a primary,
original and immediate obligation of the Guarantor and is an absolute,
unconditional, continuing and irrevocable guaranty of payment and
performance and shall remain in full force and effect until the full, final
and indefeasible payment of the Guaranteed Obligations.
2.2 Performance Under the Guaranteed Agreements.
In the event the Issuer fails to pay, perform, keep, observe, or
fulfill any Guaranteed Obligation in the manner provided in the Guaranteed
Agreements, the Guarantor shall cause forthwith to be paid the moneys, or
to be performed, kept, observed, or fulfilled each of such obligations, in
respect of which such failure has occurred in accordance with the terms and
provisions of the Guaranteed Agreements- In furtherance of the foregoing,
if an Event of Default shall exist, all of the Guaranteed Obligations
shall, in the manner and subject to the limitations provided in the Note
Agreement for the acceleration of the Notes, forthwith become due and
payable without notice, regardless of whether the acceleration of the Notes
shall be stayed, enjoined, delayed or otherwise prevented.
2.3 Releases.
The Guarantor consents and agrees that, without any notice
whatsoever to or by the Guarantor and without impairing, releasing,
abating, deferring, suspending, reducing, terminating or otherwise
affecting the obligations of the Guarantor hereunder, each Noteholder, by
action or inaction, may:
(a) compromise or settle, renew or extend the period of duration
or the time for the payment of the obligations under, or discharge the
performance of, or may refuse to, or otherwise not, enforce, or may,
by action or inaction, release all or any one or more parties to. any
one or more of the Financing Documents, or any other guaranty,
agreement or instrument related thereto;
(b) assign, sell or transfer, or otherwise dispose of, any one
or more of the Notes;
(c) grant waivers, extensions, consents and other indulgences of
any kind whatsoever to the Issuer or any other guarantor in respect of
any one or more of the Financing Documents, or
any other guaranty, agreement or instrument related thereto;
(d) amend, modify or supplement in any manner whatsoever and at
any time (or from time to time) any one or more of the Financing
Documents, or any other guaranty. agreement or instrument related
thereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guaranteed Obligations whether parties hereto or
not; and
(f) sell, exchange, release, surrender or enforce, by action or
inaction, any Property at any time pledged or granted as security in
respect of the Guaranteed Obligations, whether so pledged or granted
by the Issuer, the Guarantor or another guarantor of the Issuer's
obligations under the Financing Documents, or any other guaranty,
agreement or instrument related thereto.
2.4 Waivers.
To the fullest extent permitted by law, the Guarantor does hereby
waive:
(a) any notice of
(i) acceptance of this Unconditional Guaranty;
(ii) the issuance and any purchase of the Notes under the
Note Agreement or the creation, existence or acquisition of any of the
Guaranteed Obligations, or the amount of the Guaranteed Obligations,
subject to the Guarantor's right to make inquiry of each Noteholder to
ascertain the amount of the Guaranteed Obligations owing to such
Noteholder at any reasonable time, provided that the Guarantor will
took solely to the Security Agent for the determination of the
identities of the Noteholders;
(iii) any transfer of Notes from one holder to another;
(iv) any adverse change in the financial condition of the
Issuer and the Subsidiaries or any other fact that might increase,
expand or affect the Guarantor's risk hereunder;
(v) presentment for payment, demand, protest, and notice
thereof as to the Notes or any other instrument;
(vi) any Default or Event of Default; and
(vii) any kind or nature whatsoever to which the Guarantor
might otherwise be entitled (other than those specifically required to
be given to the Guarantor pursuant to the terms of this Guaranty);
(b) the right by statute or otherwise to require any Noteholder to
institute suit against the Issuer or any other guarantor or to exhaust the
rights and remedies of any Noteholder against the Issuer or any other
guarantor;
(c) the benefit of any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any
time hereafter in force which, but for this waiver, might be applicable to
any sale of Property of the Guarantor made under any judgment, order or
decree based on this Guaranty, and the Guarantor covenants that it will not
at any time insist upon or plead, or in any manner claim or take the
benefit or advantage of, such law;
(d) any defense or objection to the absolute, primary. continuing
nature, or the validity, enforceability or amount, of this Unconditional
Guaranty, including, without limitation, any defense based on (and the
primary, continuing nature. and the validity, enforceability and amount, of
this Unconditional Guaranty shall be unaffected by) any of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without limitation,
the Financing Documents, or any agreement or instrument
related thereto) by the Issuer or any other Person;
(iv) the execution and delivery of any agreement at any
time hereafter (including, without limitation, the Financing Documents, or
any agreement or instrument related thereto) by the Issuer or any other
Person;
(v) the genuineness, validity, regularly or enforceability
of any of the Guaranteed Obligations;
(vi) any default, failure or delay, willful or otherwise,
in the performance of any obligations by the Issuer or the Guarantor;
(vii) any creditors' rights, bankruptcy, receivership or
other insolvency proceeding of the Issuer, the Guarantor or any Subsidiary
of the Guarantor, or sequestration or seizure of any Property of the
Issuer, the Guarantor or any Subsidiary of the Guarantor, or any merger,
consolidation, reorganization, dissolution, liquidation or winding up or
change in corporate constitution or corporate identity or loss of corporate
identity of the Issuer, the Guarantor or any Subsidiary of the Guarantor;
(viii) any disability or other defense of the Issuer or the
Guarantor to payment and performance of all Guaranteed Obligations
(including, without limitation, any defense based on or otherwise relating
to Rite Aid Florida having made or continuing to make payments under the
Master Lease) other than the defenses that the Guaranteed Obligations shall
have been fully and finally performed and indefeasibly paid to the
Noteholders or that the Notes have been indefeasibly acquired by the
Guarantor in compliance with the provisions of the Put Agreement;
(ix) the cessation from any cause whatsoever of the
liability of the Issuer or the Guarantor in respect of the Guaranteed
Obligations;
(x) impossibility or illegality of performance on the part
of the Issuer or the Guarantor under the Financing Documents;
(xi) any change of the circumstances of the Issuer, the
Guarantor or any other Person, whether or not foreseen or foreseeable,
whether or not imputable to the Issuer or the Guarantor, including, without
limitation, impossibility of performance through fire, explosion, accident
labor disturbance, floods, droughts, embargoes, wars (whether or not
declared), civil commotions, acts of God or the public enemy, delays or
failure of suppliers or carriers, inability to obtain materials, economic
or political conditions, or any other causes affecting performance, or any
other force majeure, whether or not beyond the control of the Issuer or the
Guarantor and whether or not of the kind hereinbefore specified;
(xii) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or reason, similar or
dissimilar to the foregoing, or any withholding or diminution at the
source, by reason of any taxes, assessments, expenses, indebtedness,
obligations or liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or any claims,
demands, charges, Liens or encumbrances of any nature, foreseen or
unforeseen, incurred by any Person, or against any sums payable under the
Financing Documents, or any agreement or instrument related thereto so that
such sums would be rendered inadequate or would be unavailable to make the
payment as herein provided;
(xiii) any change in the ownership of the equity securities
of the Issuer, the Guarantor or any other Person liable in respect of the
Notes; or
(xiv) any other action, happening, event or reason
whatsoever that shall delay, interfere with, hinder or prevent, or in any
way adversely affect, the performance by the Issuer or the
Guarantor of any of its obligations under the Financing Documents.
2.5 Certain Waivers of Subrogation, Reimbursement and Indemnity.
The Guarantor shall not assert any claim for subrogation,
reimbursement, or indemnity whatsoever in respect of the Guaranteed
Obligations, and no right of recourse to or with respect to any assets or
Property of the Issuer until such time as the Guaranteed Obligations shall
have been indefeasibly paid in full to the Noteholders. Until such time as
such payment shall have been made, all such rights to subrogation,
reimbursement and indemnity shall be subordinated to the rights of the
Noteholders hereunder and under the Guaranteed Agreements.
2.6 Invalid Payments.
To the extent the Issuer makes a payment or payments to any
Noteholder, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required. for any of the foregoing reasons or for any other reason, to be
repaid or paid over to a custodian, trustee, receiver or any other party or
officer under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
state or federal law, or any common law or equitable cause, then to the
extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and
effect as if said payment had not been made and the Guarantor shall be
primarily liable for such obligation.
2.7 Marshaling.
Neither any Noteholder nor any Person acting for the benefit of
any Noteholder shall be under any obligation to marshal any assets in favor
of the Guarantor or against or in payment of any or all of the Guaranteed
Obligations.
2.8 Subordination.
In the event that, for any reason whatsoever, the issuer or a
Person obligated in respect of the Guaranteed Obligations pursuant to
another Guaranty, is now or hereafter becomes indebted to the Guarantor in
any manner (such -indebtedness referred to as an "Affiliate Obligation"),
the amount of such Affiliate Obligation. interest thereon, and all other
amounts due with respect thereto, shall, at all times during the existence
of a Default or an Event of Default, be subordinate as to time of payment
and in all other respects to all the Guaranteed Obligations, and the
Guarantor shall not be entitled to enforce or receive payment thereof until
all sums then due and owing to the Noteholders in respect of the Guaranteed
Obligations shall have been paid in full, except that the Guarantor may
enforce (and shall enforce, at the request of the Required Holders, and at
the Guarantor's expense) any obligations in respect of any such Affiliate
Obligation owing to the Guarantor from the Issuer or such indebted Person
so long as all proceeds in respect of any recovery from such enforcement
shall be held by the Guarantor in trust for the benefit of the Noteholders,
to be paid thereto as promptly as reasonably possible. If any other
payment, other than pursuant to the immediately preceding sentence, shall
have been made to the Guarantor by the Issuer or such indebted Person on
any such Affiliate Obligation during any time that a Default or an Event of
Default exists and there are Guaranteed Obligations outstanding, the
Guarantor shall hold in trust all such payments for the benefit of the
Noteholders, to be paid thereto as promptly as reasonably possible.
2.9 Setoff, Counterclaim or Other Deductions.
Except as otherwise required by law, each payment by the Guarantor
shall be made without setoff, counterclaim or other deduction.
2.10 Election by Guarantor to Perform Obligations.
Any election by the Guarantor to pay or otherwise perform any of
the obligations of the Issuer under the Guaranteed Agreements, or any
agreement or instrument related thereto, shall not release the Issuer, the
Guarantor or any other guarantor from such obligations or any of such
Person's other obligations under the Guaranteed Agreements, or any
agreement or instrument related thereto,
except to the extent actually performed by the Guarantor.
2.11 No Election of Remedies by Noteholders.
Each Noteholder shall, individually or collectively, have the
right to seek recourse a0inst the Guarantor to the fullest extent provided
for herein for the Guarantors obligations under this Guaranty in respect of
the Guaranteed Obligations. No election to proceed in one form of action or
proceeding, or against any party, or on any obligation, shall constitute a
waiver of such Noteholders right to proceed in any other form of action or
proceeding or against other parties unless such Noteholder has expressly
waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by any Noteholder
against the Issuer or the Guarantor under any document or instrument
evidencing obligations of the Issuer or the Guarantor to such Noteholder
shall serve to diminish the liability of the Guarantor under this Guaranty.
except to the extent that such Noteholder finally and unconditionally shall
have realized payment of the Guaranteed Obligations.
2.12 Separate Action; Other Enforcement Rights.
Each of the rights and remedies granted under this Guaranty to
each Noteholder in respect of the Notes held by such Noteholder may be
exercised by such Noteholder without notice by such Noteholder to, or the
consent of or any other action by, any other Noteholder. Each Noteholder
may proceed to protect and enforce this Unconditional Guaranty by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for
the specific performance of any covenant or agreement contained herein or
in execution or aid of any power herein granted or for the recovery of
judgment for the obligations hereby guarantied or for the enforcement of
any other proper, legal or equitable remedy available under applicable law.
2.13 Noteholder Setoff.
Each Noteholder shall have, to the fullest extent permitted by law
and this Guaranty, a right of set-off against any and all credits and any
and all other Property of the Guarantor, now or at any time whatsoever,
with or in the possession of, such Noteholder, or anyone acting for such
Noteholder, to ensure the full performance of any and all obligations of
the Guarantor hereunder.
2.14 Delay or Omission; No Waiver.
No course of dealing an the part of any Noteholder and no delay or
failure on the part of any such Person to exercise any right hereunder
shall impair such right or operate as a waiver of such right or otherwise
prejudice such Person's rights, powers and remedies hereunder. Every right
and remedy given by this Unconditional Guaranty or by law to any Noteholder
may be exercised from time to time as often as may be deemed expedient by
such Person.
2.15 Restoration of Rights and Remedies.
If any Noteholder shall have instituted any proceeding to enforce
any right or remedy under this Unconditional Guaranty or under any Note
held by such Noteholder, and such proceeding shall have been dismissed,
discontinued or abandoned for any reason, or shall have been determined
adversely to such Noteholder, then and in every such case each such
Noteholder, the Issuer and the Guarantor shall, except as may be limited or
affected by the doctrine of res judicata, as applied to any such
proceeding, be restored severally and respectively to its respective former
positions hereunder and thereunder, and thereafter, subject as aforesaid,
the rights and remedies of such Noteholders shall continue as though no
such proceeding had been instituted.
2.16 Cumulative Remedies,
No remedy under this Guaranty or any of the Guaranteed Agreements
is intended to be exclusive of any other remedy, but each and every remedy
shall be cumulative and in addition to any and every other remedy given
pursuant to this Guaranty or the Guaranteed Agreements.
2.17 Maintenance of Offices.
The Guarantor will maintain an office at its address referred to
in Section 6.5 where notices, presentations and demands in respect of this
Guaranty may be made upon it, Such office will be maintained at such
address until such time as the Guarantor shall notify the Noteholders of
any change of location of such office.
2.18 Further Assurances.
The Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Required Holders shall reasonably
request to carry out, to the reasonable satisfaction of the Required
Holders, the transactions contemplated by this Guaranty and the Guaranteed
Agreements and the documents and instruments related thereto.
3. INTERPRETATION OF THIS GUARANTY
3.1 Terns Defined.
As used in this Guaranty, the capitalized terms have the meaning
specified below, set forth in the document or set forth in the section of
this Guaranty referred to immediately following such term (such
definitions, unless otherwise expressly provided, to be equally applicable
to both the singular and plural forms of the terms defined):
Affiliate Obligation - has the meaning assigned to such term in
Section 2.8 hereof.
Attributable Debt - means, as to any particular Sale and Leaseback
Transaction under which the Guarantor or any Subsidiary is at the time
liable, at any date as of which the amount thereof is to be determined
(a) in the case of any such transaction involving a Capital
Lease, the amount on such date of the Capital Lease Obligation
thereunder, or
(b) in the case of any other Sale and Leaseback
Transaction, the then present value of the minimum rental
obligations under such Sale and Leaseback Transaction during the
remaining term thereof (after giving effect to any extensions at
the option of the lessor) computed by discounting the respective
rental payments at the actual interest factor included in such
payments or, if such interest factor cannot be readily determined,
at the rate of fourteen percent (14%) per annum. The amount of any
rental payment required to be made under any such Sale and
Leaseback Transaction not involving a Capital Lease may exclude
amounts required to be paid by the lessee on account of
maintenance and repairs, insurance, taxes. assessments, utilities,
operating and labor costs and similar charges.
Benefit Arrangement - means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by
any member of the ERISA Group.
Capital Lease - means any lease of Property which, in accordance
with generally accepted accounting principles, should be capitalized on the
lessees balance sheet; and "Capital Lease Obligation" means the amount of
the liability so capitalized in respect of a Capital Lease.
Commitments - has the meaning assigned to such term in the Credit
Agreement as in effect on the date hereof.
Consolidated Debt - means at any date the Debt of the Guarantor
and its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
Consolidated EBIT - means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated
Net Income for such period, the aggregate amount of
(a) Consolidated Interest Charges and
(b) provision for income taxes.
Consolidated Interest Charges - means, for any period, the
aggregate amount of interest charges, whether expensed or capitalized,
incurred or accrued by the Guarantor and Its Consolidated Subsidiaries
during such period.
Consolidated Net Income - means, for any period, the net income
(or loss) of the Guarantor and its Consolidated Subsidiaries, determined on
a consolidated basis for such period.
Consolidated Net Tangible Assets - means the total amount of
assets (less applicable reserves and other properly deductible items) which
under generally accepted accounting principles would be included on a
consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries after deducting therefrom
(a) all liabilities and liability items, including amounts in
respect of obligations or guarantees of obligations under leases,
which under generally accepted accounting principles would be included
on such balance sheet, except Funded Debt, capital stock and surplus,
surplus reserves and provisions for deferred income taxes, and
(b) all goodwill, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangibles, which - in each
case under generally accepted accounting principles would be included
on such consolidated balance sheet.
Consolidated Net Worth -- means at any date the consolidated
stockholders' equity of the Guarantor and -its Consolidated Subsidiaries
determined as of such date.
Consolidated Rent - means, for any period, the consolidated rental
expense of the Guarantor and its Consolidated Subsidiaries for such period.
Consolidated Subsidiary - means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Guarantor in its consolidated financial statements if such statements were
prepared as of such date.
Credit Agreement - means the Credit Agreement, dated as of July
19, 1996 and as may be amended from time to time, among the Guarantor, the
banks from time to time party thereto, and Morgan Guaranty Trust Company of
New York, as Agent.
Debt - of any Person means at any date, without duplication,
(a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(c) all obligations of such Person to pay the deferred purchase
price of Property or services, except trade accounts payable arising
in the ordinary course of business,
(d) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting
principles,
(e) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person.
and
(f) all Debt of others Guaranteed by such Person.
Default - has the meaning assigned to such term in the Note
Agreement.
Environmental Laws - means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes into the environment including, without limitation, ambient air,
surface water, ground Water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
ERISA - means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
ERISA Group - means the Guarantor, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether
or not incorporated) under common control which, together with the
Guarantor or any Subsidiary, are treated as a single employer under Section
414 of the Internal Revenue Code.
Event of Default - has the meaning assigned to such term in the
Note Agreement.
Financing Documents - has the meaning assigned to such term in the
Note Agreement.
Fixed Charge Coverage Ratio - means at any date, the ratio of
(a) Consolidated EBIT plus Consolidated Rent to
(b) Consolidated interest Charges plus Consolidated Rent,
in each case for the period of four (4) consecutive fiscal quarters most
recently ended on or prior to such date.
Funded Debt - means any Debt maturing more than one year after the
date of determination thereof and any Debt regardless of its term,
renewable pursuant to the terms thereof or of a revolving credit or similar
agreement effective for more than one year after the date of the creation
of such Debt, which would, in accordance with generally accepted accounting
practice, be classified as funded debt but shall not include
(a) any Debt for the payment, redemption or satisfaction of
which money (or evidences of indebtedness, if permitted under the
instrument creating such indebtedness) in the necessary amount shall
have been deposited in trust with a trustee or proper depository
either at or before the maturity or redemption date thereof, or
(b) guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other paper arising in the ordinary
course of business, out of instalment or conditional sales to or by,
or transactions involving title retention with, distributors, dealers
or other customers of merchandise, equipment or services or guarantees
other than guarantees of indebtedness for borrowed money.
Guarantee - by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
Guaranteed Agreements - has the meaning assigned to such term in
Section 2.1 hereof.
Guaranteed Obligations - has the meaning assigned to such term in
Section 0 hereof.
Guarantor- has the meaning assigned to such term in the first
paragraph hereof.
Guaranty, this - has the meaning assigned to such term in the
first paragraph hereof-
Improvements - has the meaning assigned to such term in Section
1.1 hereof.
Internal Revenue Code - means the Internal Revenue Code of 1986,
as amended, or any successor statute.
Issuer - has the meaning assigned to such term in Section 1 -4 hereof-
Investment - means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
Any repurchase by the Guarantor of its own capital stock shall not
constitute an Investment for purposes of this Guaranty.
Lien - means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset- For the purposes of this Guaranty, the Guarantor or any
Subsidiary shall be deemed to own Subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement Capital Lease or other title retention agreement
relating to such asset.
Master Lease - has the meaning assigned to such term in Section 11
hereof.
Material Adverse Effect - means a material adverse effect on
(a) the business, profits, Properties or condition (financial or
otherwise) of the Guarantor and the Subsidiaries taken as a whole, or
(b) the ability of the Guarantor to perform its obligations
under this Guaranty or any Guaranteed Agreement to which it is a
party.
Multiemployer Plan - means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member
of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five (5) plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five (5) year period.
Note Agreement - has the meaning assigned to such term in Section
1-5 hereof.
Noteholder - means, at any time, each Person that is the holder of
any Note at such time.
Notes - has the meaning assigned to such term in Section 1.5
hereof.
Operating Subsidiaries - has the meaning assigned to such term in
Section 1.1 hereof.
Payment Assurance Agreement - means the Payment Assurance
Agreement, dated as of February 29, 1996, made by the Guarantor and Rite
Kid Florida in favor of Deutsche Bank AG, New York Branch.
PBGC - means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of 'its functions under ERISA.
Person - means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or
instrumentality thereof.
Plan - means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Tale TV of ERISA or subject
to the minimum funding standards under Section 412 of the Internal Revenue
Code and either
(a) is maintained, or contributed to, by any member of the ERISA
Group or
(b) has at any time within the preceding five (5) years been
maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at
such time a member of the ERISA Group.
Property - means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
Purchasers - has the meaning assigned to such term in Section 1.5
hereof.
Put Agreement - means the Put Agreement, dated as of September 30,
1996, between the Guarantor and the Purchasers.
Rent Purchase Agreement - has the meaning assigned to such term in
Section 1-4 hereof.
Rental Payments - has the meaning assigned to such term in Section
1.4 hereof.
Required Holders - has the meaning assigned to such term in the
Note Agreement.
Rite Aid Florida - has the meaning assigned to such term in
Section 1.2 hereof.
RLC - has the meaning assigned to such term in Section 1.1 hereof.
RLC Notes - has the meaning assigned to such term in Section 1.1
hereof
Sale and Leaseback Transaction - has the meaning assigned to such
term in Section 5.8 hereof.
Sales Agreements - has the meaning assigned to such term in
Section 1. 1 hereof.
Secured Debt - means indebtedness for borrowed money which is
secured by a Lien on Property of the Guarantor or any Subsidiary, but shall
not include guarantees arising in connection with the sale, discount,
guarantee or pledge of notes, chattel mortgages, leases, accounts
receivable, trade acceptances and other papers arising, in the ordinary
course of business, out of installment or conditional sales to or by, or
transactions involving title retention with, distributors, dealers or other
customers, of merchandise, equipment or services.
Security Agent - has the meaning assigned to such term in the Note
Agreement.
Significant Subsidiary - means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than eight percent (8%) of the consolidated
assets of the Guarantor and its Consolidated Subsidiaries at such time.
Subleases - has the meaning assigned to such term in Section 1.2 hereof
Subsidiary - means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Guarantor.
Temporary Cash Investment - means any Investment in
(a) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof,
(b) commercial paper rated at least A-1 by Standard & Poor's
Ratings Group, a division of McGraw-Hill, inc., and P-1 by Moody's
Investors Service, Inc.,
(c) time deposits with, including certificates of deposit issued
by, any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any
state thereof and has capital, surplus and undivided profits
aggregating at least Five Hundred Million Dollars ($500,000,000) or
(d) repurchase agreements with respect to securities described
in clause (a) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (c) above, provided
in each case that such Investment matures within one (1) year from the
date of acquisition thereof by the Guarantor or a Subsidiary.
Total Capital - means, at any date, the sum of Consolidated Debt
and Consolidated Not Worth, each determined as of such date.
Unconditional Guaranty - has the meaning assigned to such term in
Section 2.1 hereof. United States - means the United States of America,
including the States and the District of Columbia, but excluding its
territories and possessions.
Wholly-Owned Consolidated Subsidiary - means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Guarantor.
Yield-Maintenance Amount - has the meaning assigned to such term
in the Note Agreement.
3.2 Section Headings and Construction.
(a) Section Headings, etc. The titles of the Sections
appear as a matter of convenience only, do not constitute a part
hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Guaranty as
a whole and not to any particular Section or other subdivision.
(b) Construction. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
4. WARRANTIES AND REPRESENTATIONS
The Guarantor represents and warrants to each Purchaser, as of the
date of effectiveness hereof, as follows"
4.1 Condition of the Issuer. The Guarantor delivers this Guaranty
based solely upon its own independent investigation of the financial
condition of the Issuer and 'in no part upon any representation or
statement of any one or more of the Noteholders with respect thereto. The
Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Issuer as the Guarantor may deem material to
'its obligations hereunder, and the Guarantor is not relying upon, nor
expecting, any Noteholder to furnish it any information concerning the
financial condition of the Issuer.
4.2 Organization. The Guarantor is a corporation duly organized
and existing in good standing under the laws of the State of Delaware, each
Subsidiary is duly organized and existing in good -standing under the laws
of the jurisdiction in which it is incorporated, and the Guarantor has and
each Subsidiary has the corporate power to own its respective Property and
to carry on its respective,business as now being conducted.
4.3 Financial Statements. The Guarantor has furnished each
Purchaser with a copy of its annual report to shareholders, and its form
10-K, in each case, for its fiscal year ended March 2, 1996, and a copy of
its form 10-Q for its fiscal quarter ended June 1, 1996. such financial
statements (including any related schedules and notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and yearend adjustments), have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved -and show all liabilities, direct
and contingent, of the Guarantor and the Consolidated Subsidiaries required
to be shown in accordance with such principles. The balance sheets tirly
present the condition of the Guarantor and the Consolidated Subsidiaries as
at the dates thereof, and the consolidated statements Of operations,
changes in shareholders' equity, income and cash flows fairly present the
results of the operations of the Guarantor and the Consolidated
Subsidiaries for the periods indicated. There has been no material adverse
change in the business, condition or operatons (financial or otherwise) of
the Guarantor and the Subsidiaries taken as a whole since March 1, 1996-
4.4 Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Guarantor, threatened
against the Guarantor or any of the Subsidiaries, or, any properties or
rights of the Guarantor or any of the Subsidiaries, by or before any court,
arbitrator or administrative or governmental body that could reasonably be
expected to have a Material Adverse Effect.
4.5 Outstanding Debt. Neither the Guarantor nor any of the
Subsidiaries has outstanding any Debt except as set forth in its form 10-Q
for its fiscal quarter ended June 1, 1996 and except for Debt outstanding
under the Credit Agreement.
4.6 Title to Properties. Each of the Guarantor and the
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties that it leases) and good title to all of
its other respective Properties, including the Properties reflected in the
most recent balance sheet referred to in Section 4-3 hereof (other than
Properties disposed of in the ordinary course of business), subject to no
Lion of any kind except Liens permitted by Section 5.9 hereof. All leases
necessary In any material respect for the conduct of the respecfive
businesses of the Guarantor and the Subsidiaries are valid and subsisting
and are in full force and effect.
4.7 Taxes. Each of the Guarantor and the Subsidia(les has filed
all Federal, State and other income tax returns that, to the best knowledge
of the officers of the Guarantor, are required to be filed, and each has
paid all taxes as shown on such returns and on all assessments received by
it to the extent that such taxes have become due, except such taxes as are
being cor-dested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with generally
accepted accounting pdnciples.
4.8 Conflicting Agreements and Other Maffers.
(a) Restrictive Agreements. Neither the Guarantor nor any of the
Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which could reasonably be expected
to have a Material Adverse Effect.
(b) Conffictfng Agreements. Neither the execution nor delivery
hereof or any of the Financing Documents to which the Guarantor or any
Subsidiary is a party, nor fulfillment of nor compliance with the terms and
provisions hereof and of any such Financing Document, will conflict with,
or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the Properties of the Guarantor or any of
the Subsidiades pursuant to, the charter or bylaws of the Guarantor or any
of the Subsidiaries, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order, judgment,
decree, statute, law, rule or regulation to which the Guarantor or any of
the Subsidiaries is subject.
(c) Limitations on Debt. Except as set forth in the Credit
Agreement, the Payment Assurance Agreement, and the Indenture, dated May,
1993, pursuant to which the Guarantor issued its 6.78% senior debentures
due 2013, neither the Guarantor nor any of the Subsidiaries is a party to,
or otherwise subject to any pirovision contained in, any instniment
evidencing indebtedness of the Guarantor or such Subsidiary, any agreement"
relating hereto or any other contract or agreement (including its charter)
that limits the amount of, or otherwise imposes restrictions on the
incurring of, Debt of the Guanantor.
4.9 Regulation G, etc. Neither the Guarantor nor any Subsidiary
owns or has any present intention of acquiring any "margin stock"as defined
in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System C'Margin Stock")- Neither the Guarantor nor any agent acting
on its behalf has taken any action that might cause this Guaranty, the
Notes or any other IFinancing Document to Violate Regulation G, Regulation
T or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934, as amended, in
each case as in effect now or as the same may hereafter be in affect.
4.10 ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Intemal Revenue Code), whether
or not waived, exists with respect to any Plan- No liability to the PBGG
has been or is expected by the Guarantor to be incurred with respect to any
Plan by the Guarantor or any of the Subsidiaries that could reasonably be
expected to have a Material Adverse Effect. Neither the Guarantor nor any
of the Subsidiades has incurred or presently expects to incur any
withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan that could reasonably be expected to have Material
Adverse Effect. The execution and delivery hereof and of the Financing
Documents will not involve any transaction that is subject to the
prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975 of the internal Revenue. Code.
The representation by the Guarantor in the next preceding sentence is made
in reliance upon and subject to the accuracy of the representation of each
Purchaser in paragraph 8 of the Note Agreement as to the source of the
funds to be used to pay the purchase price of the Notes to be purchased
each such Purchaser.
4.11 Compliance with Law.
(a) Compliance. Each of the Guarantor and the Subsidiaries is in
compliance with all applicable laws (including, without limitation, all
Environmental Laws) in effect in each jurisdiction where it is presently
doing business and in which the failure so to comply could reasonably be
expected to have a Material Adverse Effect.
(b) Liability. Neither the Guarantor nor any of the Subsidiaries
is subject to any liability under any Environmental Laws that, in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
4.12 Governmental Consent. Neither the nature of the Guarantor or
of any Subsidiary, nor any of their respective businesses or properties,
nor any relationship between the Guarantor or any Subsidiary and any other
Person, nor any circumstance in connection with the offering, issuance,
sale or delivery of the Notes, is such as to require any authorization,
consent, approval, exemption or other action by or notice to or filing with
any court or administrative or governmental body in connection with the
execution and delivery hereof or fulfillment of or compliance with the terms
and provisions hereof.
4.13 Disclosure. Neither this Guaranty nor any other document,
certificate or statement furnished to you by or an behalf of the Guarantor
in connection herewith or any Financing Document contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and in such documents,
certificates and statements not misleading. There is no fact peculiar to
the Guarantor or any of the Subsidiaries that could reasonably be expected
to have a Material Adverse Effect or in the future may (so far as the
Guarantor can now foresee) have a Material Adverse Effect and that has not
been set forth herein or in the other documents, certificates and
statements furnished to you by or on behalf of the Guarantor prior to the
date hereof in connection with the transaofiom contemplated hereby or by
the Financing Documents.
4.14 Certain Laws.
(a) Investment Company Act. The Guarantor is not, and is not
directly or indirectly controlled by, or acting on behalf of any Person
which is, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(b) Absence of Foreign or Enemy Status. The Guarantor is not
(i) an "enemy" or an "ally of enemy' within the meaning of
Section 2 of the Trading with the Enemy Act, as amended, or any
executive orders or regulations issued or promulgated pursuant
thereto, or
(ii) a "national" of any "designated enemy country" as such
terms are defined in Executive Order No. 9095, as amended, of the
President of the United States of America.
(c) Holding Company Status. The Guarantor is not a "holding
company" or an "affiliata" of a "holding company," or a "subsidiary
company" of a "holding company," or a "public utility" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
5. COVENANTS
5.1 Information.
So long as any of the Guaranteed Obligations remain outstanding,
the Guarantor will deliver to each Noteholder-
(a) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Guarantor, a consolidated
balance sheet of the Guarantor and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, all
reported on in a manner acceptable to the Securities and Exchange
Commission by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing-,
(b) as soon as available and in any event within forty-five (45)
days after the end of each of the first three (3) quarters of each
fiscal year of the Guarantor, a consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of the end of such
quarter and the related consolidated statements of income and cash
flows for such quarter and for the portion of the Guarantor's fiscal
year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Guarantors previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency
by the chief financial officer of the Guarantor
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above. a certificate of
the chief financial officer or the chief accounting officer of the
Guarantor
(i) setting forth in reasonable detail the calculations required
to establish whether the Guarantor was in compliance with the
requirements of Sections 5.7 to 5.12, inclusive, on the date of such
financial statements and
(ii) stating whether any Default exists on the date of Such
certificate and, if any Default then e)Cists, setting forth the
details thereof and the action which the Guarantor is taking or
proposes to take with respect thereto,
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements
(i) as to whether anything has come to their attention to cause
them to believe that any Default existed on the date of such
statements and
(ii) confirming the calculations set forth in the officees
certificate delivered simultaneously therewith pursuant to clause (G)
above,
(e) within five (5) days after any officer of the Guarantor
obtains knowledge of any Default, if such Default is then continuing,
a certificate of the chief financial officer or the chief accounting
officer of the Guarantor setting forth the details thereof and the
action which the Guarantor is taking or proposes to take wfth respect
thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Guarantor generally, copies of statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form " or its equivalent) and reports on Forms 10- K.
10-Q and 8-K (or their equivalents) which the Guarantor shall have
filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group
(i) gives or is required to give notice to the PBGC of any
"reportable evenf' (as defined in Section 4043 of ERISA) with respect
to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such
reportable event a copy of the notice of such reportable event given
or required to be given to the PBGC;
(ii) receives notice of complete or partial 'Withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to
administer, any Plan a copy of such notice,
(iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy ofsuch application,
(v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed
with the PBGC,
(vi) gives notice of withdrawal from, any Plan pursuant to Section
4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes
any amendment to any Plan or any Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chief financial officer
or the chief accounting officer of the Guarantor setting forth details
as to such occurrence and the action, if any, which the Guarantor or
applicable member of the ERISA Group is required or proposes to take;
and
(i) from time to time such additional information regarding the
financial position or business of the Guarantor and its Subsidiaries
as any Noteholder may reasonably request.
5.2 Payment of Obligations.
The Guarantor will, and will cause each of its Subsidiaries to,
pay and discharge, as the same shall become due and payable,
(a) all material claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons prior to the
time such claims or demands give rise to a Lien upon any of its
Property or assets, and
(b) all material taxes, assessments and governmental charges or
levies upon it or its Property or assets,
except where any of the items in clause (a) or (b) above may be contested
in good faith by appropriate proceedings, and the Guarantor or such
Subsidiary, as the case may be, shall have set aside on its books. in
00oordance with generally accepted accounting principles, appropriate
reserves, if any, for the accrual of any such items.
5.3 Maintenance of Property; Insurance,
(a) The Guarantor will keep, and will cause each Subsidiary to
keep, all Property usefiA and necessary in its business in, good
working order and condition, ordinary wear and tear excepted.
(b) The Guarantor will, and VAII cause each of its Subsidiaries
to, maintain (either in the name of the Guarantor or in such
Subsidlary's own name) with financially sound and responsible
in;surance companies, insurance on all their respective properties in
at least such amounts and against at least such risks (and with such
risk retention) as are usually insured against in the same general
area by companies of established repute engaged in the same or a
similar business: and will furnish to the Noteholders, upon request of
any Noteholder, information presented in reasonable detail as to the
insurance so carried.
5.4 Conduct of Business and Maintenance of Existence.
Except as otherwise permitted in this Guaranty, the Guarantor will
continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Guarantor and
its Significant Subsidiaries, and will preserve, renew and keep in full
fome and effect, and will cause each Significant Subsidiary (except where
such Significant Subsidiary merges into the Guarantor or any other
Subsidiary) to preserve, renew and keep in full force and affect. their
respective legal existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.
5.5 Compliance with Laws.
The Guarantor will comply, and cause each Subsidiary to comply, in
all material respects with all applicable laws, ordinances, rules,
regulations. and requirements of governmental authorities (including,
without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where the necessfty of compliance therewith
is contested in good faith by appropriate proceedings or where the failure
to comply would not have a Material Adverse Effect.
5.6 Inspection of Property, Books and Records.
The Guarantor will keep, and will cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business
and activities; and will permit, and will cause each Subsidiary to permit,
representatives of any Noteholder, at such Noteholder's expense, to visit
and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such
reasonable 'times and as often as may reasonably be desired.
5.7 Restriction on Debt of Subsidiaries.
The Guarantor will not permit any Subsidiary to create, issue,
incur, assume, or in any other way become liable for any unsecured Debt
unless immediately prior thereto the Guarantor would be entitled under
subsection (d) of Section 5.9 to create Secured Debt not specifically
permitted under Section 5.9 but for subsection (d) thereof in an amount
equal to such Debt; provided that the foregoing restriction shall not
prevent
(a) any Subsidiary from becoming liable to the Guarantor or to a
Wholly-Owned Consolidated Subsidiary for Debt or
(b) the extension, renewal or refunding of any Debt of any
Subsidiary so long as Consolidated Debt is not thereby increased.
5.8 Restriction on Sales with Leases Back.
Except for a sale or transfer by a Subsidiary to the Guarantor or
a Wholly-Owned Consolidated Subsidiary, the Guarantor will not, and will
not permit any Subsidiary to, sell or transfer any manufacturing plant,
warehouse, retail store or equipment now or hereafter owned and operated by
the Guarantor or a Subsidiary, with the intention that the Guarantor or any
Subsidiary take back a lease thereof, except a lease for a period,
including renewals, not exceeding twenty-four (24) months. by the end of
which period it is intended that the use of such Property or equipment by
the lessee will be discontinued (any such transaction being herein referred
to as a "Sale and Leaseback Transaction'); provided that, notwithstanding
the foregoing, the Guarantor or any Subsidiary may enter into a Sale and
Leaseback Transaction N the Guarantor or a Subsidiary would be entitled
under subsection (d) of Section 5.9 to create Secured Debt not spedfically
permitted under Section 5.9 but for subsection (d) thereof in an amount
equal to the Attributable Debt respecting such Sale and Leaseback
Transaction; provided further that, notwithstanding the foregoing, the
Guarantor or any Subsidiary may enter into a Sale and Leaseback Transaction
if entered into in respect of Property acquired by the Guarantor or a
Subsidiary if such Sale and Leaseback Transaction is entered into within
twenty-four (24) months from the date of such acquisition; and provided
stfil further that, noWthstanding the foregoing, the Guarantor or any
Subsidiary may enter into a Sale and Leaseback Transaction if the
Guarantor, within one hundred twenty (120) days before or after the sale or
transfer shall have been made by the Guarantor or by any Subsidiary,
applied or applies an amount equal to the greater of
(a) the net proceeds of the sale of the Property sold and leased
back pursuant to such arrangement or
(b) the fair market value of the Property so sold and leased
back at the time of entering into such arrangement (as detennined by
any two of the followng: the Chairman of the Board of the Guarantor,
its Chief Executive Officer, 'its President, any Vice President of the
Guarantor, its Treasurer and its Controller) to
(i) the retirement of Secured Debt of the Guarantor other
than at maturity or pursuant to any mandatory sinking fund payment
or any mandatory prepayment provision or
(ii) reduction of the Commitments.
5.9 Restriction on Liens.
The Guarantor will not, and will not permit any Subsidiary to,
create, issue, incur, assume or guar-antee any Secured Debt without making
effective provision (and the Guarantor covenants that in such case R will
make or cause to be made effecrive provision) whereby the Notes (and any
other Debt of the Guarantor or such Subsidiary then entitled thereto) shall
be secured by the same Uen equally and ratably with (or prior to) any and
all other obligations and Debt thereby secured for so long as any such
other obligations and Debt shall be so secured; provided that the foregoing
covenant shall not apply to the following:
(a) (i) Any Lien on any Property acquired or constructed by the
Guarantor or a Subsidiary and created contemporaneously with, or
within twenty-four (24) months after, such acquisition or the
completion of such construction and commencement of full operation off
such Property, whichever is later, to secure or provide for the
payment of any part of the purchase or construction price of such
Property, or
(ii) the acquisition by the Guarantor or a Subsidiary of
Property subject to any Lien upon such Property existing at the time
of acquisition thereof, whether or not assumed by the Guarantor or
such Subsidiary, or
(iii) any conditional sales agreement or other title retention
agreement with respect to any Property hereafter acquired; provided
that the Lien does not spread to other Property except unimproved real
Property previously owned upon which any new construction has taken
place and subsequent additions to such acquired or constructed
Property;
(b) Any Lien created for the sole purpose of extending, renewing
or refunding, in whole or part, any Lien permitted by this Section 5-9 or
any Lien securing the Debt of the Guarantor or of any Subsidiary on the
date of this Guaranty or of a corporation at the time such corporation
becomes a Subsidiary, or any extension% renewals or refunding$ of any such
Uen; provided that the principal amount, of Debt secured thereby shall not
exceed the principal amount of Debt so secured at the time of such
extension, renewal or refunding and that such extension, renewal or
refunding Lien shall be limited to all or that part of the same Property
which secured the Debt so extended, renewed or refunded;
(c) Any Secured Debt of a Subsidiary owing to the Guarantor or a
WhollyOwned Consolidated Subsidiary; and
(d) Secured Debt of the Guarantor and its Subsidiaries which would
otherwise be prohibited by the foregoing restrictions (not including
Secured Debt permitted to be secured under subsections (a) through (c)
above) so long as the sum of any such Secured Debt hereafter incurred and
outstanding at the time plus Attributable Debt of the Guarantor and any
Subsidiaries in respect of Sale and Leaseback Transaofionr, hereafter
entered into and outstanding at the time (excluding Attributable Debt
incurred in respect of any Sale and Leaseback Transaction
(i) entered into in respect of Property acquired by the
Guarantor or a Subsidiary not more than twenty-four (24) months prior
to the date such Sale and Leaseback Transaction is entered into or
(ii) if the Guarantor, within one hundred twenty (120) days
before or after such Sale and Leaseback Transaction is entered into,
applies an amount equal to the greater of
(A) the net proceeds of the sale of the Property so sold
and leased back or
(B) the fair market value of such Property at the date such
arrangement is entered into, the retirement of Secured Debt (other
than at maturitY or pursuant to any mandatory payment provision)
or to reduction of the Commitments) Plus unsecured Debt of any
Subsidiary hereafter incurred and outstanding at the time
(excluding unsecured Debt incurred through the extension, renewal
or refunding of Debt of such Subsidiary where Consolidated Debt
was not thereby increased and excluding any Debt owed to the
Guarantor or a Wholly-Owned Consolidated Subsidiary) does not at
the time exceed five percent (5%) of Consolidated Net Tangible
Assets.
5.10 Leverage Ratio.
Consolidated Debt will at no time exceed sixty-five percent (65%)
of Total Capital.
5.11 Fixed Charge Coverage.
The Fixed Charge Coverage Ratio will at no time be less than one
hundred eight-five percent (185%).
5.12 Limitation on Minority Investments.
Neither the Guarantor nor any Consolidated Subsidiary will make or
acquire any Investment in any Person other than:
(a) Investments in Consolidated Subsidiaries;
(b) Temporary Cash Investments; and
(c) Any Investment not otherwise permitted by the foregoing
clauses of this Section if, immediately after such Investment is made
or acquired, the aggregate net book value of all Investments permitted
by this clause (c) does not exceed fifteen percent (15%) of
Consolidated Net Worth.
5.13 Consolidations, Mergers and Sales of Assets.
The Guarantor will not
(a) consolidate or merge with or into any other Person or
(b) sell, lease or otherwise transfer, directly or indirectly, all
or any substantial part of the assets of the Guarantor and its
Subsidiaries, taken as a Whole, to any other Person;
provided that the Guarantor may merge with another Person if
(i) the Guarantor is the corporation surviving such merger and
(ii) immediately after giving effect to such merger, no Default
shall have occurred and be continuing;
provided further that the Guarantor may sell, lease or otherwise transfer
any retail store located within the state of North Carolina-
5.14 Master Lease. The Guarantor agrees that it shall cause the
Master Lease to be accounted for as a finance lease for financial reporting
purposes.
5.15 Retirement of Notes. Neither the Guarantor nor any of its
Subsidiaries will prepay, retire, purchase or otherwise acquire in whole or
in part any Notes, or any interest therein (whether by pledge,
participating interest or otherwise), pdor to their stated final maturity
except by prepayment pursuant hereto or pursuant to the Put Agreement-
6. MISCELLANEOUS
6.1 Expenses.
(a) The Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the
Noteholders in connection with the consideration, negotiation,
preparation or execution of any amendments, waivers, consents,
standstill agreements and other similar agreements with respect hereto
or with respect to any of the Guaranteed Agreements (whether or not
any such amendments, waivers, consents, standstill agreements or other
similar agreements are executed).
(b) At any time when the Noteholders and either one or both of
the Issuer and the Guarantor are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default
exists, the Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and the reasonable fees
of professional advisors) incurred by the Noteholders in connection
with the assessment analysis or enforcement of any rights or remedies
that are or may be available to the Noteholders.
(c) If the Guarantor shall fail to pay when due any principal
of, or YieldMaintenance Amount or accrued interest on, any Note, the
Guarantor shall pay to each holder of Notes, to the extent permitted
by law, such amounts as shall be sufficient to cover the costs and
expenses, including but not limited to reasonable attorneys! fees,
incurred by such holder in collecting any sums due on such Notes-
6.2 Amendment
This Guaranty may be amended only in a writing executed by the
Guarantor and the Required Holders. Subject to the next succeeding
sentence, the covenants set forth in Section 5.7 through 5.13, inclusive,
hereof, and the definitions in defined terms used therein, shall be deemed
to be automatically amended to be identical to the equivalent covenants and
definitions in the Credit Agreement effective upon the effectiveness of any
amendment thereto 'in the Credit Agreement. Any such deemed amendment shall
automatically cease to be eftetive upon the termination of the Credit
Agreement or any repayment of all or substantially all of the indebtedness
outstanding thereunder, if such termination or repayment shall occur within
one hundred eighty (180) days after the effectiveness of such deemed
amendment. In addlition. any such deemed amendment shall not annul or
othervAse have any effect on any acceleration of the Notes pursuant to
paragraph 6 of the Note Agreement if such amendment shall become effective
after such acceleration shall have occurred.
6.3 Survival of Representations and Warranties.
All representations and warranties contained herein or made in
writing by the Guarantor in connection herewith shall survive the execution
and delivery hereof.
6.4 Successors and Assigns.
(a) Whenever the Guarantor or any of the parties to the
Financing Documents is referred to, such reference shall be deemed to
include the successors and assigns of such party, and all the
covenants. promises and agreements contained in this Guaranty by or on
behalf of the Guarantor shall bind the successors and assigns of the
Guarantor and shall inure to the benefit of each of the Noteholders
from time to time whether so expressed or not and whether or not an
assignment of the rights hereunder shall have been delivered in
connection with any assignment or other transfer of Notes,
(b) The Guarantor agrees to provide an executed copy of this
Guaranty to any transferee of the Note by any Noteholder, provided
that no additional obligations of the Guarantor shall thereby be
created but rather that the existing obligations of the Guarantor
shall be more particularly stated in respect of one or more future
Noteholders that are the subject of this Guaranty,
6.5 Communications.
(a) Method; Address. All written communications provided for
under this Guaranty shall be sent by registered or certified mail with
return receipt requested or nationwide overnight delivery service (with
charges prepaid) and
(i) if to any Purchaser, addressed to such Purchaser at the
address specified for such commurfications in the Purchasers'
Schedule attached to the Note Agreement as Annex 1, or at such
other address as any Purchaser shall have specified to the
Guarantor in writing,
(ii) if to any other Noteholder, addressed to such other
Noteholder at such address as such other Noteho(der shall have
specified to the Guarantor in writing or, if any such other
Noteholder shall not have so specified an address to the
Guarantor, then addressed to such other Noteholder in care of the
last holder of such Note that shall have so specified an address
to the Guarantor, and
(iii) if to the Guarantor, addressed to it at the address
set forth on Annex 1 hereto, or at such other address as the
Guarantor shall have specified to each Noteholder in writing:
provided that any such communication to the Guarantor may also, at
the option of any Noteholder, be delivered by any other means
either to the Guarantor at Its address specified In such Annex 1
or to any executive officer of the Guarantor.
(b) When Given. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the teleropy machine of the recipient. Any
communication not so addressed and delivered shall be ineffective.
6.6 Descriptive Headings, etc. The descriptive headings of'the
several Sections hereof are inserted for convenience only and do not
constitute a part hereof. The words "herein," "hereof," "hereunder" and
"heretd' refer to this Guaranty as a whole and not to any particular
section or other subdivision.
6.7 Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms hereof
required to be satisfactory to each Noteholder, the Noteholders or to the
Required Holders, the determination of such satisfaction shall be made by
each such Noteholder, the Noteholders or the Required Holders, as the case
may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
6.8 Partial Invalidity.
The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions contained herein
unenforceable or invalid.
6.9 Governing Low.
THIS GUARANTY SKALL BE CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
6.10 Effective Date.
This Guaranty shall be effective as of the date hereof.
6.11 Benefits of Guaranty Restricted to Noteholders.
Nothing express or implied in this Guaranty ir, intended or shall
be construed to give to any Person other then the Guarantor and the
Noteholders any legal or equitable right, remedy or claim under or in
respect hereof or any covenant, condition or provision therein or herein
contained; and all such covenants, conditions and provisions are and shall
be held to be for the sole and exclusive benefit of the Guarantor and the
Noteholders.
6.12 Consent to Jurisdiction; Appointment of Agent.
(a) Consent to Jurisdiction. THE GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS GUARANTY, THE NOTES, OR ANY OTHER FINANCING
DOCUMENT, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE
ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER, OR UNDER ANY
GUARANTEED AGREEMENT, BROUGHT BY ANY HOLDER OF A NOTE AGAINST THE
GUARANTOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER OF A
NOTE IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK
OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY, NEW YORK, AS
SUCH HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND BY THE
EXECUTION AND DELIVERY OF THIS GUARANTY. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SU13MITS TO THE NOWEXCLUSIVE IN PERSONAM JURISDICTION
OF EACH SUCH COURT, AND THE GUARANTOR IRREVOCABLY WAIVES AND AGREES
NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE [IV
PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, THE GUARANTOR
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION T14AT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR ANY GUARANTEED AGREEMENT, BROUGHT IN ANY SUCH COURT, AND
HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILJTY OR RIGHT OF ANY HOLDER OF A NOTE TO OBTAIN JURISDICTION
OVER THE GUARANTOR IN SUCH OTHER JURISDICTION AS MAY BE PERMITTED BY
APPLICABLE LAW.
(b) Agent for Service of Process. THE GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT PROCESS SERVED EITHER
PERSONALLY OR BY REGISTERED MAIL SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY
GUARANTEED AGREEMENT, OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR
UNDER THE GUARANTEED AGREEMENTS, BROUGHT BY ANY HOLDER OF A NOTE
AGAINST THE GUARANTOR OR ANY OF ITS PROPERTY. RECEIPT OF PROCESS SO
SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY
RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE. NOTHING HEREIN
SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OR RIGHT OF A14Y
HOLDER OF A NOTE TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN ANY
MANNER PERMITTED BY APPLICABLE LAW.
6.13 Survival.
So long as the Guaranteed Obligations and all payment obligations
of the Guarantor hereunder shall not have been fully and finally performed
and indefeasibly paid, the obligations of the Guarantor hereunder shall
survive the transfer and payment of any Note and the payment in full of
- -all the Notes.
6.14 Entire Agreement
This Guaranty constitutes the trial written expression of all of
the terms hereof and is a complete and exclusive statement of those terms.
6.15 Duplicate Originals, Execution in Counterpait
Two or more duplicate originals hereof may be signed by the
parties, each of which shall be ari original but all of which together
shall constitute one and the same instrument. This Guaranty may be executed
in one or more counterparts and shall be effective when at least one
counterpart shall have been executed by each party hereto, and each set of
counterparts that, collectively, show execution by each party hereto shall
constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
IN WITNESS WHEREOF, the Guarantor has caused thi8 Guaranty to be
executed on its behalf by a duly authorized officer of the Guarantor.
RITE AID CORPORATION
By: _________________________________________
Name:
Title:
Accepted and Agreed,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: _______________________________________
Name:
Title:
PRUCO LIFE INSURANCE COMPANY
By: _____________________________________
Name:
Title:
FINCO, INC.
NOTE AGREEMENT
------------------------------------
------------------------------------
DATED AS OF SEPTEMBER 30, 1996
$79,560,908.91
7.30% SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
1. AUTHORIZATION OF ISSUE OF NOTES.................................. 1
2. PURCHASE AND SALE OF NOTES....................................... 1
3. CONDITIONS OF CLOSING............................................ 2
3A. Opinion of Purchasers' Special Counsel.................... 2
3B. Opinion of Counsel to the Company......................... 2
3C. Opinions of Counsel to the Guarantor...................... 2
3D. Representations -and Warranties; No Default............... 2
3E. Purchase Permitted by Applicable Laws..................... 2
3F. Guaranty.................................................. 3
3G. Put Agreement............................................. 3
3H. Amendment to Master Lease................................. 3
3I. Purchase of Rent Obligations.............................. 3
3J. Security Agreement........................................ 3
3K. Acknowledgment, Subordination and Consent Agreement....... 3
3L. Financing Statements and Other Filings.................... 3
3M. RLC Secretary's Certificate............................... 4
3N. Rite Aid Florida Secretary's Certificate.................. 4
3O. Payment of RLC Notes..................................... 4
3P. Private Placement Number.................................. 4
3Q. Transaction Fee.......................................... 4
3R. Closing Expenses.......................................... 4
3S. Proceedings............................................... 4
4. PAYMENTS........................................................ 5
4A. Schedule of Payments...................................... 5
4B. Put Option Following a Rating Decline..................... 5
4C. Required Prepayment upon Certain Payments under the Master
Lease..................................................... 6
4D. Optional Prepayment With Yield-Maintenance Amount......... 7
4E. Notice of Optional Prepayment ............................ 7
4F Application of Prepayments; Partial Payments Pro Rata .... 7
4G. Retirement of Notes ...................................... 8
5. COVENANTS AND AGREEMENTS......................................... 8
5A. Maintenance of Existence................................. 8
5B. Payment of Notes and Maintenance of Office................ 8
5C. Maintenance of Books and Records, Inspection............. 8
5D. Payment of Taxes.......................................... 8
5E. Compliance with Applicable Law........................... 9
5F Disposition of Assets .................................... 9
5G. Change in Name............................................ 9
5H. Nature of Business ....................................... 9
5I. Liabilities.............................................. 9
5J. Liens.................................................... 9
5K. Loans: Investments ...................................... 9
5L. Additional Agreements; Amendments to Existing Agreements
and Certificate of Incorporation ........................ 9
5M. Payment of Monies ....................................... 9
5N. Collateral Trust Indenture............................... 9
5O. Further Assurances....................................... 10
6. EVENTS OF DEFAULT............................................... 10
7. REPRESENTATIONS, COVENANTS AND WARRANTIES....................... 13
7A. Organization and Existence............................... 13
7B. Due Authorization; No Conflict........................... 13
7C. Enforceability........................................... 13
7D. Actions Pending.......................................... 13
7E. Governmental Consent..................................... 13
7F. Tax Returns.............................................. 13
7G. Compliance with Law...................................... 13
7H. Liens ................................................... 13
7I. No Events of Default..................................... 14
7J. Disclosure............................................... 14
7K. Security Documents....................................... 14
7L. ERISA.................................................... 14
7M. Governmental Consent..................................... 14
7N. Certain Laws............................................. 14
7O. Margin Regulations ...................................... 15
7P. Offering of Notes ....................................... 15
70Q Other Business .......................................... 15
8. REPRESENTATIONS OF THE PURCHASER................................ 15
8A. Purchase for Investment.................................. 15
8B. ERISA.................................................... 15
9. DEFINITIONS..................................................... 17
9A. Yield-Maintenance Terms.................................. 17
9B. Other Terms.............................................. 18
10.MISCELLANEOUS................................................... 24
10A. Note Payments ......................................... 24
10B. Expenses............................................... 24
10C. Consent to Amendments.................................. 25
10D. Form, Registration, Transfer and Exchange of Notes,
Lost Notes............................................. 25
10E. Persons Deemed Owners; Participations.................. 26
10F. Survival of Representations and Warranties; Entire
Agreement.............................................. 26
10G. Successors and Assigns................................ 26
10H. Disclosure to Other Persons ........................... 26
10I. Notices................................................ 28
10J. Descriptive Headings, etc.............................. 28
10K. Satisfaction Requirement............................... 28
10L. Severalty of Obligations............................... 28
10M. Binding Agreement...................................... 29
10N. Governing Law.......................................... 29
10O. Counterparts........................................... 29
Annex 1 - Purchasers' Schedule
Annex 2 - Payment Instructions at Closing
Annex 3 - Prepayment Schedule
Exhibit A- Form of Note
Exhibit B- Form of Special Counsel's Opinion
Exhibit B- Form of Company Counsel's Opinion
Exhibit B- Form of Guarantor Assistant Chief Counsel's Opinion
Exhibit C- Form of Company Officers' Certificate
Exhibit D- Form of Company Secretary's Certificate
Exhibit E- Form of Guaranty
Exhibit F- Form of Guarantor Officers' Certificate
Exhibit G- Form of Guarantor Secretary's Certificate
Exhibit H- Form of Put Agreement
Exhibit I- Form of First Amendment to Master Lease
Exhibit J- Form of Rent Purchase Agreement (No. 2)
Exhibit K- Form of Security Agreement
Exhibit L- Form of Acknowledgement, Subordination and Consent
Agreement
Exhibit M- Form of RLC Secretary's Certificate
Exhibit N- Form of Rite Aid Florida Secretary's Certificate
FINCO, INC.
-------------------------
NOTE AGREEMENT
$79,560,908.91 7.30% SENIOR SECURED NOTES DUE FEBRUARY 28, 2002
Dated as of September 30, 1996
To Each of the Purchasers Named in the
Purchasers' Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, FINCO, INC., a Delaware corporation (together with
its successors and assigns, the "COMPANY"), hereby agrees with the
purchasers named in the Purchasers' Schedule attached hereto as Annex I
(herein called the "PURCHASERS") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue and sale of its senior promissory notes (the "NOTES") in the
aggregate principal amount of Seventy-Nine Million, Five Hundred Sixty
Thousand Nine Hundred Eight and 91/100 Dollars ($79,560,908.91) to be dated
the date of issue thereof, to mature on February 28, 2002, to bear interest
on the unpaid balance thereof from February 28, 1997 (or such later date as
any Note shall be dated upon an exchange of Notes) until the principal
thereof shall have become due and payable at the rate of seven and
three-tenths percent (7.30%) per annum, payable monthly on the last day of
each month commencing on March 31, 1997 and at maturity, and on overdue
principal, Yield-Maintenance Amount and accrued interest at the rate
specified therein, and to be substantially in the form of Exhibit A
attached hereto with such changes therefrom, if any, as may be approved by
the Purchasers and the Company. Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months. The term "Notes" as
used herein shall include! each Note delivered pursuant to any provision
hereof and each Note delivered in substitution or exchange for any such
Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to
each Purchaser and, subject to the terms and conditions set forth herein,
each Purchaser agrees to purchase from the Company the aggregate principal
amount of Notes set forth below such Purchaser's name in the Purchasers'
Schedule attached hereto as Annex 1, for the amount set forth opposite such
Purchasers name as the purchase price thereof. The Company will deliver to
each such Purchaser, at the offices of Hebb & Gitlin, a Professional
Corporation, One State Street Hartford, Connecticut, 06103, one or more
Notes registered in the name specified on the Purchasers' Schedule with
respect to such Purchaser, evidencing the aggregate principal amount of
Notes to be purchased by such Purchaser and in the denomination or
denominations specified with respect to such Purchaser in the Purchasers'
Schedule attached hereto, against payment of the purchase price thereof by
transfer of immediately available funds as directed by the Company on Annex
2 hereto, on the date of closing, which shall be September 30, 1996 (the
"CLOSING DATE").
3. CONDITIONS OF CLOSING. Each Purchasers obligation to purchase and
pay for the Notes to be purchased hereunder is subject to the satisfaction,
on or before the Closing Date, of the following conditions:
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall have
received from Hebb & Gitlin, a Professional Corporation, which is acting as
special counsel for the Purchasers in connection with this transaction, a
favorable opinion, dated the Closing Date and substantially in the form of
Exhibit B1 hereto.
3B. OPINION OF COUNSEL TO THE COMPANY. The Purchasers shall have
received from Haight, Tramonte, Siciliano, Flask & Yeonas, P.C., counsel
for the Company, a favorable opinion dated the Closing Date and
substantially in the form of Exhibit B2 hereto.
3C. OPINIONS OF COUNSEL TO THE GUARANTOR. The Purchasers
shall have received from
(i) Morgan, Lewis & Bockius LLP, special counsel for the
Guarantor, Rite Aid Florida and the Operating Subsidiaries, a
favorable opinion dated the Closing Date and in form and
substance satisfactory to the Purchasers and
(ii) Elliot S. Gerson, Assistant Chief Counsel for the
Guarantor, Rite Aid Florida and the Operating Subsidiaries, a
favorable opinion dated the Closing Date and substantially in
the form of Exhibit B3 hereto.
3D. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 7 hereof shall be true on and as of
the Closing Date, except to the extent of changes caused by the
transactions provided for herein; on the Closing Date no Event of Default
or Default shall have occurred and be continuing; and the Purchasers shall
have received a certificate dated the Closing Date and signed by the
Chairman and Chief Executive Officer, the President, the Executive Vice
President or any Senior Vice President and the Treasurer or an Assistant
Treasurer of the Company, substantially in the form of Exhibit C hereto,
certifying to both such effects and that the preceding conditions specified
in this paragraph OD have been fulfilled, and a certificate dated the
Closing Date and signed by the Secretary or an Assistant Secretary of the
Company, substantially in the form of Exhibit D hereto, with respect to the
matters therein set forth.
3E. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer, purchase, and
sale of, and payment for, the Notes to be purchased by the Purchasers on
the Closing Date on the terms and conditions provided herein (including the
use of the proceeds of such Notes by the Company) shall riot violate any
applicable law or governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation G, T or X of the Board of
Governors of the Federal Reserve System) and shall not subject any
Purchaser to any tax, penalty, liability or other onerous condition under
or pursuant to any applicable law or governmental regulation, and each
Purchaser shall have received such certificates or other evidence as such
Purchaser may request to establish compliance with this condition.
3F. GUARANTY. Each Purchaser shall have received a guaranty from the
Guarantor, in the form of Exhibit E hereto (the "RITE AID GUARANTY"),
executed and delivered by the Guarantor, together with (a) a certificate
dated the Closing Date and signed by the Chairman and Chief Executive
Officer, the President, the Executive Vice President or any Senior Vice
President and the Treasurer or an Assistant Treasurer of the Guarantor,
substantially in the form of Exhibit F hereto and (b) a certificate dated
the Closing Date and signed by the Secretary or an Assistant Secretary of
the Guarantor, substantially in the form of Exhibit G hereto.
3G. PUT AGREEMENT. The Guarantor and the Purchasers shall have
executed and delivered an agreement, in the form of Exhibit H hereto (the
"PUT AGREEMENT"), pursuant to which the Purchasers shall have the right to
sell the Notes to the Guarantor upon the occurrence of an Event of Default.
3H. AMENDMENT TO MASTER LEASE. RLC and Rite Aid Florida shall have
executed and delivered an amendment, substantially in the form of Exhibit I
hereto (the "FIRST AMENDMENT"), to that certain Master Lease, dated
February 29, 1996 (as amended by the First Amendment, the "MASTER LEASE").
3I. PURCHASE OF RENT OBLIGATIONS. The Company and RLC shall have
executed and delivered that certain Rent Purchase Agreement (No. 2),
substantially in the form of Exhibit J hereto ("RENT PURCHASE AGREEMENT
(NO.2)"), with RLC, pursuant to which the Company shall have purchased from
RLC certain rent obligations owing under the Master Lease, and certain
related rights, for a total purchase price of Seventy-Seven Million One
Hundred Eighty-Four Thousand Four Hundred Seventy-Six and 50/100 Dollars
($77,184,476.50).
3J. SECURITY AGREEMENT. The Company shall have executed and delivered
a security agreement in favor of the Purchasers, substantially in the form
of Exhibit K hereto (the "SECURITY AGREEMENT"), pursuant to which the
Company shall have granted to the Purchasers a security interest in the
Company's rights under Rent Purchase Agreement (No. 2) and the
Acknowledgment, Subordination and Consent Agreement.
31K. ACKNOWLEDGMENT, SUBORDINATION AND CONSENT AGREEMENT. The
Guarantor, Rite Aid Florida and the Operating Subsidiaries shall have
executed and delivered an agreement, in the form of Exhibit L hereto (the
"ACKNOWLEDGEMENT, SUBORDINATION AND CONSENT AGREEMENT"), pursuant to which
each such Person shall have consented, inter alia, to the transactions
effected by Rent Purchase Agreement (No. 2) and the Security Agreement.
3L. FINANCING STATEMENTS AND OTHER FILINGS. UCC-1 financing
statements shall have been filed with
(i) the State Corporation Commission of the Commonwealth of
Virginia and the office of the court clerk of Fairfax County, naming
RLC as debtor, the Company as secured party and the Security Agent as
assignee of the secured party, and
(ii) the Secretary of State of Connecticut, naming the Company
as debtor and the Security Agent as secured party.
All recording, subscription and other similar fees, and all taxes and other
expenses related to such filings, registrations and recordings shall have
been paid, or caused to be paid, in full by the Company and the Purchasers
shall have received evidence satisfactory to the Purchasers of the proper
recording of such financing statements and the first priority perfected
status of such security interests and Liens.
3M. RLC SECRETARY'S CERTIFICATE. Each Purchaser shall have received a
certificate dated the Closing Date and signed by the Secretary or an
Assistant Secretary of RLC, substantially in the form of Exhibit M hereto,
with respect to the matters therein set forth.
3N. RITE AID FLORIDA SECRETARY'S CERTIFICATE. Each Purchaser shall
have received a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary of Rite Aid Florida, substantially in
the form of Exhibit N hereto, with respect to the matters therein set
forth.
3O. PAYMENT OF RLC NOTES. Each Purchaser shall have received evidence
of the application of the proceeds of the Notes to the prepayment of the
RLC Notes, dated February 20, 1996, in the principal amount of Seventy-Six
Million Five Hundred Thousand Dollars ($76,500,000) payable to the order of
Rite Investments, Inc.
3P. PRIVATE PLACEMENT NUMBER. The Company shall have obtained a
private placement number for the Notes from the CUSIP Service Bureau of
S&P.
3Q. TRANSACTION FEE. The Purchasers shall have received a
transaction fee as follows:
(i) prior to the Closing Date, a fee in the amount of
One Hundred Thousand Dollars ($100,000), and
(ii) on or prior to the Closing Date, a fee in the amount of
Two Hundred Thousand Dollars ($200,000), which amount shall be
deducted on a pro rata basis from the amount of funds advanced to the
Company by each such Purchaser for such
Purchaser's purchase of Notes.
3R. CLOSING EXPENSES. The Company shall have paid at the closing the
statement for fees and disbursements of the special counsel to the
Purchasers presented on the Closing Date.
3S. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all
documents incident hereto shall be satisfactory in substance and form to
each Purchaser, and each Purchaser shall have received all such counterpart
originals or certified or other copies of such documents as it may
reasonably request.
4. PAYMENTS. The Notes shall be subject to required prepayment as set
forth in paragraphs 4A, 4B and 4C hereof and shall be subject to
prepayment, at the option of the Company, as set forth in paragraph 4D
hereof.
4A. SCHEDULE OF PAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the payment of the Notes, without Yield-Maintenance
Amount, the respective amounts specified in Annex 3 hereto on the
respective dates specified in such Annex, together with accrued interest
thereon in the amounts specified in such Annex.
4B. PUT OPTION FOLLOWING A RATING DECLINE.
(I) RATING DECLINE. In the event that any Senior Obligations of
the Guarantor shall not be rated Investment Grade by at least two (2)
Rating Agencies, each Noteholder will have the right to elect, at any
time prior to the Restoration Date, to require the ~Company to redeem
such Note in whole (but not in part) on the Redemption Date at a
price equal to the Redemption Price.
(II) NOTICE. Within five (5) days after the first. date on
which any Senior Obligations of the Guarantor are not rated
Investment Grade by at least two (2) Rating Agencies (such first date
being referred to herein as the "TRIGGER Date"), the Company will
cause a notice to be mailed to each Noteholder, which notice shall
(a) state that Senior Obligations of the Guarantor are
not rated Investment Grade by at least two (2) Rating Agencies,
(b) describe the event or the action taken that resulted
in such Senior Obligations not being rated Investment Grade,
including the date of the occurrence thereof,
(c) set forth the Company's offer to redeem all of the
Notes as provided in subparagraph (iii) of this paragraph 4B,
(d) set forth in reasonable detail the Company's
calculation of the Redemption Price payable upon any such
redemption, determined as if the Redemption Date were the date
of such notice, and
(e) state the party to whom the Noteholder electing
redemption shall surrender such Note on or before the
Redemption Date.
(III) ELECTION OF REDEMPTION. At any time afterthe Trigger Date
and prior to the Restoration Date, any Noteholder may, by written
notice to the Company (the "REDEMPTION NOTICE"), elect to have the
Company redeem the Note or Notes specified in the Redemption Notice.
Upon its receipt of a Redemption Notice, the Company will promptly,
and in any event within three (3) Business Days of its receipt
thereof, send a copy of such Redemption Notice to each Noteholder
(other than the Noteholder which shall have originally delivered such
Redemption Notice). Election of redemption by a Noteholder pursuant
to this paragraph 4B shall be irrevocable and the occurrence of the
Restoration Date prior to the Redemption Date shall not affect the
Companys obligation to redeem the Note or Notes spedfied in any
Noteholders Redemption Notice. On the Redemption Date, the Company
shall pay such Noteholder the Redemption Price in respect of the
Notes held by such Noteholder and shall deliver to such Noteholder a
notice setting forth in reasonable detail the Company's calculation
of the Redemption Price.
(IV) CERTAIN DEFINED TERMS. For purposes of this Agreement the
following terms shall have the following meanings: "INVESTMENT GRADE"
means a rating of Baa3 or higher, in the case of a rating by Moody's,
and a rating of BBB- or higher, in the case of a rating by S&P, or
the equivalent of such rating by Moody's or S&P or, to the extent
applicable, by another Rating Agency.
"MOODY'S" means Moody's Investors Service, Inc. or any
successor thereto.
"RATING AGENCY" means each of Moody's and S&P and, if either Moody's
or S&P (but not both) ceases to rate Senior Obligations of corporations
generally or Senior Obligations of the Guarantor in particular, then
another comparable rating agency of recognized national standing in the
United States selected reasonably by the Required Holders. If both Moody's
and S&P cease to rate Senior Obligations of corporations generally or
Senior Obligations of the Guarantor in particular, then, for purposes of
this paragraph 4B, Senior Obligations of the Guarantor shall be deemed not
to have been rated Investment Grade by any Rating Agency.
"REDEMPTION DATE" means, in respect of the Notes held by any
Noteholder that has delivered a Redemption Notice, the fifteenth (15th) day
(or, if such day is not a Business Day, the first Business Day thereafter)
after delivery of such Redemption Notice to the Company.
"REDEMPTION PRICE" means, with respect to any Note as of the
Redemption Date therefor, an amount equal to one hundred percent (100%) of
the principal amount of such Notes plus interest thereon accrued to the
Redemption Date and the Yield-Maintenance Amount, if
any, with respect thereto.
"RESTORATION DATE" means the date on which Senior Obligations of the
Guarantor are rated Investment Grade by at least two (2) Rating Agencies.
"SENIOR OBLIGATIONS" means unsubordinated, senior, unsecured
indebtedness.
"S&P" means Standard & Poor's, a division of McGraw-Hill, Inc-, or
any successor -thereto.
4C. REQUIRED PREPAYMENT UPON CERTAIN PAYMENTS UNDER THE
MASTER LEASE. At any time when
(i) Stipulated Loss Value is paid by Rite Aid Florida
under the Master Lease, or
(ii) Rite Aid Florida shall prepay all or any portion of Basic
Rent pursuant to Section 4.2 of the Master Lease.
the Company shall prepay the Notes in a principal amount determined
pursuant to the next succeeding sentence, together with interest on such
principal amount accrued to the prepayment date arid the Yield-Maintenance
Amount if any, in respect of the principal amount of the Notes being so
prepaid. In determining the amount of principal of the Notes to be prepaid
upon such payment or prepayment, it shall be assumed that the amount of the
reduction in each payment of Basic Rent arising therefrom is allocable to
principal and interest in the same proportions that the entire amount of
such payment was so allocated immediately prior to such reduction; the
aggregate amount of the reductions in Basic Rent so allocated to principal
shall be the aggregate principal amount of the Notes to be prepaid pursuant
to this paragraph 4C. Prepayments of the Notes pursuant to this paragraph
4C shall be made at the time such Stipulated Loss Value or prepayment shall
be paid by Rite Aid Florida and, simultaneously with any such prepayment,
the Company shall deliver to each Noteholder a notice setting forth in
reasonable detail the Company's calculation of the Yield-Maintenance
Amount, payable in connection with such prepayment.
4D. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes
shall be subject to prepayment, in whole at any time or from time to time
in part (in multiples of One Million Dollars ($1,000,000), or, if the
aggregate outstanding principal amount of the Notes is less than One
Million Dollars ($1,000,000) at such time, in such principal amount), at
the option of the Company, at one hundred percent (100%) of the principal
amount so prepaid plus interest thereon accrued to the prepayment date and
the Yield-MaIntenance Amount, if any, with respect to each Note.
4E. NOTICE OF OPTIONAL PREPAYMENT. The Company will give each
Noteholder irrevocable written notice of any prepayment to be made pursuant
to paragraph 4D hereof not less than ten (10) Business Days prior to the
prepayment date, specifying such prepayment date and the principal amount
of the Notes held by such Noteholder to be prepaid on such date, and
stating that such prepayment is to be made pursuant to paragraph 4D. The
notice of prepayment shall also set forth in reasonable detail the
Company's calculation of the Yield-Maintenance Amount payable to each
Noteholder in connection with such prepayment determined as if the date of
such notice were the date of prepayment. Notice of prepayment having been
given as aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon accrued to the prepayment date and
together with the Yield-Maintenance Amount, if any, shall become due and
payable an such prepayment date. On such prepayment date, the Company will
deliver to each Noteholder a notice setting forth in reasonable detail the
Company's calculalion of the Yield-Maintenance Amount due on such date.
4F. APPLICATION OF PREPAYMENTS, PARTIAL PAYMENTS PRO RATA.
(I) APPLICATION OF OTHER PREPAYMENTS. Any prepayment of Notes
pursuant to paragraph 4D hereof shall be applied first, to the amount
due on the maturity date of the Notes and second, to the mandatory
payments applicable to the Notes, as set forth in paragraph 4A, in
the inverse order of the maturity thereof. Any prepayment of Notes
pursuant to paragraph 4B or paragraph 4C shall be applied ratably to
the amount due on the maturity date of the Notes and the mandatory
payments of the Notes as set forth in paragraph 4A.
(II) PARTIAL PREPAYMENTS PRO RATA. Upon any partial payment or
prepayment of Notes pursuant to paragraph 4A, paragraph 4C or
paragraph 4D hereof, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding in proportion to the
respective aggregate principal amounts of the Notes then outstanding.
4G. RETIREMENT OF NOTES. The Company will not prepay, retire,
purchase or otherwise acquire in whole or in part any Notes, or any
interest therein (whether by pledge, participating interest or otherwise),
prior to their stated final maturity except by, prepayment pursuant to this
paragraph 4 or upon acceleration of such final maturity pursuant to
paragraph 0 hereof.
5. COVENANTS AND AGREEMENTS. The Company covenants and agrees that on
and after the Closing Date and so long as any of the Notes shall be
outstanding:
5A. MAINTENANCE OF EXISTENCE. The Company shall at all times maintain
its existence as a corporation organirzed under the laws of the state of
Delaware, and shall not take or permit to be taken any action which would
have the effect of terminating its existence.
5B. PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
(I) PAYMENT OF NOTES. The Company will punctually pay, or cause
to be paid, the p(incipall of and accrued interest (and
Yield-Maintenance Amount if any) on, the Notes, as and when the same
shall become due according to the terms hereof and of the Notes.
(II) MAINTENANCE OF CHIEF EXECUTIVE OFFICE. The Company will
maintain its chief executive office at the address of the Company set
forth in paragraph 101 hereof where notices, presentations and
demands in respect hereof or the Notes may be made upon ft. The
Company shall not have any other office and, without providing at
least thirty (30) days prior written notice to each Noteholder, shall
not dhange the location of its chief executive office.
5C. MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. The Company shall
maintain true and correct books of records and accounts in which full and
correct entries will be made of all its material business transactions in
accordance with sound business practices-, and will permit representatives
of any Noteholder, at such Noteholders expense or in any event without
expense to the Company, to visit its chief executive office and examine and
make abstracts from any of its books and records, and to discuss its
affairs, finances and accounts wirth its officers, employees and
independent public accountants, all at such reasonable times, upon
reasonable notice, and as often as may reasonably be desired.
5D. PAYMENT OF TAXES. The Company shall file or cause to be filed all
Federal, state and local tax returns which are required to be filed by it,
and shall pay or discharge or cause to be paid or discharged before any
penalty shall accrue fmm the failure to so pay or discharge, all taxes,
assessments and governmental charges, imposts, duties and levies charged,
levied or imposed upon it or upon its income, profits or Property
(including withholding and any penalties, interest and additions to taxes),
provided that no such penalty need be paid if it is being contested ingood
faith by appropriate proceedings promptly initiated and diligently
conducted if appropriate reserves therefor have been established and if the
failure to pay such penalty will not have a Material Adverse Effect.
5E. COMPLIANCE WITH APPLICABLE LAW. The Company shall comply in all
material respects with all requirements of applicable law.
5F. DISPOSITION OF ASSETS. The Company shall not convey, sell, lease,
sublease or otherwise dispose of, in one transaction or a series of
transactions (or agree in writing to do any of the foregoing at any future
time), any of its Property or any part thereof. The Company shall at all
times own (i) the right to receive the Rental Payments and (ii) the Related
Rights, free and clear of any Lien other than Liens created by the
Financing Documents in favor of the Security Agent.
5G. CHANGE IN NAME. The Company shall not change its name or adopt an
assumed, business or trade name.
5H. NATURE OF BUSINESS. The Company shall not engage in any business
other than as set forth in its certificate of incorporation as in effect on
the Closing Date.
5I. LIABILITIES. The Company shall not directly or indirectly create,
incur, assume, issue ar otherwise have any liabilities other than the
Notes, amounts owing to the Noteholders under the Financing Documents and
liabilities not in excess of Ten Thousand Dollars ($10,000) on account of
incidentals or services supplied to the Company-
5J. LIENS. The Company shall not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to its
Properties other than the Liens created by the Security Agreement.
5K. LOANS; INVESTMENTS. The Company shall not make any loans,
advances or extensions of credit to any Person, or make any investment in
any Person or Property other than the acquisition of the Rental Payments
and the Related Rights pursuant to Rent Purchase Agreement (No. 2).
5L. ADDITIONAL AGREEMENTS; AMENDMENTS TO EXISTING AGREEMENTS AND
CERTIFICATE OF INCORPORATION. After the Closing Date, the Company shall not
enter into any agreement, any amendment or waiver of any agreement to which
it is a party at the close of business on the Closing Date, or any
amendment to its certificate of incorporation.
5M. PAYMENT OF MONIES. The Company shall (i) instruct Rite Aid
Florida to pay all Rental Payments directly to the Security Agent and (ii)
pay over to the Security Agent, promptly upon receipt, all monies received
by it in respect of the Rental Payments and the Related Rights for
application to principal of, and interest and Yield-Maintenance Amount on,
the Notes and other amounts owing hereunder.
5N. COLLATERAL TRUST INDENTURE. The Company shall, upon the request
of the Required Holders, enter into a collateral trust indenture containing
customary terms and conditions pursuant to which a collateral trustee
(which shall be a bank or trust company selected by the Required Holders)
shall be the secured party with respect to the collateral encumbered by the
Security Agreement and shall act for the benefit of the Noteholders. The
Company shall pay all costs and expenses incurred by the Noteholders in
connection with the preparation, negotiation and execution of any such
collateral trust indenture including, without limitation, fees and
disbursements of counsel for the Noteholders and the collateral trustee and
the fees and disbumements of the collateral trustee.
5O. FURTHER ASSURANCES. The Company shall at its sole cost and
expense cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents, assurances and information
(financial or otherwise) relating to this Agreement or the other Financing
Documents as the Required Holders may reasonably request in order to carry
out more effectively the intent and purposes of this Agreement and the
other Financing Documents, and the transactions contemplated hereby and
thereby. The Company shall cause the financing statements (and continuation
statements with respect thereto) identified in paragraph 3L, and all other
documents necessary in that connection, to be recorded or filed at such
places and times, and in such manner, and shall take, or shall cause to be
taken, all such other action as may from time to time be necessary or
reasonably requested by the Required Holders in order to (i) establish,
preserve, protect and perfect the Company's right, title and interest in
and to the Rental Payments and the Related Rights, and (ii) establish,
preserve, protect and perfect the Lien of the Required Holders in and to
the Collateral.
6. EVENTS OF DEFAULT. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall
be voluntary or involuntary or come abott or be effected by operation of
law or otherwise):
(i) the Company defaults in the payment of any
principal of or YieldMaintenance Amount on any Note when the same
shall become due: or
(ii) the Company defaults in the payment of any interest on any
Note for more than five (5) Business Days after the date due; or
(iii) any representation or warranty made by the Company herein
or in any writing furnished in connection with or pursuant hereto, or
by the Guarantor in any Financing Document or in any writing
furnished in connection with or pursuant thereto, shall be false in
any material respect on the date as of which made; or
(iv) the Company fails to perform or observe any agreement
contained in paragraph 5 hereof, or the Guarantor fails to perform or
observe any agreement contained in Section 5 of the Rite Aid
Guaranty: or
(v) the Company, the Guarantor, Rite Aid Florida or any
Operating Subsidiary fails to perform or observe any other agreement,
term or condition contained herein or in any other Financing Document
and such failure shall not be remedied within thirty (30) days after
any officer of any such corporation obtains actual knowledge thereof
(whether as the result of notice from any Noteholder or otherwise);
or
(vi) the Guarantor or any Significant Subsidiary defaults in
any payment of principal of or interest on any other obligation for
money borrowed (or any Capitalized Lease Obligation, any obligation
under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for Property
whether or not secured by a purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto, or
the Guarantor or any Significant Subsidiary fails to perform or
observe any other agreement term or condition contained in any
agreement under which any such obligation is created (or if
any other event thereunder or under any such agreement shall occur
and be continuing) and the effect of such failure or other event is
to cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to any originally stated maturity, or
to be repurchased by the Guarantor or any Significant Subsidiary,
provided that the aggregate amount of all obligations as to which
such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration or
repurchase. shall occur and be continuing exceeds Twenty-Five Million
Dollars ($25,000,000); or
(vii) the Company, the Guarantor or any Significant Subsidiary
makes an assignment for the benefit of creditors or is generally not
paying its debts as such debts become due; or
(viii)any decree or order for relief in respect of the Company,
the Guarantor or any Significant Subsidiary is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (the "BANKRUPTCY LAW"), of any
jurisdiction; or
(ix) the Company, the Guarantor or any Significant Subsidiary
petitions or applies to any tribunal for, or consents to, the
appointment of, or the taking of possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company, the
Guarantor or any Significant Subsidiary, or of any substantial part
of the Property of the Company, the Guarantor or any Significant
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings relating to the Company, the
Guarantor or any Significant Subsidiary under the Bankruptcy Law of
any other jurisdiction; or
(x) any petition or application referred to in subparagraph
(ix) of this paragraph 0 is filed, or any such proceedings are
commenced, against the Company, the Guarantor or any Significant
Subsidiary and the Company, the Guarantor or such Significant
Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings,
and such order, judgment or decree remains unstayed and in effect for
more than thirty (30) days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company, the Guarantor or any Significant
Subsidiary decreeing the dissolution of the Company or the Guarantor
and such order, judgment or decree remains unstayed and in effect for
more than sixty (60) days; or
(xii) any order, judgment or decree is entered in any
proceedings against the Guarantor or any Significant Subsidiary
decreeing a split-up of the Guarantor or such Significant Subsidiary
that requires the divestiture of assets representing a Substantial
Part, or the divestiture of the stock of any such Significant
Subsidiary whose assets represent a Substantial Part, of the
consolidated assets of the Guarantor and its Subsidiaries (determined
in accordance with generally accepted accounting principles) or that
requires the divestiture of assets, or stock of a Subsidiary of the
Guarantor, that shall have contributed a Substantial Part of the
consolidated net income of the Guarantor and its Subsidiaries
(determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently
ended, and such order, judgment or decree remains unstayed and in
effect for more than sixty (60) days; or
(xiii) the Rite Aid Guaranty shall cease to be in full force and
effect or shall be declared by a court or Govemmental Authority of
competent jurisdiction to be void, voidable or unenforceable against
the Guarantor, or the Guarantor shall contest the validity or
enforceability of the Rite Aid Guaranty, or the Guarantor shall
otherwise deny that it has any further liability under the Rite Aid
Guaranty: or
(xiv) a final judgment in an amount in excess of Twenty-Five
Million Dollars ($25,000,000) is rendered against the Guarantor or
any of its Subsidiaries and, within sixty (60) days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within sixty (60) days after the expiration of any
such stay, such judgment is not discharged; or
(xv) any Lien or Liens shall exist at any time on any Property
of the Guarantor or any of its Subsidiaries securing tax,
pension-related or litigation obligations and the aggregate amount so
secured at such time shall be in excess of Twenty-Five Million
Dollars ($25,000,000);
then
(a) if such event is an Event of Default specified in
subparagraph (vii) through (xi), inclusive, of this paragraph 0 with
respect to the Company, all of the Notes at the time outstanding
shall automatically become immediately due and payable at par
together with interest accrued thereon, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the
Company, and
(b) if such event is any other Event of Default,
the Required Holders may at its or their option, by notice in writing to
the Company, declare all of the Notes to be, and all of the Notes shall
thereupon be and become, immediately due and payable together with interest
accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other
notice of any kind. all of which are hereby waived by the Company.
7. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants, as of the Closing Date, as
follows:
7A. ORGANIZATION AND EXISTENCE. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
state of Delaware, and has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement, to own its
Property, and to conduct its business in the manner and in the places in
which it is presently proposed to be conducted and in which failure to have
such authority would have a Material Adverse Effect.
7B. DUE AUTHORIZATION; NO CONFLICT. Each of this Agreement and the
other Financing Documents to which the Company is a party has been duly
authorized by all necessary action on the part of the Company, has been
duly executed and delivered by the Company, and the execution, delivery and
performance by the Company thereof do not (i) violate the certificate of
incorporation or bylaws of the Company, or (ii) result in, or require. the
creation or imposition of any Lien (other than Liens created by the
Security Agreement) upon or with respect to any of the Property now owned
by it. The Company is not a party to any agreement or instrument other than
its constitutive documents and the Financing Documents to which it is a
party.
7C. ENFORCEABILITY. Each of this Agreement and the other Financing
Documents to which the Company is a party coristitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
7D. ACTIONS PENDING. There is no action, suit investigation or
proceeding pending or, to the knowledge of the Company, threatened against
the Company, or any properties or rights of the Company, by or before any
court, arbitrator or administrative or governmental body.
7E. GOVERNMENTAL CONSENT. Neither the nature of the Company, nor any
of its businesses or properties, nor any relationship between the Company
and any other Person, nor any circumstance in connection with the offering.
issuance. sale or delivery of the Notes 'is such as to require any
authorization, consent, approval, exemption or other action by or notice to
or filing with any court or administrative or governmental body in
connection with the execution and delivery hereof, the offering, issuance,
sale or delivery of the Notes or fulfillment of or compliance with the
terms and provisions hereof or of the Notes.
7F. TAX RETURNS. The Company has not been required to file, on or
prior to the date hereof, any Federal, state or local income, or franchise
or other tax returns.
7G. COMPLIANCE WITH LAW. The Company is in compliance in all material
respects with all applicable laws (including, without limitation, all
Environmental Protection Laws). The Company is not subject to any liability
under any Environmental Protection Laws,
7H. LIENS. The Collateral is not subject to any Lien, except for
Liens contemplated by the Financing Documents.
7I. NO EVENTS OF DEFAULT. The Company is not in default with respect
to any of its obligations hereunder or under any other Financing Document.
No condition exists that would, upon consummation of the transactions
contemplated hereby and by the other Financing Documents, constitute a
Default or an Event of Default.
7J. DISCLOSURE. Neither this Agreement any other Financing Document,
nor any other document, certificate or statement furnished to the
Purchasers by or on behalf of the Company, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to
make the Statements contained herein and in such documents, certificates
and slatements not misleading. There is no fact peculiar to the Company
that could reasonably be expected to have a Material Adverse Effect or in
the future may (so far as the Company can now foresee) have a Material
Adverse Effect and that has not been set forth herein, in any of the other
Financing Documents, or in the other documents, certificates and statements
funnished to the Purchasers in writing by or on behalf of the Company prior
to the date hereof in connection with the transactions contemplated hereby
or by the other Financing Documents.
7K. SECURITY DOCUMENTS. To the extent that the Collateral is
comprised of general intangibles, (i) the Security Agreement is effective
to create a legal, valid and enforceable Lien upon the Collateral in favor
of the Security Agent, (ii) upon proper recording or filing in the
locations referred to in paragraph 3L, the Noteholders will have a
first-priority perfected Lien in the Collateral, and (iii) no further
action is required to establish a valid and enforceable, first-priority
Lien in and to the Collateral in favor of the Security Agent.
7L. ERISA. The Company does not maintain any Pension Plans and does
not participate in any Multiemployer Plans. The execution and delivery
hereof and of the other Financing Documents will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA or
in connection with which a tax could be imposed pursuant to section 4975 of
the IRC, The representation by the Company in the next preceding sentence
is made in reliance upon and subject to the accuracy of the representation
of each Purchaser in paragraph 8B hereof as to the source of the funds to
be used to pay the purchase price of the Notes to be purchased by each such
Purchaser.
7M. GOVERNMENTAL CONSENT. Neither the nature of the Company, nor any
of its businesses or properties, nor any relationship between the Company
and any other Person, nor any circumstance in connection with the offering,
issuance, sale or delivery of the Notes, is such as to require any
authorization, consent approval, exemption or other action by or notice to
or filing with any court or administrative or governmental body in
connection with the execution and delivery hereof or fulfillment of or
compliance with the terms and provisions hereof.
7N. CERTAIN LAWS.
(I) INVESTMENT COMPANY ACT. The Company is not, and is not
directly or indirectly controlled by, or acting on behalf of any
Person which is, an "'investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(II) ABSENCE OF FOREIGN OR ENEMY STATUS. The Company is
not
(a) an "enemy" or an "ally of enemy" within the meaning
of section 2 of the Trading with the Enemy Act, as amended, or
any executive orders or regulations issued or promulgated
pursuant thereto, or
(b) a "national" of any "designated enemy country" as
such terms are defined in Executive Order No. 9095, as amended,
of the President of the United States
of America.
(III) HOLDING COMPANY STATUS. The Company is not a "holding
company" or an "affiliate" of a "holding company," or a "subsidiary
company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
7O. MARGIN REGULATIONS. The Company is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock as
defined in Regulation G of the Board of Governors of the Federal Reserve
System. 11 C.F.R., Chapter 11, as amended. The Company does not own any
margin stock and will not use the proceeds from the sale of Notes to
acquire any margin stock.
7P. OFFERING OF NOTES. Neither the Company nor any agent acting on
its behalf has ever, directly or indirectly, offered the Notes or any
similar Security of the Company for sale to, or solicited any offers to buy
the Notes or any similar Security of the Company from, or otherwise
approached or negotiated with respect hereto with, any Person other than
institutional investors.
7Q. OTHER BUSINESS. The Company has not engaged in any business
transaction unrelated to this Agreement, the Notes and the other Financing
Documents to which it is a party.
8. REPRESENTATIONS OF THE PURCHASER.
8A. PURCHASE FOR INVESTMENT. Each Purchaser represents as of the
Closing Date, and in making the sale of Notes to each such Purchaser it is
specifically understood and agreed, that such Purchaser is not acquiring
the Notes to be purchased by it under this Agreement with a present
intention to sell or a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided
that the disposition of each Purchasers Property shall at all times be and
remain within its control.
8B. ERISA. Each Purchaser represents as of the Closing Date:
(i) if it is acquiring the Notes for its own account with funds
from or attributable to its general account, and in reliance upon the
Company's representations set forth in paragraph 7L and the
representations of the Guarantor set forth in Section 4.10 of the
Rite Aid Guaranty, that the amount of the reserves and liabilities
for the general account contracts (as defined by the annual statement
for life insurance companies as in effect on the date hereof and
approved by the National Association of Insurance Commissioners (the
"NAIC ANNUAL STATEMENT")) held by or on behalf of any Pension Plan
together with the amount of the reserves and liabilities for the
general account contracts held by or on behalf of any other Pension
Plans maintained by the same employer (or affiliate thereof, as such
term is defined in section V of Department of Labor Prohibited
Transaction Exemption 95-60 (60 FR 35925, July 12, 1995)) or by the
same employee organization (as defined in ERISA) in the general
account do not exceed ten percent (10%) of the total reserves and
liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with the state of domicile of the insurance company; for
purposes of the percentage limitation in this clause (i), the amount
of reserves and liabilities for the general account contracts held by
or on behalf of a Pension Plan shall be determined before reduction
for credits on account of any reinsurance ceded on a coinsurance
basis; or
(ii) if any part of the funds being used by it to purchase the
Notes shall come from assets of an employee benefit plan (as defined
in section 3 of ERISA) or a plan (as defined in section 4975(e)(1) of
the IRC):
(a) if such funds are attributable to a "separate
account" (as defined in sedion 3 of ERISA), then
(1) all requirements for an exemption under
Department of Labor Prohibited Transaction Exemption 90-1
(issued January 29, 1990) are met with respect to the use
of such funds to purchase the Notes, or
(2) the employee benefit plans with an interest in
such separate account have been identified in a writing
delivered by such Purchaser to the
Company;
(b) if such funds are attributable to a "separate
account" (as defined in section 3 of ERISA) that is maintained
solely in connection with fixed contracted obligations of an
insurance company, any amounts payable, or credited, to any
employee benefit plan having an interest in such account and to
any participant or beneficiary of such plan (including an
annuitant) are not affected in any manner by the investment
performance of the separate account;
(c) if such funds are attributable to an "investment
fund" managed by a "qualified plan asset manager" (as such
terms are defined in Part V of Department of Labor Prohibited
Transaction Exemption 84-14, issued March 13, 1984), all
requirements for an exemption under such Exemption are met wfth
respect to the use of such funds to purchase the Notes; or
(d) such employee benefit plan is excluded from the
provisions of section 406 of ERISA by virtue of section 4(b) of
ERISA.
9. DEFINITIONS. The following terms shall have the meanings specified
with respect thereto below:
9A. YIELD-MAINTENANCE TERMS.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are
required or authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be paid or prepaid pursuant to
paragraph 4 hereof (any partial prepayment being applied in
satisfaction of required payments of principal as provided in
paragraph 4F) or is declared to be immediately due and payable
pursuant to paragraph 0 hereof, as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
rftpect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on a semiannual
basis) equal to the Reinvestment Yield With respect to such Called
Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note, one half of one percent (.5%) per annum plus
the yield to maturity implied by either,
(i) the yields reported, as of 10:00 A.M. (New York City
time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display
designated as "Page 678" on the Telerate Service (or such other
display as may replace Page 678 on the Telerate Service) for
actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as
of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time
shall not be ascertainable, then
(ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have
been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield shall be determined, if
necessary, by
(a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted
financial practice, and
(b) interpolating linearly between reported yields.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note as of the Settlement Date with respect to such
Called Principal, the number of years (calculated to the nearest
one-twelfth (1/12) year) obtained by dividing
(i) such Called Principal into
(ii) the sum of the products obtained by
multiplying
(a) each Remaining Scheduled Payment of such Called
Principal (but not of interest thereon) by
(b) the number of years (calculated to the nearest
one-twelfth (1/12) year) that will elapse between such
Settlement Date and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due on or after the Settlement
Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to
be prepaid pursuant to paragraph 4 hereof or is declared to be
immediately due and payable pursuant to paragraph 6 hereof, as the
context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any
Note, an amount equal to the excess, if any, of the Discounted Value
of the Called Principal of such Note over the sum of
(i) such Called Principal plus
(ii) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called
Principal.
The Yield-Maintenance Amount shall in no event be less than zero.
9B. OTHER TERMS.
"ACKNOWLEDGMENT, SUBORDINATION AND CONSENT AGREEMENT" has the
meaning assigned to it in paragraph 3K of this Agreement.
"AFFILIATE" means any Person directly or indirectly
controlling, controlled by, or under direct or indirect common
control with, the Company, RLC or the Guarantor, and shall include,
without limitation, Subsidiaries of any such Person (including,
without limitation, Rite Aid Florida and the Operating Subsidiaries).
A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning assigned to it in paragraph
10C hereof.
"BANKRUPTCY LAW" has the meaning assigned to it in
clause (viii) of paragraph 0 of this Agreement.
"BASIC RENT" has the meaning assigned to it in the
Master Lease as in effect on the Closing Date.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are
required or authorized to be closed.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation of
any Person which, under generally accepted accounting prindiples, is
or will be required to be capitalized on the books of such Person,
taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with such principles.
"CLOSING DATE" has the meaning assigned to it in
paragraph 0 of this Agreement.
"COLLATERAL" has the meaning assigned to it in the
Security Agreement.
"COMPANY" has the meaning assigned to it in the
introductory sentence of this Agreement.
"CONFIDENTIAL INFORMATION" has the meaning assigned to
it in paragraph I OH of this agreement.
"DEFAULT" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of
notice or both, become an Event of Default.
"ENVIRONMENTAL PROTECTION LAW" means any federal, state,
county, regional or local law, statute, or regulation (including,
without limitation, CERCLA, RCRA and SARA) enacted in connection with
or relating to the protection or regulation of the environment,
including, without limitation, those laws, statutes, and regulations
regulating the disposal, removal, production, storing, refining,
handling, transferring, processing, or transporting of Hazardous
Substances, and any regulations, issued or promulgated in connection
with such statutes by any Governmental Authority and any orders,
decrees or judgments issued by any court of competent jurisdiction in
connection with any of the foregoing.
As used in this definition,
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time
to time (by SARA or otherwise), and all rules and regulations
promulgated in connection therewith;
"Hazardous Substances" has the mearfing assigned
to such term in 42 U.S.C. section 9601(14), as amended from
time to time.
"RCRA" means the Resource Conservabon and Recovery
Act of 1976, as amended, and any rules and regulations issued in
connection therewith: and
"SARA" means the Superfund Amendments and Reauthorization
Act of 1986, as amended from time to time, and all rules and
regulations promulgated in connection therewith.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" means any corporation or trade or
business that
(i) is a member of the same controlled group of
corporations (within the meaning of section 414(b) of the IRC)
as the Company or
(ii) is under common control (within the meaning of
section 414(c) of the IRC) with the Company.
"EVENT OF DEFAULT" means any of the events specified in
paragraph 0 of this Agreement, provided that there has been satisfied
any requirement in connection with such event for the giving of
notice, or the lapse of time, or the happening of any further
condition, event or act.
"FINANCING DOCUMENT" means
(i) the Notes,
(ii) this Agreement,
(iii) the Rite Aid Guaranty,
(iv) the Put Agreement,
(v) the Master Lease,
(vi) Rent Purchase Agreement (No. 2),
(vii) the Security Agreement, and
(viii) the Acknowledgment, Subordination and
Consent Agreement.
"FIRST AMENDMENT" has the meaning assigned to it in
paragraph 3H of this Agreement.
"GOVERNMENTAL AUTHORITY" means
(i) the government of the United States of
America or any State or other political subdivision thereof, or
(ii) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
"GUARANTOR" means Rite Aid Corporation, a Delaware
corporation.
"INSTITUTIONAL INVESTOR" means any "accredited investor" as
defined in section (a)(1) through section (a)(3), inclusive, of Rule
501 to the Securities Act, as in effect on the date hereof.
"INVESTMENT GRADE" has the meaning assigned to it in
paragraph 4B of this Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time, and all rules and regulations promulgated thereunder.
"LIEN" means any mortgage, pledge, security interest
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any condiflonal sale or other title
retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
"MASTER LEASE" has the meaning assigned to it in
paragraph 3H of this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse!
effect on
(i) the business, profits, Properties or
condition (financial or otherwise) of the Company, or
(ii) the ability of the Company to perform its respective
obligations under any Financing Document to which it is a
party.
"MOODY'S" has the meaning assigned to it in paragraph 4B
of this Agreement.
"MULTIEMPLOYER PLAN" means any "multiemployer plan" (as such
term is defined in ERISA) in respect of which the Company or any
ERISA Affiliate is an "employee" (as such term is defined in ERISA),
"NAIC ANNUAL STATEMENT" has the meaning assigned to it
in paragraph 8B of this Agreement.
"NOTEHOLDER" means any holder, from time to time, of the
Notes.
"NOTES" has the meaning assigned to such term in
paragraph 0 of this Agreement.
"OPERATING SUBSIDIARY" means each operating subsidiary of the
Guarantor that has entered into subleases with Rite Aid Florida
pursuant to a sublease under the Master Lease.
"PENSION PLAN" means any "employee pension benefit plan" (as
such term is defined in ERISA) maintained by the Company or any ERISA
Affiliate for employees of the Company or such ERISA Affiliate,
excluding any Multiemployer Plan, but including, without limitation,
any Multiple Employer Pension Plan.
As used in this definition,
"Multiple Employer Pension Ran" means any employee
benefit plan within the meaning of section 3(3) of ERISA (other
than a Multiemployer Plan), subject to Title IV of ERISA. to
which the Company or any ERISA Affiliate, and an employer (as
such term is defined in section 3 of ERISA) other than an ERISA
Affiliate or the Company, contribute.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"PROPERTY" means any interest in any kind af property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"PURCHASERS" has the meaning assigned to it in the
introductory sentence of this Agreement.
"PUT AGREEMENT" has the meaning assigned to it in
paragraph 3G of this Agreement.
"RATING AGENCY" has the meaning assigned to it in
paragraph 4B of this Agreement.
"REDEMPTION DATE" has the meaning assigned to it in
paragraph 4B of this Agreement.
"REDEMPTION NOTICE" has the meaning assigned to it in
paragraph 4B of this Agreement.
"REDEMPTION PRICE" has the meaning assigned to it in
paragraph 4B of this Agreement.
"RELATED RIGHTS" means the fight, title, interest, benefits,
powers, pdvileges and remedies conveyed to the Company pursuant to
Section 2.6 of Rent Purchase Agreement (No. 2).
"RENT PURCHASE AGREEMENT (NO. 2)" has the meaning
assigned to it in paragraph 31 of this Agreement.
"RENTAL PAYMENTS" has the meaning assigned to it in Rent
Purchase Agreement (No.
2).
"REQUIRED HOLDERS" means the holder or holders of at least
sixty-six and two-thirds percent (660%) of the aggregate principal
amount of the Notes from time to time outstanding, exclusive of Notes
which, notwithstanding paragraph 4G, may be owned by the Company or
any Affiliate.
"RESTORATION DATE" has the meaning assigned to it in
paragraph 4B of this Agreement.
"RITE AID FLORIDA" means Rite Aid of Florida, Inc., a
Florida corporation.
"RITE AID GUARANTY" has the meaning assigned to it in
paragraph 3F of this Agreement.
"RLC" means Realty Leasing Consultants, Inc., a Delaware
corporation.
"RLC NOTES" means those certain promissory notes issued by RLC
to the Operating Subsidiaries in payment of RLC's purchase of various
improvements located in approximately two thousand one hundred
(2,100) retallstores operated by the Operating Subsidiaries.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SECURITY" means "security" as defined in section 2(1)
of the Securities Act.
"SECURITY AGENT" means The Prudential Insurance Company
of America in its capacity as Security Agent under the Security
Agreement or its successor in such capacity.
"SECURITY AGREEMENT" has the meaning assigned to it in
paragraph 3J of this Agreement.
"SENIOR OBLIGATIONS" has the meaning assigned to it in
paragraph 4B of this Agreement.
"SIGNIFICANT SUBSIDIARY" means, at any time, any Subsidiary of
the Guarantor or any group of Subsidiaries of the Guarantor having
corisolidated assets, individually or in the aggregate, equal to or
greater than eight percent (8%) of the consolidated assets of the
Guarantor, its consolidated Subsidiaries and Rite Aid Florida.
"S&P" has the meaning assigned to it in paragraph 4B of
this Agreement.
"STIPULATED LOSS VALUE" has the meaning assigned to it
in the Master Lease as in effect on the Closing Date.
"SUBSIDIARY" means, with respect to any Person, any corporation
at least a majority of the total combined voting power of all classes
of Voting Stock of which shall, at the time as of which any
determination is being made, be owned by such Person either directly
or through Subsidiaries.
As used in this definition.
"Voting Stock" means, with respect to any corporation,
any shares of stock of such corporation whose holders are
entitled under ordinary circumstances to vote for the election
of directors of such corporation (irrespective of whether at
the time stock of any other class or classes shall have or
might have voting power by reason of the happening of any
contingency).
"SUBSTANTIAL PART" means, when used with respect to assets at
any time, more than ten percent (10%) of consolidated assets of the
Guarantor and its Subsidiaries at such time, and, when used with
respect to consolidated net income in respect of any period, more
than ten percent (10%) of consolidated net income of the Guarantor
and its Subsidiaries for such period.
"TRANSFEREE" means any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"TRIGGER DATE" has the meaning assigned to it in
paragraph 48 of this Agreement.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial
Code as in effect in the State of New York,
10. MISCELLANEOUS.
10A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal thereof and Yield
Maintenance Amount if any, and accrued interest thereon, that comply with
the terms hereof, by, wire transfer of immediately available funds for
credit to such Purchasers account or accounts as specified in the
Purchasers' Schedule attached hereto, or such other account or accounts in
the United States as such Purchaser may designate in writing,
notwithstanding any contrary provision herein or in any Note with respect
to the place of payment. Each Purchaser agrees that, before disposing of
any Note, it will make a notation thereon (or on a schedule attached
hereto) of all principal payments previously made thereon and of the date
to which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 10A to any Transferee. The Company shall be
entitled to rely upon any affidavit, certificate, letter, notice, telegram,
facsimile transmission or other document believed by it to be genuine, and
to be protected and saved harmless in all payments required to be made
hereunder, if made in good fafth and without actual notice or knowledge of
the changed conditions or status of any Person or entity who or which has
previously been receiving such payments.
10B. EXPENSES.
(i) At any time when the Noteholders and either one or both of
the Company and the Guarantor are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default
exists, the Company shall pay when billed the costs and expenses
Cincluding attorneys! fees and the fees of professional advisors)
incurred by the Noteholders in connection with the assessment,
analysis or enforcement of any rights or remedies that are or may be
available to the Noteholders,
(ii) If the Company shall fail to pay when due gny principal
of, or YieldMaintenance Amount or interest on, any Note, the Company
shall pay to each Noteholder, to the extent permitted by law, such
amounts as shall be sufficient to cover the costs and expenses,
including but not limited to attorneys' fees, incurred by such
Noteholder in collecting any sum due on such Notes.
The obligations of the Company under this paragraph 10B shall survive the
transfer of any Note or portion thereof or interest therein by any
Purchaser or any Transferee and the payment of any Note.
10C. CONSENT TO AMENDMENTS. This Agreement and the Notes may be
amended, and the Company may take any action prohibited herein or in the
Notes, or omit to perform any act required herein or therein to be
performed by it, if the Company shall obtain the written consent to such
amendment, action or omission to act, of the Required Holders and the
Guarantor except that, without the written consent of all Noteholders, no
amendment or waiver hereof shall (i) change the maturity of any Note, (ii)
change the principal of, or the rate or time of payment of interest or any
Yield-Maintenance Amount payable With respect to, any Note, (iii) affect
the time, amount or allocation of any required prepayments, (iv) reduce the
proportion of the principal amount of the Notes required with respect to
any consent, or (v) waive or amend either of paragraph 6(i) or paragraph
6(ii) hereof. Each Noteholder shall be bound by any consent authorized by
this paragraph 10C, whether or not such Note shall have been marked to
indicate such consent, but any Notes issued thereafter may bear a notation
referring to any such consent. No course of dealing between the Company and
any Noteholder nor any delay in exercising any rights hereunder or under
any Note shall operate as a waiver of any, rights of any Noteholder. As
used herein and in the Notes, the term "THIS AGREEMENT" and references
hereto mean this Agreement as it may from time to time be amended or
supplemented. The Company will not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any Noteholder as
consideration for or as an inducement to the entering into by any
Noteholder of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to the holders of all
Notes then outstanding.
10D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES.
(I) FORM, REGISTRATION, TRANSFER AND EXCHANGE OF Notes. The
Notes are issuable as registered notes without coupons in
denominations of at least One Hundred Thousand Dollars ($100,000),
except as may be necessary to reflect any principal amount not evenly
divisible by One Hundred Thousand Dollars ($100,000). The Company
shall keep at its principal office a register in which the Company
shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the
principal office of the Company, the Company shall, at its expense,
execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount registered in the name of such transferee
or transferees. At the option of any Noteholder, Notes may be
exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes that the
Noteholder making the exchange is entitled to receive. Every Note
surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly
executed, by such Noteholder or such Noteholder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for any
Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue that were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange.
(II) LOST NOTES. Upon receipt of written notice from any
Noteholder of the loss, theft, destruction or mutilation of such Note
and, in the case of any such loss, theft or destruction, upon receipt
of such Noteholders indemnity agreement (which, in the case of an
Institutional Investor, shall be unsecured), or in the case of any
such mutilation upon surrender and cancellation of such Note, the
Company will make and deliver a new Note, of like tenor, in lieu of
the lost, stolen, destroyed or mutilated Note.
10E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose
name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of and Yield-Maintenance Amount,
if any, and interest on such Note! and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be
affected by notice to the contrary. Subject to the preceding sentence, any
Noteholder may from time to time grant participations in all or any part of
such Note held by it to any Person on such terms and conditions as may be
determined by such Noteholder in its sole and absolute discretion.
10F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ENTIRE AGREEMENT.
All representations and Warranties contained herein or made in writing by
or on behalf of the Company in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion theTeof or interest therein and the
payment of any Note, and may be relied upon by any Transferee, regardless
of any investigation made at any time by or on behalf of any Purchaser or
any Transferee. Subject to the preceding sentence, this Agreement and the
Notes embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings relating to
the subject matter hereof.
10G. SUCCESSORS AND ASSIGNS. All covenants and other agreements
herein contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not. Upon its acquisition of any Note, each Transferee shall
be deemed to have made the representations set forth in paragraph 8B or
shall be deemed to have represented that its acquisition and holding of
such Notes will not constitute a "prohibited transaction" (as such term is
defined in section 406 of ERISA).
10H. DISCLOSURE TO OTHER PERSONS. For purposes of this paragraph 10H.
"CONFIDENTIAL INFORMATION" means information delivered to each Purchaser or
other Noteholder, if any, by or on behalf of the Company, the Guarantor or
any Subsidiary of the Guarantor in connection with the transactions
contemplated by or otherwise pursuant to this Agreement or any other
Financing Document that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when reoeived by any
such Purchaser or other Noteholder as being confidential information of the
Company, the Guarantor or such Subsidiary of the Guarantor, provided that
such term does not include information that (a) was publicly known or
otherwise known to such Purchaser or other Noteholder prior to the time of
such disclosure, (b) subsequently becomes publicly known through no act or
omission by such Purchaser or other Noteholder or any Person acting on
behalf of such Purchaser or other Noteholder. (c) otherwise becomes known
to such Purchaser or other Noteholder other than through disclosure by the
Company, the Guarantor or any Subsidiary of the Guarantor or (d)
constitutes financial statements delivered to the Noteholders under Section
5.1 of the Rite Aid Guaranty that are otherwise publicly available. Each
Noteholder will use its best efforts to maintain the confidentiality of
such Confidential Information in accordance with procedures adopted by such
Noteholder in good faith to protect confidential information of third
parties delivered to such Noteholder. The Company acknowledges that any
Noteholder may deliver copies of any such Confidential Information
delivered to such Noteholder, and disclose any other information disclosed
to such Noteholder, in connection herewith or any other Financing Document
to
(i) such Noteholder's directors, officers, employees,
agents and professional consultants,
(ii) any other Noteholder,
(iii) any Person to which such Noteholder offers to sell any
Note held by it or any part thereof,
(iv) any Person to which such Noteholder sells or offers to
sell a participation in all or any part of any Note held by it,
(v) any federal or state regulatory authority having
jurisdiction over such Noteholder,
(vi) the National Association of Insurance
Commissioners or any similar organization. or
(vii) any other Person to which such delivery or disclosure may
be necessary or appropriate
(a) in compliance with any law, rule, regulation
or order applicable to such Noteholder,
(b) in response to any subpoena or other legal
process,
(c) in connection wfth any litigation to which such
Noteholder is a party, or
(d) in connection Wth the enforcement or protection of
such Noteholder's rights and remedies under the Notes, this
Agreement or any other Financing Document;
provided, however, any such Noteholder shall, to the extent not prohibited
by law, give the Company written notice of the disclosure of such
information pursuant to this clause (vii) and the identity of such Person
receiving it.
10I. NOTICES. All written communications provided for under this
Agreement shall be sent by registered or certified mail with return receipt
requested or nationwide overnight delivery service (with charges prepaid)
and
(i) if to any Purchaser, addressed to such Purchaser at the
address specified for such communications in the Purchasers' Schedule
attached hereto as Annex 1, or at such other address as any Purchaser
shall havespecified to the Company in writing,
(ii) if to any other Noteholder, addressed to such other
Noteholder at such address as such other Noteholder shall have
specified to the Company in writing or, if any such other Noteholder
shall not have so specified an address to the Company, then addressed
to such other Noteholder in care of the last holder of such Note that
shall have so specified an address to the Company, and
(iii) if to the Company, addressed to it at 54 Sasco Hill Road,
Fairfield, Connecticut, Attention: John Costello, or at such other
address as the Company shall have specified to each Noteholder in
writing; provided that any, such communication to the Company may
also, at the option of any Noteholder, be delivered by any other
means either to the Company at its address specified above or to any
executive officer of the Company.
10J. DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the
several paragraphs hereof are inserted for convenience only and do not
constitute a part hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular
section or other subdivision.
10K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms hereof
required to be satisfactory to each Purchaser, the Purchasers or to the
Required Holders, the determination of such satisfaction shall be made by
each such Purchaser, the Purchasers or the Required Holders, as the case
may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons makinp such determination.
10L. SEVERALTY OF OBLIGATIONS.
The sales of the Notes to the Purchasers are to be several sales, and
the obligations of the Purchasers under this Agreement are several
obligations. No failure by any Purchaser to perform its obligations under
this Agreement shall relieve any other Purchaser or the Company of any, of
its obligations hereunder, and no Purchaser shall be responsible for the
representations or obligations of, or any action taken or ornitted by, any
other such Person hereunder.
10M. BINDING AGREEMENT.
When this Agreement is executed and delivered by the Company and each
of the Purchasers, it shall become a binding agreement among the Company
and each of the Purchasers.
10N. GOVERNING LAW. THIS AGREEMENT SHALL HE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF NEW YORK.
10O. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof hereof to produce or account for
more than one such counterpart.
[REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
If each Purchaser is in agreement with the foregoing, please sign the
form of acceptance ori the enclosed counterpart of this letter and return
the same to the Company, whereupon this letter shall become a binding
agreement among the Purchasers and the Company.
Very truly yours,
FINCO, INC.
By:______________________________________
Name:
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By ____________________________
Name:
Title:
PRUCO LIFE INSURANCE COMPANY
By _____________________________
Name:
Title:
Exhibit 4.30
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of January 11, 2000
among
RITE AID FUNDING LLC
as the Seller
and
CORPORATE ASSET FUNDING COMPANY, INC.
and
CORPORATE RECEIVABLES CORPORATION
as the Investors
and
CITIBANK, N.A.
and
CITICORP NORTH AMERICA, INC.
as the Agent
and
RITE AID CORPORATION
as Collection Agent
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENTS....................................................1
ARTICLE I
DEFINITIONS.........................................................2
SECTION 1.01. Certain Defined Terms................................2
SECTION 1.02. Other Terms.........................................28
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES.................................28
SECTION 2.01.Purchase Facility.....................................28
SECTION 2.02.Making Purchases......................................29
SECTION 2.03.Receivable Interest Computation.......................30
SECTION 2.04.Settlement Procedures.................................31
SECTION 2.05.Fees..................................................33
SECTION 2.06.Payments and Computations, Etc........................34
SECTION 2.07.Dividing or Combining Receivable Interests............34
SECTION 2.08.Increased Costs.......................................34
SECTION 2.09.Additional Yield on Receivable Interests Bearing a
Eurodollar Rate..............................................35
SECTION 2.10.Security Interest.....................................36
ARTICLE III
CONDITIONS OF PURCHASES............................................37
SECTION 3.01.Conditions Precedent to Initial Purchase on
Original Closing Date......................37
SECTION 3.02.Conditions Precedent to Initial Purchase on
New Closing Date...........................37
SECTION 3.03.Conditions Precedent to the Amendment Closing Date....38
SECTION 3.04.Conditions Precedent to All Purchases
and Reinvestments..........................40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.....................................41
SECTION 4.01.Representations and Warranties of the Seller..........41
ARTICLE V
COVENANTS..........................................................45
SECTION 5.01.Covenants of the Seller...............................45
SECTION 5.02.Covenant of the Parent, the Seller and each Originator52
ARTICLE VI
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES ...............................................53
SECTION 6.01.Designation of Collection Agent.......................53
SECTION 6.02.Duties of Collection Agent............................53
SECTION 6.03.Certain Rights of the Agent...........................54
SECTION 6.04.Rights and Remedies...................................55
SECTION 6.05.Further Actions Evidencing Purchases..................56
SECTION 6.06.Covenants of the Collection Agent and the Originator..56
SECTION 6.06A. Representations of the Collection Agent..........58
SECTION 6.07.Indemnities by the Collection Agent...................58
SECTION 6.08.Establishment of Deposit Accounts.....................60
ARTICLE VII
EVENTS OF TERMINATION..............................................62
SECTION 7.01.Events of Termination.................................62
ARTICLE VIII
THE AGENT .........................................................66
SECTION 8.01.Authorization and Action..............................66
SECTION 8.02.Agent's Reliance, Etc.................................66
SECTION 8.03.CNAI and Affiliates...................................67
SECTION 8.04.Bank's Purchase Decision..............................67
ARTICLE IX
INDEMNIFICATION....................................................67
SECTION 9.01.Indemnities by the Seller.............................67
ARTICLE X
MISCELLANEOUS......................................................69
SECTION 10.01. Amendments, Etc..................................69
SECTION 10.02. Notices, Etc.....................................70
SECTION 10.03. Assignability....................................70
SECTION 10.04. Costs, Expenses and Taxes........................71
SECTION 10.05. No Proceedings...................................71
SECTION 10.06. Confidentiality..................................72
SECTION 10.07. Patient Confidentiality..........................72
SECTION 10.08. GOVERNING LAW....................................73
SECTION 10.09. No Novation......................................73
SECTION 10.10. Execution in Counterparts........................73
SECTION 10.11. Survival of Termination..........................73
SCHEDULES
SCHEDULE I - Deposit Account Banks; Lock-Boxes; Deposit Accounts
SCHEDULE II - Special Concentration Limits
ANNEXES
ANNEX A - Form of Seller Report
ANNEX B-1 - Form of Originator Deposit Account Agreement
ANNEX B-2 - Form of Purchaser Deposit Account Agreement
ANNEX C - Form of Opinion of Counsel to the Seller
ANNEX D - [Intentionally Omitted]
ANNEX E - Form of Confirmation of Parent Guaranty
ANNEX F - Form of Weekly Report
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of January 11, 2000
RITE AID FUNDING LLC, a California limited liability company
(the "Seller"), CORPORATE ASSET FUNDING COMPANY, INC., a Delaware
corporation, CORPORATE RECEIVABLES CORPORATION, a California corporation,
CITIBANK, N.A., and CITICORP NORTH AMERICA, INC., a Delaware corporation
("CNAI"), as agent (the "Agent") for the Investors and the Banks, and RITE
AID CORPORATION, a Delaware corporation, as Collection Agent, agree as
follows:
PRELIMINARY STATEMENTS.
The Collection Agent, the Investors, certain of the Banks, the
Seller and the Agent entered into a Receivables Purchase Agreement, dated
as of November 26, 1997, as amended, and as further amended and restated by
the Amended and Restated Receivables Agreement, dated as of November 24,
1999, as amended by Amendment Agreement No. 1, dated as of December 3, 1999
(the "Original Receivables Purchase Agreement"), pursuant to which the
Seller has sold Receivable Interests to the Investors and the Banks upon
the terms and subject to the conditions set forth in the Original
Receivables Purchase Agreement.
The Collection Agent, the Investors, the Banks, the Seller and
the Agent desire to amend and restate the Original Receivables Purchase
Agreement in its entirety in order to reflect prior amendments to certain
financial covenants, modify eligibility criteria related to PBM's and the
Special Concentration Limits relating thereto (each, as defined below) and
modify certain reserve calculations and requirements.
The Seller has acquired, and may continue to acquire
Receivables from the Originators, either by purchase or by contribution to
the capital of the Seller, as determined from time to time by the Seller
and the Originators. The Seller is prepared to sell undivided fractional
ownership interests (referred to herein as "Receivable Interests") in the
Receivables. CAFCO or CRC (as such terms are hereinafter defined) may, in
their sole discretion, purchase such Receivable Interests, and the Banks
are prepared to purchase such Receivable Interests, in each case on the
terms set forth herein. Accordingly, the parties agree to amend and restate
the Original Receivables Purchase Agreement as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Adverse Claim" means a lien, security interest or other charge
or encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person.
"Affiliated Obligor" means any Obligor that is an Affiliate of
another Obligor.
"Agent PBM" means each PBM designated by the Agent in a writing
delivered to the Seller in its sole discretion from time to time
(including, as of the Amendment Closing Date, PCS and Diversified
Pharmaceutical Services, Inc.), the payments from whom relate to specified
Originator Receivables and are intended as payments made by such Person in
its capacity as an agent of an Insurer and not as payments made by such
Person based on its assumption of payment obligations relating to such
Originator Receivables in substitution of the payment obligations of an
Insurer.
"Agent's Account" means the special account of the Agent,
account number 40636695 maintained at the office of Citibank at 399 Park
Avenue, New York, New York.
"Agreement" means this Amended and Restated Receivables
Agreement, dated as of January 11, 2000, as the same may be amended,
modified or restated from time to time.
"Alternate Base Rate" means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall be at all
times equal to one-half of 1% per annum above the highest of:
(a) the rate of interest announced publicly by Citibank
in New York, New York, from time to time as Citibank's base
rate;
(b) 1/2 of one percent above the latest three-week moving
average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major
United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if such day
is not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by Citibank
on the basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New
York or, if such publication shall be suspended or terminated,
on the basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of
recognized standing selected by Citibank, in either case
adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one
percent; and
(c) the Federal Funds Rate.
"Amended Credit Agreement" means that certain Amended and
Restated Credit Agreement dated as of October 25, 1999, as amended, among
the Parent, as the borrower, the banks party thereto and Morgan Guaranty
Trust Company of New York, as agent or under the Term Loan Agreement, as
amended, dated as of October 25, 1999 among the Parent, as the borrower,
the banks party thereto and Morgan Guaranty Trust Company of New York, as
agent.
"Amendment Closing Date" means the date and time of the
fulfillment of the conditions set forth in Section 3.03 hereof, anticipated
to occur on January 11, 2000.
"Applicable Spread" means, for any day, the percentage set
forth below in the applicable row under the column corresponding to the
Status that exists on such day:
STATUS LEVEL I LEVEL II LEVEL III
------ ------- -------- ---------
Alternative Base Rate 1.00% 1.50% 2.00%
Eurodollar Rate 2.00% 2.50% 3.00%
"Asset Purchase Agreement" means, in the case of any Bank other
than Citibank, the asset purchase agreement entered into by such Bank
concurrently with the Assignment and Acceptance pursuant to which it became
party to this Agreement.
"Assignee Rate" for any Settlement Period for any Receivable
Interest means an interest rate per annum equal to the Applicable
Spread plus the Eurodollar Rate for such Settlement Period; provided,
however, that in case of:
(i) any Settlement Period on or prior to the first day of which
an Investor or Bank shall have notified the Agent that the
introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or
other governmental authority asserts that it is unlawful, for
such Investor or Bank to fund such Receivable Interest at the
Assignee Rate set forth above (and such Investor or Bank shall
not have subsequently notified the Agent that such
circumstances no longer exist),
(ii) any Settlement Period of one to (and including) 29 days
(other than a Settlement Period which corresponds to the month
of February or which begins on a day in the month of February
and runs to the numerically corresponding day of the following
month),
(iii) any Settlement Period as to which the Agent does not
receive notice, by no later than 12:00 noon (New York City
time) on the third Business Day preceding the first day of such
Settlement Period, that the related Receivable Interest will
not be funded by issuance of commercial paper, or
(iv) any Settlement Period for a Receivable Interest the
Capital of which allocated to the Investors or the Banks is
less than $500,000,
then, the "Assignee Rate" for such Settlement Period shall be an
interest rate per annum equal to the Alternate Base Rate plus the
Applicable Spread, in each case, in effect on the first day of such
Settlement Period; provided, further, that the Agent and the Seller
may agree in writing from time to time upon a different "Assignee
Rate".
"Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank, an Eligible Assignee and the Agent,
pursuant to which such Eligible Assignee may become a party to this
Agreement, in form and substance satisfactory to the Agent.
"Average Dilution Ratio" means for any Month the average of the
Dilution Ratios for the 12 most recently ended Months of the Seller.
"Average Maturity" means at any time that period of days equal
to the average maturity of the Pool Receivables calculated by the
Collection Agent in the then most recent Seller Report; provided, however,
if the Agent shall reasonably disagree with any such calculation, the Agent
may recalculate such Average Maturity.
"Bank Commitment" of any Bank means, (a) with respect to
Citibank, $300,000,000 or such amount as reduced by any Assignment and
Acceptance entered into between Citibank and other Banks; or (b) with
respect to a Bank that has entered into an Assignment and Acceptance, the
amount set forth therein as such Bank's Bank Commitment, in each case as
such amount may be reduced by an Assignment and Acceptance entered into
between such Bank and an Eligible Assignee, and, with respect to each of
(a) and (b) above, as the same may be further reduced (or terminated)
pursuant to the next sentence or, with the consent of such Bank, increased
in connection with an increase in the Purchase Limit pursuant to Section
2.01(b) . Any reduction (or termination) of the Purchase Limit pursuant to
the terms of this Agreement shall reduce ratably (or terminate) each Bank's
Bank Commitment.
"Banks" means Citibank and each Eligible Assignee that shall
become a party to this Agreement pursuant to Section 10.03.
"Beneficiary" means, as of any date of determination, any of the
Investors, the Banks and the Agent.
"Business Day" means any day on which (i) banks are not
authorized or required to close in New York City, and (ii) if this
definition of "Business Day" is utilized in connection with the Eurodollar
Rate, dealings are carried out in the London interbank market.
"CAFCO" means Corporate Asset Funding Company, Inc. and any
successor or assign of CAFCO that is a receivables investment company which
in the ordinary course of its business issues commercial paper or other
securities to fund its acquisition and maintenance of receivables.
"Capital" of any Receivable Interest means the original amount
paid to the Seller for such Receivable Interest at the time of its purchase
by an Investor or a Bank pursuant to this Agreement, or such amount divided
or combined in accordance with Section 2.07, in each case reduced from time
to time by Collections distributed on account of such Capital pursuant to
Section 2.04(d); provided, that if such Capital shall have been reduced by
any distribution and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Capital shall
be increased by the amount of such rescinded or returned distribution, as
though it had not been made.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering former and active
members of the uniformed services and certain of their dependents, financed
and administered by the Unites States Departments of Defense, Health and
Human Services and Transportation and established pursuant to 10 U.S.C.
ss.ss. 1071-1106, and all regulations promulgated thereunder including
without limitation (a) all federal statutes (whether set forth in 10 U.S.C.
ss.ss. 1071-1106 or elsewhere) affecting CHAMPUS and (b) all rules,
regulations (including 32 CFR 199), manuals, orders and administrative,
reimbursement and other guidelines of all Governmental Entities (including,
without limitation, the Department of Health and Human Services, the
Department of Defense, the Department of Transportation, the Assistant
Secretary of Defense (Health Affairs) and the Office of CHAMPUS, or any
Person or entity succeeding to the functions of any of the foregoing)
promulgated pursuant to or in connection with any of the foregoing (whether
or not having the force of law) in each case, as amended, supplemented or
otherwise modified from time to time.
"Citibank" means Citibank, N.A., a national banking association.
"Collection Agent" means at any time the Person then authorized
pursuant to Section 6.01 to administer and collect Pool Receivables.
"Collection Agent Fee" has the meaning specified in
Section 2.05(a).
"Collection Agent Fee Reserve" for any Receivable Interest at
any time means the sum of (i) the unpaid Collection Agent Fee relating to
such Receivable Interest accrued to such time plus (ii) an amount equal to
(a) the Capital of such Receivable Interest on such date multiplied by (b)
the product of (x) the sum of (A) the percentage per annum at which the
Collection Agent Fee is accruing on such date and (B) the percentage per
annum at which the Program Fee (as such term is defined in the Fee
Agreement) is accruing on such date and (y) a fraction having the sum of
the Average Maturity plus the Collection Delay Period (each as in effect at
such date) as its numerator and 360 as its denominator.
"Collection Delay Period" means 10 days or such other number of
days as the Agent may select upon three Business Days' notice to the
Seller.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable, and any Collection of such Receivable deemed to have been
received pursuant to Section 2.04.
"Commitment Termination Date" means the earliest of (a)
November 1, 2000, unless, prior to such date (or the date so extended
pursuant to this clause), upon the Seller's request, made not less than 45
days prior to the then Commitment Termination Date, one or more Banks
having 100% of the Purchase Limit shall in their sole discretion consent,
which consent shall be given not more than 30 days prior to the then
Commitment Termination Date, to the extension of the Commitment Termination
Date to the date occurring 360 days after the then Commitment Termination
Date; provided, however, that any failure of any Bank to respond to the
Seller's request for such extension shall be deemed a denial of such
request by such Bank, (b) the Facility Termination Date, (c) the date
determined pursuant to Section 7.01, and (d) the date (not earlier than
November 1, 2002) the Purchase Limit reduces to zero.
"Concentration Limit" for any Obligor (including each Non-Agent
PBM but excluding each Agent PBM) means at any time, 4% and for each Agent
PBM at any time, means 25%, or, in each case, such other percentage
("Special Concentration Limit") for such Obligor designated by the Agent in
a writing delivered to the Seller (initially, the Special Concentration
Limits shall be as specified on Schedule II hereto) ; provided, that in the
case of an Obligor with any Affiliated Obligor, the Concentration Limit
shall be calculated as if such Obligor and such Affiliated Obligor are one
Obligor; provided, further, that the Agent may cancel any Special
Concentration Limit upon three Business Days' notice to the Seller.
"Confirmation of Parent Guaranty" means the Confirmation of
Parent Guarantee, dated as of the New Closing Date, substantially in the
form of Annex E attached hereto, made by the Parent in favor of the Agent,
for the benefit of the Investors and the Banks, whereby the Parent confirms
its obligations under the Parent Guaranty.
"Consolidated Capital Expenditures" means, for any period, the
aggregate amount of expenditures by the Parent and its Consolidated
Subsidiaries for plant, property and equipment during such period
(including any such expenditure by way of acquisition of a Person or by way
of assumption of indebtedness or other obligations of a Person, to the
extent reflected as plant, property and equipment), but excluding any such
expenditures made (i) for the replacement or restoration of assets to the
extent financed by condemnation awards or proceeds of insurance received
with respect to the loss or taking of or damage to the asset or assets
being replaced or restored and (ii) for assets acquired to the extent
financed by a Sale and Leaseback Transaction.
"Consolidated Debt" means at any date the Debt of the Parent
and its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period, plus (a), to the extent deducted in determining
Consolidated Net Income for such period, the aggregate amount of (i)
Consolidated Interest Charges, (ii) provision for income taxes, (iii)
depreciation and amortization, (iv) LIFO Adjustments, (v) store closing
expenses and (vi) any other nonrecurring charge to the extent such
nonrecurring charge does not involve any cash expenditure during such
period, less (b), to the extent not deducted in determining Consolidated
Net Income for such period, the aggregate amount of (i) any cash
expenditure during such period in connection with which a nonrecurring
charge was taken in any prior period and (ii) LIFO Adjustments.
"Consolidated Interest Charges" means, for any period, the
aggregate amount of interest charges, whether expensed or capitalized,
incurred or accrued by the Parent and its Consolidated Subsidiaries during
such period.
"Consolidated Net Income" means, for any period, the net income
(or loss) of the Parent and its Consolidated Subsidiaries (exclusive of (a)
extraordinary items of gain or loss, (b) any gain or loss in connection
with any sale of assets other than sales of inventory in the ordinary
course of business, but in the case of loss only to the extent that such
loss does not involve any cash expenditure during such period and (c) the
Parent's share of the net income (or loss) of drugstore.com), determined on
a consolidated basis for such period.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Parent and its Consolidated Subsidiaries
determined as of such date; provided that such consolidated stockholders'
equity shall be adjusted to exclude the effects of items which have been
excluded from Consolidated Net Income for any period commencing after
August 28, 1999 by reason of the parenthetical phrase contained in the
definition of such term. Consolidated Net Worth includes the Parent's 8%
Convertible Pay- In-Kind Preferred Stock.
"Consolidated Rent" means, for any period, the consolidated
rental expense of the Parent and its Consolidated Subsidiaries for such
period, and including in any event rental costs of closed stores for such
period whether or not reflected as an expense in the determination of
Consolidated Net Income for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Parent in its consolidated financial statements if such statements were
prepared as of such date.
"Contract" means the agreement, insurance policy or other
instrument obligating an Obligor to pay for merchandise, insurance or
services from time to time.
"Cure Period" means the period beginning on and including a
Pool Noncompliance Date and ending on but excluding the earlier of (a) the
first date thereafter on which the Net Receivables Pool Balance equals or
exceeds the Required Weekly Net Receivables Pool Balance and (b) the second
consecutive Business Day following the occurrence of such Pool
Non-compliance Date.
"CRC" means Corporate Receivables Corporation and any successor
or assign of CRC that is a receivables investment company which in the
ordinary course of its business issues commercial paper or other securities
to fund its acquisition and maintenance of receivables.
"Credit and Collection Policy" means those receivables credit
and collection policies and practices of PCS (with respect to
PCS-originated Receivables), the Parent or the Collection Agent (if the
Parent is not the Collection Agent) in effect on the New Closing Date, as
modified in compliance with this Agreement.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with generally
accepted accounting principles, (v) all noncontingent obligations of such
Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (vi) all Debt secured by a
Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vii) all Debt of others Guaranteed by such
Person.
"Default Ratio" means, for any Month, the ratio (expressed as a
percentage) computed as of the last day of such Month by dividing (i) the
aggregate Outstanding Balance of all Originator Receivables that became
Defaulted Receivables during such Month, by (ii) the aggregate Outstanding
Balance of all Originator Receivables generated in the fifth Month
immediately preceding such Month.
"Defaulted Receivable" means an Originator Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for 121 days from the date of service relating to such
Receivable;
(ii) as to which the Obligor thereof or any other Person
obligated thereon or owning any Related Security in respect
thereof has taken any action, or suffered any event to occur,
of the type described in Section 7.01(g); or
(iii) which, consistent with the Credit and Collection
Policy, has been written off the Parent, the Seller's or the
applicable Originator's books as uncollectible.
"Deposit Account" means the Originator Deposit Account and the
Purchaser Deposit Account.
"Deposit Account Agreement" means, collectively, the Originator
Deposit Account Agreement and the Purchaser Deposit Account Agreement.
"Deposit Account Bank" initially means Mellon Bank, N.A. and
shall means any bank holding a Deposit Account, from time to time.
"Deposit Date" means each Business Day on which any Collections
are deposited in the Purchaser Deposit Account.
"Designated Obligor" means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a Designated Obligor
upon three Business Days' notice by the Agent to the Seller.
"Designated Percentage" means, with respect to aggregate
Outstanding Balance of Rejected Accounts, the percentage designated by the
Agent in a writing delivered to the Seller in its sole discretion from time
to time, reflecting historical actual final Collections received by the
Originators with respect to Rejected Accounts.
"Diluted Receivable" means an Originator Receivable as to which
Dilution has occurred.
"Dilution" means any reduction in the Outstanding Balance of
any Receivable, except for reductions resulting from payments or writeoffs
with respect to such Receivable.
"Dilution Discount Amount" means (i) prior to the occurrence
and continuance of a Special Event, an amount determined from time to time
by the Agent based on its continuing review of the Receivables Pool, and
initially established at $7,000,000, and (ii) following the occurrence and
continuance of a Special Event, zero.
"Dilution Horizon Factor" means the ratio (expressed as
percentage) computed by dividing (i) the aggregate Outstanding Balance of
all Originator Receivables created during the most recently ended Month by
(ii) the Eligible Receivables Pool Balance as of the last day of the most
recently ended Month.
"Dilution Percentage" means for any Month, the sum of (A) the
product of (i) the Average Dilution Ratio for the most recently ended
Month, (ii) 1.5, and (iii) the Dilution Horizon Factor as of the most
recently ended Month plus (B) the product of (i) the Dilution Volatility
Factor as of the last day of the most recently ended Month and (ii) the
Dilution Horizon Factor as of the last day of the most recently ended
Month.
"Dilution Ratio" means, for any Month, the ratio (expressed as
a percentage) computed as of the last day of such Month by dividing (i) the
aggregate amount of Dilution with respect to the Receivables during such
Month by (ii) the aggregate Outstanding Balance of all Receivables created
during the Month immediately preceding the most recently ended Month.
"Dilution Reserve" means, for any Receivable Interest on any
date (in each case as of the close of business of the Collection Agent as
of such date), (i) if on such date a Special Event shall have occurred and
be continuing, the sum of (A) the sum of Capital, the Yield Reserve and the
Collection Agent Fee Reserve for Receivable Interests on such date
multiplied by the greater of (x) an amount equal to the Dilution Percentage
and (y) the product of (1) the Dilution Horizon Factor on such date and (2)
the Average Dilution Ratio on such date, plus (B) Receivable Interests with
respect to Receivables attributable to PCS's obligors on such date
multiplied by 0.133 and (ii) on any other date, zero.
"Dilution Volatility Factor" means, as of the last day of each
Month, the product (expressed as a percentage) of (i) the amount by which
(A) the highest Dilution Ratio for any of the twelve most recently ended
Month exceeds (B) the Average Dilution Ratio for the most recently ended
Month and (ii) a fraction equal to (A) the highest Dilution Ratio for any
of the twelve most recently ended Months divided by (B) the Average
Dilution Ratio for the most recently ended Month.
"E-Mail Report" has the meaning specified in Section 6.02 hereof.
"Eligible Assignee" means CNAI, any of its Affiliates, any
Person managed by Citibank, CNAI or any of their Affiliates, or any
financial or other institution acceptable to the Agent.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which is a United States resident
and is not an Affiliate of any of the parties hereto;
(ii) the Obligor of which, at the time of the initial
creation of an interest therein under this Agreement, is a
Designated Obligor and is not the Obligor of any Defaulted
Receivables which in the aggregate constitute 10% or more of
the aggregate Outstanding Balance of all Receivables of such
Obligor;
(iii) which at the time of the initial creation of an
interest therein under this Agreement is not a Defaulted
Receivable or subject to Dilution (provided, however, that,
that portion of such Receivable which is not subject to
Dilution may, in the Agent's sole discretion, be deemed an
'Eligible Receivable');
(iv) which is a Rejected Account, but only to the extent
that when the Outstanding Balance of such Rejected Account is
combined with the Outstanding Balance of all other Rejected
Accounts then included in the Receivables Pool, such amount
does not exceed the Designated Percentage for outstanding
Rejected Accounts as of such date;
(v) which is not past, or within 60 days of, the
statutory limit for collection applicable to the Obligor;
(vi) which is an obligation representing all or part of
the sales price of merchandise, insurance or services within
the meaning of Section 3(c)(5) of the Investment Company Act of
1940, as amended, and the nature of which is such that its
purchase with the proceeds of notes would constitute a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended;
(vii) which is an "account" or a "general intangible"
within the meaning of Section 9-106 of the UCC of the
applicable jurisdictions governing the perfection of the
interest created by a Receivable Interest;
(viii)which is denominated and payable only in United
States dollars in the United States;
(ix) which arises under a Contract which, together with
such Receivable, is in full force and effect and constitutes
the legal, valid and binding obligation of the Obligor of such
Receivable and is not subject to any dispute, (and other than
PCS-originated Receivables) offset (including, without
limitation, any offset arising by virtue of such Obligor
providing health insurance to the employees of any Originator),
counterclaim or defense whatsoever (except the potential discharge
in bankruptcy of such Obligor);
(x) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, consumer
protection, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which none of the
Parent, the Seller, the applicable Originator or the Obligor is
in violation of any such law, rule or regulation in any
material respect;
(xi) which arises under a Contract which (A) does not
require the Obligor thereunder to consent to the transfer, sale
or assignment of the rights and duties of the Parent, the
Seller or the applicable Originator thereunder, (B) except to
the extent addressed in the opinion of counsel delivered
pursuant to Section 3.02(g), does not contain a confidentiality
provision that purports to restrict the ability of the
Investors or the Banks to exercise their rights under this
Agreement, including, without limitation, their right to review
the Contract and (C) except to the extent addressed in the
opinion of counsel delivered pursuant to Section 3.02(g), does
not contain any provision prohibiting the transfer, sale or
assignment of the Obligor's payment obligation to the
applicable Originator;
(xii) which (A) satisfies all applicable requirements of
the Credit and Collection Policy and (B) complies with such
other criteria and requirements (other than those relating to
the collectibility of such Receivable) as the Agent may from
time to time specify to the Seller upon 30 days' notice;
(xiii)as to which, at or prior to the time of the initial
creation of an interest therein under this Agreement, the Agent
has not notified the Seller that such Receivable (or class of
Receivables) is no longer acceptable for purchase by an
Investor and the Banks hereunder;
(xiv) as to which, at or prior to the time of the initial
creation of an interest therein under this Agreement, the
information provided by the Seller with respect thereto is
complete and correct, and the applicable Originator has billed
the applicable Obligor and has delivered to such Obligor all
requested supporting claim documents with respect to such
Receivable;
(xv) as to which, the applicable Originator has, or has
the right to use, valid provider identification numbers and
licenses to generate valid Receivables. All information set
forth in the bill and supporting claim documents with respect
to such Receivable is true, complete and correct; if
additional information is requested by the Obligor, the
applicable Originator or the Parent has or will promptly
provide the same, and if any error has been made with respect
to such information, the applicable Originator or the Parent
will promptly correct the same and, if necessary, rebill such
Receivable;
(xvi) as to which, the applicable Originator has, or has
the right to use, valid provider identification numbers and
licenses to generate valid Medicare and Medicaid cost reports
with respect to such Receivable for all cost reporting periods
ending on or before the date of the last audited cost report
have been examined and audited by (i), as to Medicaid, the
applicable state agency or other HCFA-designated agents or
agents of such state agency, charged with such responsibility
or (ii), as to Medicare, the Medicare intermediary or other
HCFA-designated agents charged with such responsibility; and
there is no basis for any Governmental Entity to assert an
offset against any Originator;
(xvii)which, according to the Contract related thereto,
is required to be paid in full not more than 90 days from the
date the Originator of such Receivable performed the service
related thereto; and
(xviiiwhich, in the case of PCS-originated Receivables,
has been approved by the Agent, in its sole discretion, as
"Eligible Receivables" based on the Agent's due diligence
regarding such Receivables.
"Eligible Receivables Pool Balance" means as of any date the
Outstanding Balance of Eligible Receivables then in the Receivables Pool
reduced by the sum of (without duplication) (i) the Outstanding Balance of
Eligible Receivables that are then Defaulted Receivables, (ii) the Dilution
Discount Amount, (iii) Unapplied Cash, (iv) Unbilled Accounts, (v) 1.00
minus the Designated Percentage (expressed as a decimal) of Rejected
Accounts and (vi) any offset risk attributable to PCS-originated
Receivables, as determined by the Agent.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Rate" means, for any Settlement Period, an interest
rate per annum equal to the rate per annum at which deposits in U.S.
dollars are offered by the principal office of Citibank in London, England
to prime banks in the London interbank market at 11:00 A.M. (London Time)
two Business Days before the first day of such Settlement Period in an
amount substantially equal to the Capital associated with such Settlement
Period on such first day and for a period equal to such Settlement Period.
"Eurodollar Rate Reserve Percentage" of any Investor or Bank
for any Settlement Period in respect of which Yield is computed by
reference to the Eurodollar Rate means the reserve percentage applicable
two Business Days before the first day of such Settlement Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) (or if more than one such
percentage shall be applicable, the daily average of such percentages for
those days in such Settlement Period during which any such percentage shall
be so applicable) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Investor or Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurocurrency
Liabilities is determined) having a term equal to such Settlement Period.
"Event of Termination" has the meaning specified in Section 7.01.
"Expected Net Value" means, with respect to any Receivable
Interest, the gross unpaid amount of such Receivable Interest on the
purchase date thereof multiplied by the Net Value Factor.
"Facility Termination Date" means the earliest of (a) November
1, 2002, (b) the date determined pursuant to Section 7.01, (c) the date the
Purchase Limit reduces to zero pursuant to Section 2.01(b) or (d) the
Commitment Termination Date.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by
it.
"Fee Agreement" means the agreement of even date between the
Seller and the Agent, as the same may be amended or restated from time to
time, with respect to the fees to be paid by or on behalf of the Seller in
connection with this Agreement.
"Fees" means all fees payable to the Agent pursuant to the Fee
Agreement.
"Fixed Charge Coverage Ratio" means at any date, the ratio of
(i) Consolidated EBITDA plus Consolidated Rent to (ii) Consolidated
Interest Charges plus Consolidated Rent, in each case for the period of
four consecutive fiscal quarters most recently ended on or prior to such
date.
"Funds Transfer Letter" means the letter executed and delivered
by the Seller to the Agent on the Original Closing Date.
"Governmental Entity" means the United States of America, any
state, any political subdivision of a state and any agency or
instrumentality of the United States of America or any state or political
subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government. Payments from Governmental Entities shall be deemed to include
payments governed under the Social Security Act (42 U.S.C. ss.1395, et
seq.), including payments under Medicare, Medicaid and CHAMPUS, and
payments administered or regulated by HCFA.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of
any other Person; provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"HCFA" means the Health Care Financing Administration of the
United States Department of Health and Human Services.
"Incipient Event of Termination" means an event that but for
notice or lapse of time or both would constitute an Event of Termination.
"Information" has the meaning specified in Section 10.06(b).
"Insurer" means any Person which in the ordinary course of its
business or activities agrees to pay for healthcare goods and services
received by individuals, including commercial insurance companies,
nonprofit insurance companies (such as Blue Cross, Blue Shield entities),
employers or unions which self-insure for employee or member health
insurance, prepaid health care organizations, preferred provider
organizations and health maintenance organizations. "Insurer" includes
insurance companies issuing health, personal injury, workers' compensation
or other types of insurance but does not include any individual guarantors.
"Investment Grade" means, a rating of at least BBB- by S&P and
at least Baa3 by Moody's; provided, that if the Parent does not have rated
long-term public senior unsecured debt securities outstanding, "Investment
Grade" shall mean the rating determined by the Agent, in its sole
discretion, that would be assigned to the Parent's long-term public senior
unsecured debt securities if the Parent did have such rated securities.
"Investor" means CAFCO or CRC and all other owners by
assignment or otherwise of a Receivable Interest originally purchased by
CAFCO or CRC, as the case may be, and, to the extent of the undivided
interests so purchased, shall include any participants.
"Investor Rate" means, to the extent CAFCO or CRC funds such
Receivable Interest by issuing commercial paper, the weighted average per
annum rate equivalent to daily rates paid or payable by CAFCO or CRC, as
the case may be, from time to time as interest on or otherwise (by means of
interest rate hedges or otherwise) in respect of those promissory notes
issued by CAFCO or CRC, as the case may be, that are allocated, in whole or
in part, by the Agent (on behalf of CAFCO or CRC, as the case may be) to
fund the purchase or maintenance of such Receivable Interest during such
Settlement Period as determined by the Agent (on behalf of CAFCO or CRC, as
the case may be) and reported to the Seller from time to time on a weighted
average basis for such Settlement Period, which rates shall reflect and
give effect to the commissions of placement agents and dealers in respect
of such commercial paper notes, to the extent such commissions are
allocated, in whole or in part, to such commercial paper notes by the Agent
(on behalf of CAFCO or CRC, as the case may be); provided, however, that if
any component of such rate is a discount rate, in calculating the 'Investor
Rate' for such Settlement Period the Agent shall for such component use the
rate resulting from converting such discount rate to an interest bearing
equivalent rate per annum.
"Level I Status" exists at any date if (i) such date is on or
after May 1, 2000, and (ii) Parent's long-term unsecured debt (without
third party credit enhancement) is rated BBB- or higher by S&P and Baa3 or
higher by Moody's.
"Level II Status" exists at any date if (a) Parent's long-term
unsecured debt (without third party credit enhancement) is rated BB+ or
higher by S&P and Ba1 or higher by Moody's and (b) Level I Status does not
exist.
"Level III Status" exists at any date if, at such date, no
other Status exists.
"LIFO Adjustments" means, for any period, the net adjustment to
costs of goods sold for such period required by the Parent's LIFO inventory
method, determined in accordance with generally accepted accounting
principles.
"Liquidation Day" means, for any Receivable Interest, (i) each
day during a Settlement Period for such Receivable Interest on which the
conditions set forth in Section 3.02 are not satisfied, and (ii) each day
which occurs on or after the Termination Date for such Receivable Interest.
"Liquidation Fee" means, for any Settlement Period during which
a Liquidation Day occurs, the amount, if any, by which (i) the additional
Yield (calculated without taking into account any Liquidation Fee or any
shortened duration of such Settlement Period pursuant to clause (iv) of the
definition thereof) which would have accrued during such Settlement Period
on the reductions of Capital of the Receivable Interest relating to such
Settlement Period had such reductions remained as Capital, exceeds (ii) the
income, if any, received by the Investors' investing the proceeds of such
reductions of Capital.
"Lock-Box" means the Originator Lock-Box and the Purchaser
Lock-Box.
"Loss Horizon Factor" means, for any date, the ratio (expressed
as a percentage) computed as of the last day of the most recently ended
Month by dividing (i) the aggregate Outstanding Balance of all Originator
Receivables created during the five (5) Month period ending on such date by
(ii) the Eligible Receivables Pool Balance as of such date.
"Loss-to-Liquidation Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Month by dividing (i) the
aggregate Outstanding Balance of all Originator Receivables written off by
the Parent, applicable Originator or the Seller, or which should have been
written off by the Parent, the Seller or the applicable Originator in
accordance with the Credit and Collection Policy, during the one Month
period ending on such last day by (ii) the aggregate amount of Collections
of Originator Receivables actually received during such period.
"Loss Percentage" means, for any Month, the product of (w) the
highest Default Ratio for any Month for the twelve most recently ended
Months, (x) the difference between (a) one and (b) the Recovery Rate then
in effect, (y) the Loss Horizon Factor as of the last day of the most
recently ended Month and (z) 1.5.
"Loss Reserve" means, for any Receivable Interest on any date,
the greatest of (i) 10%, (ii) three (3) times the Concentration Limit, and
(iii) an amount equal to the Loss Percentage on such date multiplied by the
sum of Capital, the Yield Reserve and the Collection Agent Fee Reserve for
such Receivable Interest, in each case, as of the close of business of the
Collection Agent on such date.
"Month" means the fiscal month maintained on the books and
records of the Seller and the Parent in accordance with generally accepted
accounting practices, consistently applied.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means, at any date, the Eligible
Receivables Pool Balance reduced by the aggregate amount by which the
Outstanding Balance of Eligible Receivables (other than Defaulted
Receivables) of each Obligor then in the Receivables Pool then exceeds the
product of (A) the Concentration Limit for such Obligor multiplied by (B)
the Capital of all Receivable Interests.
"Net Value Factor" with respect to any Receivable Interest,
means the historical actual final Collections received from the applicable
Obligor within the past 121 days of the purchase date of such Receivable
Interest, divided by the gross face value of such Receivable Interest.
"New Closing Date" means November 24, 1999.
"Non-Agent PBM" means each PBM, the payments from whom relate
to specified Originator Receivables and are intended to constitute payments
of direct obligations of such Person and in full substitution of any
payment obligation of an Insurer with respect to such Originator
Receivables, and not merely as payments in a capacity as an agent of such
Insurers.
"Notice to Insurer" means a notice, in substantially the form
of Annex F hereto, from the Seller to each Insurer and PBM, relating to the
payment of Collections from such Insurer or PBM, as the case may be.
"Obligor" means an Insurer, PBM or Governmental Entity, as
applicable, obligated to make payments pursuant to a Contract.
"Obligor Notification Date" means the earliest of (i) April 1,
2000, (ii) such time that the Purchaser Deposit Account has a data
automation system which permits the tracking of Collections and (iii) such
time as the Agent shall decide to send a Notice to Insurers to each Obligor
who is not a Governmental Entity instructing all such Obligors to send all
Collections to the Purchaser Lock-Box or the Purchaser Deposit Account.
"Original Closing Date" means November 26, 1997.
"Original Receivables Purchase Agreement" has the meaning
assigned to such term in the preliminary statement of this Agreement.
"Original Originator Purchase Agreement" means the Purchase and
Contribution Agreement dated the Original Closing Date between the
Originators, as sellers, and the Seller, as purchaser, as the same may have
be amended, modified or restated from time to time.
"Originator Deposit Account" has the meaning specified in
Section 6.08(b).
"Originator Deposit Account Bank" shall initially be Mellon
Bank, N.A. and has the meaning specified in Section 6.08(b).
"Originator Deposit Account Agreement" means an agreement, in
substantially the form of Annex B-1, among Seller, Originator Deposit
Account Bank, the Agent and the Originators.
"Originator Lock-Box" shall have the meaning specified in 6.08(b).
"Originator Purchase Agreement" means the Amended and Restated
Purchase and Contribution Agreement dated the New Closing Date between the
Originators, as sellers, and the Seller, as purchaser, as the same may be
amended, modified or restated from time to time.
"Originator Receivable" means the accounts and general
intangibles (within the meaning of Section 9-106 of the UCC) relating to
the indebtedness of any Obligor resulting from the provision or sale of
merchandise, insurance or services by an Originator, and, if pursuant to a
Contract, such related Contract, and including the right to payment of any
interest or finance charges and other obligations of such Obligor with
respect thereto.
"Originators" means the Persons designated as "Originators"
from time to time in the Originator Purchase Agreement.
"Other Corporations" means the Parent, the Originator and all
of their respective Subsidiaries except the Seller.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"Parent" means Rite Aid Corporation, a Delaware corporation.
"Parent Guaranty" means the Guarantee, dated as of the Original
Closing Date, made by the Parent in favor of the Agent, for the benefit of
the Investors and the Banks, as confirmed pursuant to the Confirmation of
Parent Guaranty and as amended, modified or supplemented from time to time
in accordance with its terms.
"PCS" means PCS Health Systems, Inc.
"PCS-originated Receivables" means any Receivables the
Originator of which is a PCS Pharmacy Entity.
"PCS Pharmacy Entity" means PCS Mail Services of Ft. Worth,
Inc., a Delaware corporation and PCS Mail Services of Birmingham, Inc., a
Delaware corporation, together with their respective successors and
assigns, and any other subsidiary of PCS approved by the Agent whose
principal business is the sale of pharmaceutical products by mail order.
"Percentage" of any Bank means, (a) with respect to Citibank,
the percentage set forth on the signature page to this Agreement, or such
amount as reduced by any Assignment and Acceptance entered into with an
Eligible Assignee, or (b) with respect to a Bank that has entered into an
Assignment and Acceptance, the amount set forth therein as such Bank's
Percentage, or such amount as reduced by an Assignment and Acceptance
entered into between such Bank and an Eligible Assignee.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, limited liability
company, trust, unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency thereof.
"PBM" means a Person conducting business as pharmacy benefit
manager (including, as of the Amendment Closing Date, PCS) that processes
coverage information, applies payment and reimbursement criteria and makes
payment on behalf of certain Insurers to Originators for amounts due and
payment under Originator Receivables.
"Pool Non-compliance Date" means any day on which the Weekly
Report due on such date discloses that the Net Receivables Pool Balance as
of the end of the previous week was below the Required Daily Net
Receivables Pool Balance.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Public Debt" means debt securities of the Parent issued
pursuant to an indenture qualified under (or in form suitable for
qualification under) the Trust Indenture Act of 1939, as amended.
"Purchase Limit" means $300,000,000, as such amount may be
increased or reduced pursuant to Section 2.01(b). References to the unused
portion of the Purchase Limit shall mean, at any time, the Purchase Limit,
as then reduced pursuant to Section 2.01(b), minus the then outstanding
Capital of Receivable Interests under this Agreement.
"Purchaser Deposit Account" has the meaning specified in
Section 6.08(a).
"Purchaser Deposit Account Agreement" means an agreement, in
substantially the form of Annex B-2, among the Seller, the Purchaser
Deposit Account Bank, the Agent and the Orignators.
"Purchaser Deposit Account Bank" shall initially be Mellon
Bank, N.A. and has the meaning specified in Section 6.08(a).
"Purchaser Lock-Box" has the meaning specified in Section 6.08(a).
"Receivable" means any Originator Receivable which has been
acquired by the Seller from an Originator by purchase or by capital
contribution pursuant to the Originator Purchase Agreement.
"Receivable Interest" means, at any time, an undivided
percentage ownership interest in (i) all then outstanding Pool Receivables
arising prior to the time of the most recent computation or recomputation
of such undivided percentage interest pursuant to Section 2.03, (ii) all
Related Security with respect to such Pool Receivables, and (iii) all
Collections with respect to, and other proceeds of, such Pool Receivables.
Such undivided percentage interest shall be computed as
C + R
-----
NRPB
where:
C = the Capital of such Receivable Interest at
the time of computation.
R = the Reserves of such Receivable Interest at
the time of computation.
NRPB = the Net Receivables Pool Balance at the time of
computation.
Each Receivable Interest shall be determined from time to time pursuant to
the provisions of Section 2.03.
"Receivables Pool" means at any time the aggregation of each
then outstanding Receivable in respect of which the Obligor is a Designated
Obligor at such time or was a Designated Obligor on the date of the initial
creation of an interest in such Receivable under this Agreement.
"Recovery Rate" means, an amount from time to time determined
by the Agent and initially, 10%.
"Rejected Accounts" means any Eligible Account which either (i)
has been rejected by the Obligor of such Receivable for the failure of the
Originator of such Receivable to (A) comply with the terms and provisions
of the relevant Contract or (B) successfully transmit any claim or other
information regarding such Receivable to such Obligor or (ii) has been
rejected by such Originator as a result of its inability to bill the
Obligor of such Receivable electronically.
"Related Security" means with respect to any Receivable:
(i) all of the Seller's interest in any merchandise
(including returned merchandise) relating to any sale giving
rise to such Receivable;
(ii) all security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements
signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting
or securing payment of such Receivable whether pursuant to the
Contract related to such Receivable or otherwise; and
(iv) the Contract and all other books, records and other
information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related
property and rights) relating to such Receivable and the
related Obligor.
"Reporting Extension Period" means the period commencing on the
Amendment Closing Date and terminating on the earlier of (x) July 11, 2000
or (y) the date that is 10 days prior to the earliest date on which any
holder of Public Debt or any trustee or other representative of any such
holder had a right, on the Amendment Closing Date, to accelerate the
maturity thereof by reason of any default waived under the Amended Credit
Agreement pursuant to Waiver No. 1 thereto, dated as of January 11, 2000.
"Required Weekly Net Receivables Pool Balance" means, as of any
day of determination, the sum of (i) the aggregate of the Reserves for all
Receivable Interests, plus (ii) the aggregate of all Capital for all
Receivable Interests.
"Reserves" means, with respect to any Receivable Interest as of
any day, the sum of the Yield Reserve, Collection Agent Fee Reserve, Loss
Reserve and Dilution Reserve for such Receivable Interest as of such day.
"Revolving Period" means the period beginning on the New
Closing Date and terminating on the close of business on the Business Day
immediately preceding the Termination Date for any Receivable Interest.
"S&P" means Standard & Poor's Rating Services, a division of
McGraw-Hill Companies, Inc.
"Sale and Leaseback Transaction" shall mean the sale or
transfer of any manufacturing plant, warehouse, retail store or equipment
now or hereafter owned and operated by the Parent or any of its
Subsidiaries, with the intention that the Parent or any Subsidiary of the
Parent take back a lease thereof, except a lease for a period, including
renewals, not exceeding 24 months, by the end of which period it is
intended that the use of such property or equipment by the lessee will be
discontinued. "Sale and Leaseback Transactions" shall not include the sale
or transfer by a Subsidiary to the Parent or a Wholly-Owned Consolidated
Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Seller Report" means a report in substantially the form of
Annex A (as the same may be modified from time to time upon the request and
with the consent of the Agent) hereto and containing such additional
information as the Agent may reasonably request from time to time,
furnished by the Collection Agent to the Agent pursuant to Section 6.02(g).
"Seller's Account" means account number 9102750222 at The Chase
Manhattan Bank, New York, ABA # 021000021.
"Settlement Date" means the first Business Day after the end of
each Month during the term of this Agreement; provided that with respect to
any Settlement Period for which Yield is computed by reference to the
Assignee Rate, the Settlement Date shall be the last day of the Settlement
Period.
"Settlement Period" means:
(a) initially the period commencing on the date of
purchase of such Receivable Interest and ending such number of
days as the Seller shall select and the Agent shall approve
pursuant to Section 2.02, up to 270 days from such date; and
(b) thereafter each period commencing on the last day of
the immediately preceding Settlement Period for such Receivable
Interest and ending such number of days (not to exceed 270
days) as the Seller shall select and the Agent shall approve on
notice by the Seller received by the Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M. (New
York City time) on such last day, except that if the Agent
shall not have received such notice or approved such period on
or before 11:00 A.M. (New York City time) on such last day,
such period shall be one day;
provided, that (i) any Settlement Period in respect of which Yield is
computed by reference to the Assignee Rate based on the Eurodollar Rate
shall be of such duration (and may include two tranches of durations) as
shall be selected by the Seller (including one week and one, two or three
months) as the Agent may approve on two Business Days' prior notice by the
Seller received by the Agent (including notice by telephone, confirmed in
writing) not later than 11:00 A.M. (New York City time) and notified to the
Seller; (ii) any Settlement Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be extended to the
next succeeding Business Day (provided, however, if Yield in respect of
such Settlement Period is computed by reference to the Eurodollar Rate, and
such Settlement Period would otherwise end on a day which is not a Business
Day, and there is no subsequent Business Day in the same calendar month
as such day, such Settlement Period shall end on the next preceding
Business Day); (iii) in the case of any Settlement Period of one day, (A)
if such Settlement Period is the initial Settlement Period for a Receivable
Interest, such Settlement Period shall be the day of purchase of such
Receivable Interest; (B) any subsequently occurring Settlement Period which
is one day shall, if the immediately preceding Settlement Period is more
than one day, be the last day of such immediately preceding Settlement
Period, and, if the immediately preceding Settlement Period is one day, be
the day next following such immediately preceding Settlement Period; and
(C) if such Settlement Period occurs on a day immediately preceding a day
which is not a Business Day, such Settlement Period shall be extended to
the next succeeding Business Day; and (iv) in the case of any Settlement
Period for any Receivable Interest which commences before the Termination
Date for such Receivable Interest and would otherwise end on a date
occurring after such Termination Date, such Settlement Period shall end on
such Termination Date and the duration of each Settlement Period which
commences on or after the Termination Date for such Receivable Interest
shall be of such duration as shall be selected by the Agent.
(c) in the case of any Settlement Period in respect of which
Yield is computed by reference to the Alternate Base Rate, such Settlement
Period shall be of such duration as shall be selected by the Agent and
notified to the Seller.
"Special Event" means (i) the occurrence of an Event of
Termination or (ii) the date on which the Parent's long-term public
unsecured senior debt securities shall have been withdrawn or downgraded
below Investment Grade.
"Status" refers to the determination of whether Level I Status,
Level II Status or Level III Status exists at any time.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Parent, the Seller or an Originator, as the case may be, or one or more
Subsidiaries.
"Tangible Net Worth" means at any time the excess of (i) the
Outstanding Balance of all Receivables plus cash and cash equivalents of
the Seller, minus (ii) the sum of (a) the product of (x) one minus the
Recovery Rate and (y) the Outstanding Balance of such Receivables which
have become Defaulted Receivables (other than Receivables which, consistent
with the Credit and Collection Policy, has been written off the Parent, the
Seller's or the applicable Originator's books as uncollectible), plus (b)
Capital of such Receivables, plus (c) aggregate Reserves, plus (d) the
Outstanding Balance of such Receivables which, consistent with the Credit
and Collection Policy, has been written off the Parent, the Seller's or the
applicable Originator's books as uncollectible.
"Termination Date" for any Receivable Interest means (i) in the
case of a Receivable Interest owned by an Investor, the earlier of (a) the
Business Day which the Seller or the Agent so designates by notice to the
other at least one Business Day in advance for such Receivable Interest and
(b) the Facility Termination Date and (ii) in the case of a Receivable
Interest owned by a Bank, the earlier of (a) the Business Day which the
Seller so designates by notice to the Agent at least one Business Day in
advance for such Receivable Interest and (b) the Commitment Termination
Date.
"Total Capital" means, at any date, the sum of Consolidated
Debt and Consolidated Net Worth, each determined as of such date.
"Transaction Document" means any of this Agreement, the
Originator Purchase Agreement, the Parent Guaranty, and all other
agreements and documents delivered or related hereto or thereto.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
"Unapplied Cash" means (i) as of any day prior to the
occurrence and continuance of a Special Event, zero and (ii) on any other
day, the actual amount of unapplied Collections held by the Seller as of
such day.
"Unbilled Accounts" means Eligible Receivables the Obligor of
which is not billed on a daily basis by the relevant Originator.
"Weekly Report" means an Officer's Certificate of the
Collection Agent substantially in the form of Annex F hereto.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Parent.
"Yield" means:
(i) for each Receivable Interest for any Settlement
Period to the extent CAFCO or CRC will be funding such
Receivable Interest during such Settlement Period through the
issuance of commercial paper,
IR x C x ED + LF
--
360
(ii) for each Receivable Interest for any Settlement
Period to the extent (x) the Investors will not be funding such
Receivable Interest during such Settlement Period through the
issuance of commercial paper or (y) the Banks will be funding
such Receivable Interest,
AR x C x ED + LF
--
360
where:
AR = the Assignee Rate for such Receivable Interest
for such Settlement Period
C = the Capital of such Receivable Interest
during such Settlement Period
IR = the Investor Rate for such Receivable
Interest for such Settlement Period
ED = the actual number of days elapsed during such
Settlement Period
LF = the Liquidation Fee, if any, for such
Receivable Interest for such Settlement
Period
provided, that no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by
applicable law; and provided, further that Yield for any Receivable
Interest shall not be considered paid by any distribution to the extent
that at any time all or a portion of such distribution is rescinded or must
otherwise be returned for any reason.
"Yield Reserve" for any Receivable Interest at any time means
the sum of (i) the Liquidation Yield at such time for such Receivable
Interest, and (ii) the then accrued and unpaid Yield for such Receivable
Interest. For purposes of this definition,
(a) "Liquidation Yield" means, for any Receivable Interest on any
date, an amount equal to the Rate Variance Factor on such date
multiplied by the product of (i) the Capital of such Receivable
Interest on such date and (ii) the product of (a) the Alternate Base
Rate for such Receivable Interest for a 30-day period deemed to
commence on such date and (b) a fraction having the sum of the Average
Maturity plus the Collection Delay Period (each as in effect at such
date) as its numerator and 360 as its denominator; and
(b) "Rate Variance Factor" means 1.2 or such other factor
determined by the Agent from time to time greater than one that
reflects the potential variance in selected interest rates over a
period of time designated by the Agent, as computed by the Collection
Agent each month and set forth in the Seller Report in accordance with
the provisions thereof; provided, that the factors used in computing
the "Rate Variance Factor" may be changed from time to time upon at
least five days' prior notice to the Collection Agent.
SECTION 1.02. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC in the State
of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, CAFCO or CRC may, in their sole discretion, and the
Banks shall, ratably in accordance with their respective Bank Commitments,
purchase Receivable Interests from the Seller from time to time during the
period from the Original Closing Date to the Facility Termination Date (in
the case of CAFCO and CRC) and to the Commitment Termination Date (in the
case of the Banks). Under no circumstances shall CAFCO or CRC make any such
purchase, or the Banks be obligated to make any such purchase, if after
giving effect to such purchase the aggregate outstanding Capital of
Receivable Interests would exceed the Purchase Limit.
(b) The Seller may, upon at least thirty Business Days' notice to
the Agent, terminate the facility provided for in this Agreement in whole
or, from time to time, reduce in part the unused portion of the Purchase
Limit; provided, that each partial reduction shall be in the amount of at
least $1,000,000 or an integral multiple thereof. The Seller may, upon 30
days written notice to the Agent, request that the Purchase Limit be
increased. The Agent shall notify the Seller within 15 days of the receipt
of such request whether one or more of the Investors have agreed to the
increase in the Purchase Limit; provided, however, that, no such increase
shall become effective unless one or more Banks shall agree to increase
their respective Bank Commitments such that the aggregate amount of all
Bank Commitments equals the increased Purchase Limit.
(c) Until the Agent gives the Seller the notice provided in
Section 3.02(c)(iii), the Agent, on behalf of the Investors which own
Receivable Interests, may have the Collections attributable to such
Receivable Interests automatically reinvested pursuant to Section 2.04 in
additional undivided percentage interests in the Pool Receivables by making
an appropriate readjustment of such Receivable Interests. The Agent, on
behalf of the Banks which own Receivable Interests, shall have the
Collections attributable to such Receivable Interests automatically
reinvested pursuant to Section 2.04 in additional undivided percentage
interests in the Pool Receivables by making an appropriate readjustment of
such Receivable Interests.
SECTION 2.02. Making Purchases. (a) Each purchase by CAFCO, CRC
or the Banks shall be made on at least three Business Days' notice from the
Seller to the Agent. Each such notice of a purchase shall specify (i) the
amount requested to be paid to the Seller (such amount, which shall not be
less than $5,000,000, being referred to herein as the initial "Capital" of
the Receivable Interest then being purchased) and (ii) the date of such
purchase (which shall be a Business Day). The Agent shall promptly
thereafter notify the Seller that CAFCO or CRC has determined to make a
purchase and, if so, whether all of the terms specified by the Seller are
acceptable to CAFCO or CRC, as the case may be.
If CAFCO or CRC has determined not to make a proposed purchase,
the Agent shall promptly send notice of the proposed purchase to all of the
Banks concurrently by telecopier, telex or cable specifying the date of
such purchase, each Bank's Percentage multiplied by the aggregate amount of
Capital of Receivable Interest being purchased and whether the Yield for
such Receivable Interest is calculated based on the Eurodollar Rate (which
may be selected only if such notice is given at least two Business Days
prior to the purchase date) or the Alternate Base Rate.
(b) On the date of each such purchase of a Receivable Interest,
CAFCO, CRC or the Banks, as the case may be, shall, upon satisfaction of
the applicable conditions set forth in Article III, make available to the
Seller in same day funds an amount equal to the initial Capital of such
Receivable Interest, at the account set forth in the Funds Transfer Letter.
Calculation of Capital shall take into account the Expected Net Value with
respect to each Receivable Interest.
(c) Effective on the date of each purchase pursuant to this
Section 2.02 and each reinvestment pursuant to Section 2.04, the Seller
hereby sells and assigns to the Agent, for the benefit of the parties
making such purchase, an undivided percentage ownership interest, to the
extent of the Receivable Interest then being purchased, in each Pool
Receivable then existing and in the Related Security and Collections with
respect thereto.
(d) Notwithstanding the foregoing, a Bank shall not be obligated
to make purchases under this Section 2.02 at any time in an amount which
would exceed such Bank's Bank Commitment less (in the case of any Bank
other than Citibank) the outstanding and unpaid amount of any purchases
made by such Bank under the Asset Purchase Agreement. Each Bank's
obligation shall be several, such that the failure of any Bank to make
available to the Seller any funds in connection with any purchase shall not
relieve any other Bank of its obligation, if any, hereunder to make funds
available on the date of such purchase, but no Bank shall be responsible
for the failure of any other Bank to make funds available in connection
with any purchase.
SECTION 2.03. Receivable Interest Computation. (a) Each
Receivable Interest shall be initially computed on its date of purchase.
Thereafter until the Termination Date for such Receivable Interest, such
Receivable Interest shall be automatically recomputed (or deemed to be
recomputed) on each day other than a Liquidation Day. Any Receivable
Interest, as computed (or deemed recomputed) as of the day immediately
preceding the Termination Date for such Receivable Interest, shall
thereafter remain constant. Such Receivable Interest shall become zero when
Capital thereof and Yield thereon shall have been paid in full, and all
other amounts owed by the Seller hereunder to the Investors, the Banks or
the Agent are paid and the Collection Agent shall have received the accrued
Collection Agent Fee thereon.
(b) If any Receivable Interest would otherwise be reduced on any
day on account of newly arising Pool Receivables, the parties who hold such
Receivable Interest may prevent such reduction by notifying the Collection
Agent on such day that the Receivables Pool and the Net Receivables Pool
Balance for such Receivable Interest will include, with respect to
Receivables arising as Pool Receivables on such day, only such number or
portion of such Receivables as shall cause such Receivable Interest to
remain constant. The remainder of such Receivables or portion thereof shall
be treated as Receivables arising on the next succeeding Business Day
(subject to reapplication of this subsection (b)).
SECTION 2.04. Settlement Procedures. (a) Collection of Pool
Receivables shall be administered by a Collection Agent, in accordance with
the terms of Article VI of this Agreement. On and after the New Closing
Date on each Deposit Date during each Settlement Period during the
Revolving Period the Collection Agent shall, by no later than 11:00 a.m.
New York time, and in the following order:
(i) deposit in the Agent's Account an amount equal to the
sum of (x) Reserves plus (y) Yield for each
Settlement Period commencing on or before such
Deposit Date to the extent such amount has not been
previously so deposited;
(ii) if such Deposit Day is a Tuesday (or if such day is
not a Business Day, the next Business Day), deliver
to the Agent the Weekly Report and remit to the
Agent's Account the amount, if any, necessary to make
the Net Receivables Pool Balance equal the Required
Weekly Net Receivables Pool Balance; and
(iii) deposit the remainder of such Collections to the
Seller's Account to be reinvested by the Seller in
Receivables; provided that, if immediately following
any such deposit such Deposit Date would be a Pool
Non-compliance Date, the Collection Agent shall
retain all such remaining Collections in the
Purchaser Deposit Account to be applied pursuant to
Section 2.04(b)(ii).
(b) On each Deposit Date if and so long as a Cure Period shall
have occurred and be continuing, the Collection Agent shall, by no later
than 11:00 a.m. New York time, and in the following order:
(i) deposit in the Agent's Account an amount equal to the
sum of (x) Reserves plus (y) Yield for each
Settlement Period commencing on or before such
Deposit Date to the extent such amount has not been
previously so allocated;
(ii) deposit, out of the remainder of such Collections, to
the Agent's Account an amount sufficient to make the
Net Receivables Pool Balance equal the Required
Weekly Net Receivables Pool Balance; provided,
however, if such Deposit Date is second Business Day
after a Cure Period has commenced and is continuing
and Collections are insufficient to make the Net
Receivables Pool Balance equal the Required Weekly
Net Receivables Pool Balance, the Seller shall, from
its own funds, deposit into the Agent's Account an
amount sufficient to make the Net Receivables Pool
Balance equal the Required Weekly Net Receivables
Pool Balance; and
(iii) deposit the remainder of such Collections to the
Seller's Account to be reinvested by the Seller in
Receivables; provided that, if immediately following
any such deposit such Deposit Date would be a Pool
Non-compliance Date, the Collection Agent shall
retain all such remaining Collections in the
Purchaser Deposit Account to be applied pursuant to
Section 2.04(b)(ii).
(c) Upon receipt of funds deposited into the Agent's Account, the
Agent shall distribute them as follows:
(i) if such distribution occurs on a day that is not a
Liquidation Day, first to the Investors or the Banks that hold
the relevant Receivable Interest in payment in full of all
accrued Yield and then to the Collection Agent in payment in full
of all accrued Collection Agent Fee.
(ii) if such distribution occurs on a Liquidation Day,
first to the Investors or the Banks that hold the relevant
Receivable Interest in payment in full of all accrued Yield,
second to such Investors or Banks in reduction to zero of all
Capital, third to such Investors, Banks or the Agent in payment
of any other amounts owed by the Seller hereunder, and fourth to
the Collection Agent in payment in full of all accrued Collection
Agent Fee.
After the Capital and Yield and Collection Agent Fee with respect
to a Receivable Interest, and any other amounts payable by the Seller to
the Investors, the Banks or the Agent hereunder, have been paid in full,
all additional Collections with respect to such Receivable Interest shall
be paid to the Seller for its own account.
(d) For the purposes of this Section 2.04:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed, cancelled or foreclosed
merchandise or services, or any cash discount or other adjustment
made by the Parent, the Seller or the Originator, or any setoff,
the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in the amount of such
reduction or adjustment;
(ii) if on any day any of the representations or warranties
contained in Section 4.01(g) is no longer true with respect to
any Pool Receivable, the Seller shall be deemed to have received
on such day a Collection of such Pool Receivable in full;
(iii) except as provided in subsection (i) or (ii) of this
Section 2.04(d), or as otherwise required by applicable law or
the relevant Contract, all Collections received from an Obligor
of any Receivables shall be applied to the Receivables of such
Obligor in the order of the age of such Receivables, starting
with the oldest such Receivable, unless such Obligor designates
its payment for application to specific Receivables; and
(iv) if and to the extent the Agent, the Investors or the
Banks shall be required for any reason to pay over to an Obligor
any amount received on its behalf hereunder, such amount shall be
deemed not to have been so received but rather to have been
retained by the Seller and, accordingly, the Agent, the Investors
or the Banks, as the case may be, shall have a claim against the
Seller for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect
thereof.
(e) To the extent that the amounts deposited to the Agent's
Account with respect to any Settlement Period are insufficient to pay all
then accrued but unpaid Yield, Fees and (if payable to a Collection Agent
other than Rite Aid Corporation), Collection Agent Fee, the Seller shall be
obligated to pay to the Agent, on the last day of such Settlement Period,
for the account of the Investors, the Banks and the Agent (and the
Collection Agent, if applicable), an amount sufficient to pay fully all
such amounts, by depositing such amount to the Agent's Account. The Agent
shall distribute such funds as set forth 2.04(c) above.
SECTION 2.05. Fees. (a) Each Investor and Bank shall pay to the
Collection Agent a fee (the "Collection Agent Fee") of 1/4 of 1% per annum
on the average daily Capital of each Receivable Interest owned by such
Investor or Bank, from the date of purchase of such Receivable Interest
until the later of the Termination Date for such Receivable Interest or the
date on which such Capital is reduced to zero, payable on the Settlement
Date. Upon three Business Days' notice to the Agent, the Collection Agent
(if not the Parent, the Seller or an Originator, or any of their respective
designees) may elect to be paid, as such fee, another percentage per annum
on the average daily Capital of such Receivable Interest, but in no event
in excess for all Receivable Interests relating to a single Receivables
Pool of 110% of the reasonable costs and expenses of the Collection Agent
in administering and collecting the Receivables in such Receivables Pool.
The Collection Agent Fee shall be payable only from Collections pursuant
to, and subject to the priority of payment set forth in, Section 2.04. So
long as the Parent (or any Originator) is acting as the Collection Agent
hereunder, amounts paid as the Collection Agent Fee pursuant to this
Section 2.05(a) shall reduce, on a dollar-for-dollar basis, the obligation
of the Seller to pay the "Collection Agent Fee" pursuant to Section 6.03 of
the Originator Purchase Agreement, provided, that such obligation of the
Seller shall in no event be reduced below zero.
(b) The Seller shall pay to the Agent certain fees in the amounts
and on the dates set forth in the Fee Agreement.
SECTION 2.06. Payments and Computations, Etc. (a) All amounts to
be paid or deposited by the Seller or the Collection Agent hereunder shall
be paid or deposited no later than 11:00 A.M. (New York City time) on the
day when due in same day funds to the Agent's Account.
(b) The Seller shall, to the extent permitted by law, pay
interest on any amount not paid or deposited by the Seller (whether as
Collection Agent or otherwise) when due hereunder, at an interest rate per
annum equal to 2% per annum above the Alternate Base Rate, payable on
demand.
(c) All computations of interest under subsection (b) above and
all computations of Yield, fees, and other amounts hereunder shall be made
on the basis of a year of 360 days for the actual number of days elapsed.
Whenever any payment or deposit to be made hereunder shall be due on a day
other than a Business Day, such payment or deposit shall be made on the
next succeeding Business Day and such extension of time shall be included
in the computation of such payment or deposit.
SECTION 2.07. Dividing or Combining Receivable Interests. Either
the Seller or the Agent may, upon notice to the other party received at
least three Business Days prior to the last day of any Settlement Period in
the case of the Seller giving notice, or up to the last day of such
Settlement Period in the case of the Agent giving notice, either (i) divide
any Receivable Interest into two or more Receivable Interests having
aggregate Capital equal to the Capital of such divided Receivable Interest,
or (ii) combine any two or more Receivable Interests originating on such
last day or having Settlement Periods ending on such last day into a single
Receivable Interest having Capital equal to the aggregate of the Capital of
such Receivable Interests; provided, however, that no Receivable Interest
owned by CAFCO or CRC may be combined with a Receivable Interest owned by
any Bank.
SECTION 2.08. Increased Costs. (a) If CNAI, any Investor, any
Bank, any entity which enters into a commitment to purchase Receivable
Interests or interests therein, or any of their respective Affiliates (each
an "Affected Person") determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect
the amount of the capital required or expected to be maintained by such
Affected Person and such Affected Person determines that the amount of such
capital is increased by or based upon the existence of any commitment to
make purchases of or otherwise to maintain the investment in Pool
Receivables or interests therein related to this Agreement or to the
funding thereof and other commitments of the same type, then, upon demand
by such Affected Person (with a copy to the Agent), the Seller shall
immediately pay to the Agent for the account of such Affected Person (as a
third-party beneficiary), from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in
the light of such circumstances, to the extent that such Affected Person
reasonably determines such increase in capital to be allocable to the
existence of any of such commitments. A certificate as to such amounts
submitted to the Seller and the Agent by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve
requirements referred to in Section 2.09) in or in the interpretation of
any law or regulation or (ii) compliance with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase (other than an increase in
income or franchise taxes) in the cost to any Investor or Bank of agreeing
to purchase or purchasing, or maintaining the ownership of Receivable
Interests in respect of which Yield is computed by reference to the
Eurodollar Rate, then, upon demand by such Investor or Bank (with a copy to
the Agent), the Seller shall immediately pay to the Agent, for the account
of such Investor or Bank (as a third-party beneficiary), from time to time
as specified by such Investor or Bank, additional amounts sufficient to
compensate such Investor or Bank for such increased costs. A certificate as
to such amounts submitted to the Seller and the Agent by such Investor or
Bank shall be conclusive and binding for all purposes, absent manifest
error.
(c) Notwithstanding the generality of the foregoing provisions
and not in derogation of the obligation of the Seller to pay to any
Affected Person compensation which is duly requested and payable to such
Person pursuant to the provisions of this Section 2.08, if any Affected
Person shall request compensation pursuant to this Section 2.08, the Seller
shall be entitled to request that reasonable efforts be taken to assign
such Affected Person's interest hereunder to another Person that does not
require similar compensation and is otherwise acceptable to the Agent and
the Seller. In order to exercise the foregoing option, the Seller shall
direct the applicable Affected Person in writing to take all necessary
actions to give effect to the foregoing provision.
SECTION 2.09. Additional Yield on Receivable Interests Bearing a
Eurodollar Rate.(a) The Seller shall pay to any Investor or Bank, so long
as such Investor or Bank shall be required under regulations of the Board
of Governors of the Federal Reserve System to maintain reserves with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities, additional Yield on the unpaid Capital of each Receivable
Interest of such Investor or Bank during each Settlement Period in respect
of which Yield is computed by reference to the Eurodollar Rate, for such
Settlement Period, at a rate per annum equal at all times during such
Settlement Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Settlement Period from (ii) the rate obtained by
dividing such Eurodollar Rate referred to in clause (i) above by that
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of
such Investor or Bank for such Settlement Period. Such additional Yield
shall be determined by such Investor or Bank and notice thereof given to
the Seller through the Agent within 30 days after any Yield payment is made
with respect to which such additional Yield is requested and shall be paid
on the next Settlement Date. A certificate as to such additional Yield
submitted to the Seller and the Agent by such Investor or Bank shall be
conclusive and binding for all purposes, absent manifest error.
(b) Notwithstanding the generality of the foregoing provision and
not in derogation of the obligation of the Seller to pay to any Investor or
any Bank compensation which is duly requested and payable to such Person
pursuant to the provisions of this Section 2.09, if any Investor or any
Bank shall request compensation pursuant to this Section 2.09, the Seller
shall be entitled to request that such Investor or such Bank utilize
reasonable efforts to assign its interest hereunder to another Person that
does not require similar compensation and is otherwise acceptable to the
Agent and the Seller. In order to exercise the foregoing option, the Seller
shall direct the relevant Person in writing to take all necessary actions
to give effect to the foregoing provision.
SECTION 2.10. Security Interest. As collateral security for the
performance by the Seller of all the terms, covenants and agreements on the
part of the Seller (whether as Seller or otherwise) to be performed under
this Agreement or any document delivered in connection with this Agreement
in accordance with the terms thereof, including the punctual payment when
due of all obligations of the Seller hereunder or thereunder, whether for
indemnification payments, fees, expenses or otherwise, the Seller hereby
assigns to the Agent for its benefit and the ratable benefit of the
Investors and the Banks, and hereby grants to the Agent for its benefit and
the ratable benefit of the Investors and the Banks, a security interest in,
all of the Seller's right, title and interest in and to (A) the Originator
Purchase Agreement, including, without limitation, (i) all rights of the
Seller to receive moneys due or to become due under or pursuant to the
Originator Purchase Agreement, (ii) all security interests and property
subject thereto from time to time purporting to secure payment of monies
due or to become due under or pursuant to the Originator Purchase
Agreement, (iii) all rights of the Seller to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Originator
Purchase Agreement, (iv) claims of the Seller for damages arising out of or
for breach of or default under the Originator Purchase Agreement, and (v)
the right of the Seller to compel performance and otherwise exercise all
remedies thereunder, and (B) all Receivables, the Related Security with
respect thereto and the Collections and all other assets, including,
without limitation, accounts, instruments and general intangibles (as those
terms are defined in the UCC) owned by the Seller and not otherwise
purchased or scheduled to be purchased under this Agreement, and (C) to the
extent not included in the foregoing, all proceeds of any and all of the
foregoing.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase on
Original Closing Date. Intentionally omitted.
SECTION 3.02. Conditions Precedent to Initial Purchase on New
Closing Date. The initial purchase of a Receivable Interest under this
Agreement is subject to the conditions precedent that the Agent shall have
received on or before the date of such purchase the following, each (unless
otherwise indicated) dated such date, in form and substance satisfactory to
the Agent:
(a) Certified copies of the resolutions of the Board of Directors
of the Parent, the Seller and each Originator approving each of the
Transaction Documents to which it is a party and certified copies of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Originator
Purchase Agreement.
(b) A certificate of the Secretary or Assistant Secretary of the
Parent, the Seller and each Originator certifying the names and true
signatures of the officers of the Parent, the Seller and each Originator
authorized to sign the Originator Purchase Agreement and this Agreement and
the other documents to be delivered by it hereunder and thereunder.
(c) Intentionally omitted.
(d) Intentionally omitted.
(e) Intentionally omitted.
(f) The Lock-Boxes and the Deposit Accounts shall have been
established and any Obligors who have previously delivered Collections
(other than Collections arising from PCS-originated Receivables) to any
Originator, the Seller or the Collection Agent to any location other than
into an Originator Lock-Box or an Originator Deposit Account shall have
received a Notice to Insurers instructing all such Obligors to remit all
Collections to either an Originator Lock-Box or an Originator Deposit
Account and the Agent shall be satisfied with the foregoing in all
respects.
(g) A favorable opinion of Morgan, Lewis & Bockius, LLP, counsel
for the Parent, the Seller and the Originators, substantially in the form
of Annex C hereto and as to such other matters as the Agent may reasonably
request.
(h) The Fee Agreement referred to in Section 2.05(b).
(i) An executed copy of the Originator Purchase Agreement.
(j) Intentionally omitted.
(k) A copy of the articles of organization of the Seller,
certified as of a recent date by the Secretary of State or other
appropriate official of the state of its organization, and a certificate as
to the good standing of the Seller from such Secretary of State or other
official, dated as of a recent date.
(l) A favorable opinion of Kaye, Scholer, Fierman, Hays &
Handler, LLP, counsel for the Agent, as to such matters as the Agent may
reasonably request.
(m) A favorable opinion of Kaye, Scholer, Fierman, Hays &
Handler, LLP, counsel for the Agent, addressed to CAFCO and the dealer for
the commercial paper of CAFCO, as to the correctness of the representation
and warranty of the Seller set forth in Section 4.01(l), substantially in
the form previously delivered by such counsel to the Agent.
(n) The Agent shall have had the opportunity, if it so chooses,
to review the Collection Agent's billing, collection and reporting systems,
and the results of such review shall have been satisfactory to the Agent in
all respects.
(o) The Confirmation of Parent Guaranty, duly executed by the
Parent.
(p) The Agent shall have received the Agreed Upon Procedures
Report from KPMG Peat Marwick LLP.
SECTION 3.03. Conditions Precedent to the Amendment Closing Date.
The effectiveness of the restatement and amendment of the Original
Receivables Purchase Agreement as contemplated by this Agreement is subject
to the conditions precedent that the Agent shall have received on or before
the date of such purchase the following, each (unless otherwise indicated)
dated such date, in form and substance satisfactory to the Agent:
(a) counterparts of this Agreement executed by each of the
parties hereto;
(b) evidence that all representations and warranties contained in
this Agreement or otherwise made in writing to the Agent in connection
herewith are true and correct in all material respects;
(c) evidence that no Incipient Event of Termination or Event of
Termination has occurred and is continuing;
(d) a certificate of an officer of the Seller, stating and
certifying that:
(i) the execution, delivery and performance by the
Seller of this Agreement, as amended and restated on the
Amendment Closing Date, is within the Seller's corporate
powers and has been duly authorized by all necessary
corporate action, based on certificates and evidence
attached to such officer's certificate;
(ii) all representations and warranties contained in
this Agreement or otherwise made in writing to the Agent in
connection herewith are true and correct in all material
respects; and
(iii) no Incipient Event of Termination or Event of
Termination has occurred and is continuing;
(e) payment of the amendment fee, in immediately available funds,
in the amount set forth in the fee letter dated January 11, 2000;
(f) [Intentionally Omitted]
(g) evidence that (i) the Lock-Boxes and the Deposit Accounts
previously established with Mellon Bank are operating in accordance with
the terms and procedures established in the Deposit Account Agreement, and
(ii) the Collection Agent has established a data automation system which
permits the tracking and segregation of Collections in the manner described
in Section 6.06(f) hereof;
(h) a fully executed copy, dated the Amendment Closing Date, of
(i) the amendment to Originator Purchase Agreement, and (ii) the amendments
to the Deposit Account Agreement to include each PCS Pharmacy Entity as an
"Originator" thereunder, and evidence that the conditions precedent to the
effectiveness of such agreements have been fulfilled in full; and
(i) such other approvals, opinions or documents as the Agent may
reasonably request.
SECTION 3.04. Conditions Precedent to All Purchases and
Reinvestments. Each purchase (including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that (a)
in the case of each purchase, the Collection Agent shall have delivered to
the Agent at least one Business Day prior to such purchase, in form and
substance satisfactory to the Agent, a completed Seller Report containing
information covering the most recently ended reporting period for which
information is required pursuant to Section 6.02(g) and demonstrating that
after giving effect to such purchase no Event of Termination or Incipient
Event of Termination under Section 7.01(j) would occur, (b) in the case of
each reinvestment, the Collection Agent shall have delivered to the Agent
on or prior to the date of such reinvestment, in form and substance
satisfactory to the Agent, a completed Seller Report containing information
covering the most recently ended reporting period for which information is
required pursuant to Section 6.02(g), (c) on the date of such purchase or
reinvestment the following statements shall be true, except that the
statement in clause (iii) below is required to be true only if such
purchase or reinvestment is by an Investor (and acceptance of the proceeds
of such purchase or reinvestment shall be deemed a representation and
warranty by the Seller that such statements are then true):
(i) The representations and warranties contained in Section 4.01
are correct on and as of the date of such purchase or reinvestment as
though made on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such purchase or reinvestment, that constitutes an Event of
Termination or an Incipient Event of Termination, and
(iii) The Agent shall not have given the Seller at least one
Business Day's notice that the Investors have terminated the
reinvestment of Collections in Receivable Interests, and
(iv) The applicable Originator shall have sold or contributed to
the Seller, pursuant to the Originator Purchase Agreement, all
Originator Receivables arising on or prior to such date, and
(v) The Lock-Boxes and the Deposit Accounts shall be operating as
set forth herein to the satisfaction of the Agent; and
(d) the Agent shall have received a favorable opinion of counsel
for the Seller, substantially in the form of Annex C hereto; provided, that
such opinion shall not be required under this Section 3.02(d) if (x) the
opinions most recently delivered pursuant to Section 3.02(g) or this
Section 3.02(d) are dated a date no more than 12 months before the
applicable purchase date and such opinions shall not have been revoked,
withdrawn or suspended by the Person delivering it, or (y) counsel
delivering the opinions most recently delivered pursuant to Section 3.02(g)
or this Section 3.02(d) shall have delivered to the Agent a letter, in form
and substance satisfactory to the Agent and dated a date not more than 12
months before the applicable purchase date, confirming such opinions as of
the date of such letter, and such opinions shall not have been revoked,
withdrawn or suspended by the Person delivering it, and (e) the Agent shall
have received such other approvals, opinions or documents as it may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller. The
Seller hereby represents and warrants as follows:
(a) The Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
California, and is duly qualified to do business, and is in good standing,
in every jurisdiction where the nature of its business requires it to be so
qualified.
(b) The execution, delivery and performance by the Seller of the
Transaction Documents (including, without limitation, this Agreement as
amended and restated and the Originator Purchase Agreement as amended and
restated) and the other documents to be delivered by it hereunder,
including the Seller's use of the proceeds of purchases and reinvestments,
(i) are within the Seller's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not contravene (1)
the Seller's articles of organization or operating agreement, (2) any law,
rule or regulation applicable to the Seller, (3) any contractual
restriction binding on or affecting the Seller or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting
the Seller or its property, and (iv) do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of its properties (except for the interest created
pursuant to this Agreement). Each of the Transaction Documents has been
duly executed and delivered by the Seller.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of
the Transaction Documents or any other document to be delivered thereunder,
except for the filing of UCC financing statements which are referred to
therein.
(d) Each of the Transaction Documents (including, without
limitation, this Agreement as amended and restated and the Originator
Purchase Agreement as amended and restated) constitutes the legal, valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms.
(e) The financial statements of the Parent and its consolidated
Subsidiaries as set forth in the Form 10-Q of the Parent filed with the SEC
on November 2, 1999, fairly present the financial condition and the results
of the operations of the Parent and its consolidated Subsidiaries as at
such dates as set forth therein, all in accordance with generally accepted
accounting principles consistently applied, and since August 28, 1999 there
has been no material adverse change in the business, operations, property
or financial or other condition of the Parent or any Originator. The
balance sheet of the Seller dated as of October 23, 1999, a copy of which
has been furnished to the Agent, fairly presents the financial condition of
the Seller as at such date, in accordance with generally accepted
accounting principles, and since August 28, 1999 there has been no material
adverse change in the business, operations, property or financial or other
condition of the Seller.
(f) Other than as set forth in the Form 10-Q of the Parent filed
with the SEC on November 2, 1999 there is no pending or threatened action
or proceeding affecting the Parent, any Originator or any of their
respective Subsidiaries before any court, governmental agency or arbitrator
which may materially adversely affect the financial condition or operations
of the Parent, any Originator or any of their respective Subsidiaries or
the ability of the Parent, the Seller or any Originator to perform their
respective obligations under the Transaction Documents, or which purports
to affect the legality, validity or enforceability of the Transaction
Documents; none of the Parent, any Originator nor any of their respective
Subsidiaries is in default with respect to any order of any court,
arbitration or governmental body except for defaults with respect to orders
of governmental agencies which defaults are not material to the business or
operations of the Parent or any Originator.
(g) No proceeds of any purchase or reinvestment will be used to
acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
(h) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security free and clear of any Adverse Claim; upon
each purchase or reinvestment, the Investors or the Banks, as the case may
be, shall acquire a valid and perfected first priority undivided percentage
ownership interest to the extent of the pertinent Receivable Interest in
each Pool Receivable then existing or thereafter arising and in the Related
Security and Collections with respect thereto. No notices to Obligors are
required to be delivered in order to create or perfect a valid and
perfected first priority undivided percentage ownership interest to the
extent of the pertinent Receivable Interest in each Pool Receivable. No
effective financing statement or other instrument similar in effect
covering any Contract or any Pool Receivable or the Related Security or
Collections with respect thereto is on file in any recording office, except
those filed in favor of the Agent relating to this Agreement and those
filed by the Seller pursuant to the Originator Purchase Agreement.
(i) Each Seller Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report (including each Weekly Report and E-Mail
Report) furnished or to be furnished at any time by or on behalf of the
Seller to the Agent, the Investors or the Banks in connection with this
Agreement is or will be accurate in all material respects as of its date or
(except as otherwise disclosed to the Agent, Investors or the Banks, as the
case may be, at such time) as of the date so furnished, and no such
document contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make
the statements contained therein, in the light of the circumstances under
which they were made, not misleading.
(j) The principal place of business and chief executive office of
the Seller and the office where the Seller keeps its records concerning the
Pool Receivables are located at the address or addresses referred to in
Section 5.01(b).
(k) The Deposit Account Banks are the only institutions holding
Deposit Accounts for the receipt of payments from Lock-Boxes in respect of
Receivables and (i) as of the Obligor Notification Date all Obligors who
are not Governmental Entities, and only such Obligors, shall have been
instructed or, upon the creation of Receivables owed by them after the
Obligor Notification Date, will be instructed to make all payments directly
to the Purchaser Deposit Account and the corresponding Lock-Box and (ii)
all Governmental Entity Obligors, and only such Obligors, have been
instructed or, upon the creation of Receivables owed by them, will be
instructed to make all payments directly to the Originator Deposit Account
and Governmental Entity Lock-Boxes, and all such instructions have not been
modified or revoked by the Seller and all such instructions that have been
given are in full force and effect.
(l) Each purchase of a Receivable Interest and each reinvestment
of Collections in Pool Receivables will constitute (i) a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended, and (ii) a purchase or other acquisition of notes,
drafts, acceptances, open accounts receivable or other obligations
representing part or all of the sales price of merchandise, insurance or
services within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended.
(m) The Seller is not known by and does not use any tradename or
doing- business-as name.
(n) The Seller was organized on November 14, 1997, and the Seller
did not engage in any business activities prior to the Original Closing
Date and has not engaged in any business activities other than performing
under the Original Originator Purchase Agreement and the Original
Receivables Purchase Agreement. The Seller has no Subsidiaries.
(o) (i) The fair value of the property of the Seller is greater
than the total amount of liabilities, including contingent liabilities, of
the Seller, (ii) the present fair salable value of the assets of the Seller
is not less than the amount that will be required to pay all probable
liabilities of the Seller on its debts as they become absolute and matured,
(iii) the Seller does not intend to, and does not believe that it will,
incur debts or liabilities beyond the Seller's abilities to pay such debts
and liabilities as they mature and (iv) the Seller is not engaged in a
business or a transaction, and is not about to engage in a business or a
transaction, for which the Seller's property would constitute unreasonably
small capital.
(p) With respect to each Pool Receivable, the Seller (i) shall
have received such Pool Receivable as a contribution to the capital of the
Seller by the applicable Originator or (ii) shall have purchased such Pool
Receivable from the applicable Originator in exchange for payment (made by
the Seller to the applicable Originator in accordance with the provisions
of the Originator Purchase Agreement) of cash in an amount which
constitutes fair consideration and reasonably equivalent value. Each such
sale referred to in clause (ii) of the preceding sentence shall not have
been made for or on account of an antecedent debt owed by the applicable
Originator to the Seller and no such sale is or may be voidable or subject
to avoidance under any section of the Federal Bankruptcy Code.
(q) The Seller is implementing a comprehensive, detailed program
to address on a timely basis the "Year 2000 Problem" (i.e., the risk that
computer applications used by the Seller may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999); the Seller reasonably anticipates
that it will on a timely basis successfully resolve the "Year 2000 Problem"
for all material computer applications used by it; and such program shall
be in full operation by no later than June 30, 1999.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Seller. Until the latest of the
Facility Termination Date or the date on which no Capital of or Yield on
any Receivable Interest shall be outstanding or the date all other amounts
owed by the Seller hereunder to the Investors, the Banks or the Agent are
paid in full:
(a) Compliance with Laws, Etc. The Seller will comply in all
material respects with all applicable laws, rules, regulations and orders
and preserve and maintain its corporate existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications, and
privileges would not materially adversely affect the collectibility of the
Pool Receivables or the ability of the Seller to perform its obligations
under the Transaction Documents.
(b) Offices, Records and Books of Account. The Seller will keep
its principal place of business and chief executive office and the office
where it keeps its records concerning the Pool Receivables at the address
of the Seller set forth under its name on the signature pages to this
Agreement or, upon 30 days' prior written notice to the Agent, at any other
locations in jurisdictions where all actions reasonably requested by the
Agent to protect and perfect the interest in the Pool Receivables have been
taken and completed. The Seller also will maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables and related
Contracts in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool
Receivables (including, without limitation, records adequate to permit the
daily identification of each Pool Receivable and all Collections of and
adjustments to each existing Pool Receivable).
(c) Performance and Compliance with Contracts and Credit and
Collection Policy. The Seller will, at its expense, timely and fully
perform and comply with all material provisions, covenants and other
promises required to be observed by it under the Contracts related to the
Pool Receivables, and timely and fully comply in all material respects with
the Credit and Collection Policy in regard to each Pool Receivable and the
related Contract. The Seller shall immediately inform the Agent of any
changes in the payment procedures under a Contract relating to an Agent
PBM.
(d) Sales, Liens, Etc. The Seller will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Adverse Claim upon or with respect to, the Seller's undivided
interest in any Pool Receivable, Related Security, related Contract or
Collections, or upon or with respect to any account to which any
Collections of any Pool Receivable are sent, or assign any right to receive
income in respect thereof.
(e) Extension or Amendment of Receivables. Except as provided in
Section 6.02(c), the Seller will not extend, amend or otherwise modify the
terms of any Pool Receivable, or amend, modify or waive any term or
condition of any Contract related thereto, without the prior written
consent of the Agent.
(f) Change in Business or Credit and Collection Policy. The
Seller will not, without the prior written consent of the Agent, make any
change in the character of its business or in the Credit and Collection
Policy that would, in either case, materially adversely affect the
collectibility of the Pool Receivables or the ability of the Seller to
perform its obligations under this Agreement.
(g) Change in Payment Instructions to Obligors. The Seller will
not add or terminate any bank as a Deposit Account Bank from those listed
in Schedule I to this Agreement, or make any change in its instructions to
Obligors regarding payments to be made to the Seller or payments to be made
to any Deposit Account Bank without the prior written consent of the Agent.
(h) Deposits to Deposit Accounts. The Seller will deposit, or
cause to be deposited, all Collections of Pool Receivables into Deposit
Accounts. The Seller will not deposit or otherwise credit, or cause or
permit to be so deposited or credited, to any LockBox Account cash or cash
proceeds other than Collections of Pool Receivables. If and to the extent
that funds that are not Collections are deposited into a Deposit Account,
the Collection Agent shall withdraw such funds from such Deposit Account
and deposit them in the Seller's Account.
(i) Marking of Records. At its expense, the Seller will mark its
master data processing records evidencing Pool Receivables and related
Contracts with a legend evidencing that Receivable Interests related to
such Pool Receivables and related Contracts have been sold in accordance
with this Agreement.
(j) Further Assurances. (i) The Seller agrees from time to time,
at its expense, promptly to execute and deliver all further instruments and
documents, and to take all further actions, that may be necessary or
desirable, or that the Agent may reasonably request, to perfect, protect or
more fully evidence the Receivable Interests purchased under this
Agreement, or to enable the Investors, the Banks or the Agent to exercise
and enforce their respective rights and remedies under this Agreement.
Without limiting the foregoing, the Seller will, upon the request of the
Agent, execute and file such financing or continuation statements, or
amendments thereto, and such other instruments and documents, that may be
necessary or desirable, or that the Agent may reasonably request, to
perfect, protect or evidence such Receivable Interests.
(ii) The Seller authorizes the Agent to file financing or
continuation statements, and amendments thereto and assignments thereof,
relating to the Pool Receivables and the Related Security, the related
Contracts and the Collections with respect thereto without the signature of
the Seller where permitted by law. A photocopy or other reproduction of
this Agreement shall be sufficient as a financing statement where permitted
by law.
(iii) The Seller and the Parent shall utilize their
respective best efforts to cause the delivery of the final Agreed Upon
Procedures Report from KPMG Peat Marwick LLP in form and substance
acceptable to the Agent within 10 Business Days of the Amendment Closing
Date.
(iv) The Seller shall deliver UCC search reports in form and
substance satisfactory to the Agent with respect to each PCS Pharmacy
Entity by no later than January 14, 2000.
(v) The Seller shall cause each PCS Pharmacy Entity to
deliver to the Agent fully executed UCC-1 financing statements prepared by
the Agent with respect to such PCS Pharmacy Entities by no later than
January 14, 2000.
(k) Reporting Requirements. The Seller will provide to the Agent
(in multiple copies, if requested by the Agent) the following; provided,
the Seller shall not have to provide copies of the following to the Agent
to the extent that the same is available in a filing made through EDGAR and
Seller has promptly notified the Agent of such filing:
(i) as soon as available and in any event within 45 days
after the end of the first three quarters of each fiscal year of
the Parent and each Originator (except during the Reporting
Extension Period), balance sheets of the Parent and its
consolidated Subsidiaries as of the end of such quarter and
statements of income and retained earnings of the Parent and its
consolidated Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer of the Parent;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Parent and each
Originator (except during the Reporting Extension Period), a copy
of the annual report for such year for the Parent and its
consolidated Subsidiaries, containing financial statements for
such year audited by Deloitte & Touche LLP or other independent
public accountants reasonably acceptable to the Agent;
(iii) during the Reporting Extension Period, as soon as
available and in any event no later than the first day of each
Month in respect of such forecast (or, in the reasonable
discretion of the Agent, no later than 5 days thereafter), a
monthly forecast of cash receipts and disbursements, commencing
with February, 2000;
(iv) during the Reporting Extension Period, as soon as
available and in any event no later than the 25th day of the next
succeeding Month (or, in the reasonable discretion of the Agent,
no later than 5 days thereafter), a monthly reconciliation of
actual cash receipts and disbursements to the forecast for such
month delivered pursuant to clause (iii) above;
(v) during the Reporting Extension Period, as soon as
available and in any event no later than the 4th day following
the last day of the week in respect of which such sales report is
to be delivered (or, in the reasonable discretion of the Agent,
no later than 5 days thereafter), a weekly sales report for each
week;
(vi) during the Reporting Extension Period, as soon as
available and in any event no later than March 31, 2000 (or, in
the reasonable discretion of the Agent, no later than 5 days
thereafter), an operating forecast for each month in the fiscal
year ending on or closest to February 28, 2001;
(vii) during the Reporting Extension Period, as soon as
available and in any event no later than the 30th day of the next
succeeding Month (or, in the reasonable discretion of the Agent,
no later than 5 days thereafter), a monthly reconciliation of
actual operating results for each month specified in the
operating forecast delivered pursuant to clause (vi) above to the
budget for such Month;
(viii)as soon as possible and in any event within five days
after the occurrence of each Event of Termination or Incipient
Event of Termination, a statement of the chief financial officer
of the Seller setting forth details of such Event of Termination
or event and the action that the Seller has taken and proposes to
take with respect thereto;
(ix) promptly after the sending or filing thereof, copies of
all reports and registration statements that the Parent or any of
its Subsidiaries files with the SEC or any national securities
exchange;
(x) promptly after the filing or receiving thereof, copies of
all reports and notices that the Seller or any Affiliate files
under ERISA with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or
that the Seller or any Affiliate receives from any of the
foregoing or from any multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) to which the Seller or any Affiliate
is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal
liability or an event or condition which could, in the aggregate,
result in the imposition of liability on the Seller and/or any
such Affiliate in excess of $5,000,000;
(xi) at least ten Business Days prior to any change in the
name of the Parent, any Originator or the Seller, a notice
setting forth the new name and the effective date thereof;
(xii) promptly after the Seller obtains knowledge thereof,
notice of any "Event of Termination" or "Facility Termination
Date" under the Originator Purchase Agreement;
(xiii)so long as any Capital shall be outstanding, as soon as
possible and in any event no later than the day of occurrence
thereof, notice that any Originator has stopped selling or
contributing to the Seller, pursuant to the Originator Purchase
Agreement, all newly arising Originator Receivables;
(xiv) at the time of the delivery of the financial statements
provided for in clauses (i) and (ii) of this paragraph (except
during the Reporting Extension Period), a certificate of the
chief financial officer or the treasurer of the Seller to the
effect that, to the best of such officer's knowledge, no Event of
Termination has occurred and is continuing or, if any Event of
Termination has occurred and is continuing, specifying the nature
and extent thereof;
(xv) promptly after receipt thereof, copies of all notices
received by the Seller from the Parent or any Originator under
the Originator Purchase Agreement;
(xvi) upon the request of the Agent, an aging of Pool
Receivables in which the Investors and/or the Banks have
purchased Receivables Interests hereunder; and
(xvii)such other information respecting the Receivables or
the condition or operations, financial or otherwise, of the
Seller as the Agent may from time to time reasonably request.
(l) Corporate Separateness. (i) The Seller shall at all times
maintain at least two independent members each of whom (x) is not currently
and has not been during the five years preceding the Original Closing Date
an officer, director or employee of an Affiliate of the Seller or any Other
Corporation, (y) is not a current or former officer or employee of the
Seller and (z) is not a stockholder of any Other Corporation or any of
their respective Affiliates.
(ii) The Seller shall not direct or participate in the
management of any of the Other Corporations' operations.
(iii) The Seller shall conduct its business from an office
separate from that of the Other Corporations (but which may be
located in the same facility as one or more of the Other
Corporations). The Seller shall have stationery and other
business forms and a mailing address and a telephone number
separate from that of the Other Corporations.
(iv) The Seller shall at all times be adequately capitalized
in light of its contemplated business.
(v) The Seller shall at all times provide for its own
operating expenses and liabilities from its own funds.
(vi) The Seller shall maintain its assets and transactions
separately from those of the Other Corporations and reflect such
assets and transactions in financial statements separate and
distinct from those of the Other Corporations and evidence such
assets and transactions by appropriate entries in books and
records separate and distinct from those of the Other
Corporations. The Seller shall hold itself out to the public
under the Seller's own name as a legal entity separate and
distinct from the Other Corporations. The Seller shall not hold
itself out as having agreed to pay, or as being liable, primarily
or secondarily, for, any obligations of the Other Corporations.
(vii) The Seller shall not maintain any joint account with
any Other Corporation or become liable as a guarantor or
otherwise with respect to any Debt or contractual obligation of
any Other Corporation.
(viii)The Seller shall not make any payment or distribution
of assets with respect to any obligation of any Other Corporation
or grant an Adverse Claim on any of its assets to secure any
obligation of any Other Corporation.
(ix) The Seller shall not make loans, advances or otherwise
extend credit to any of the Other Corporations.
(x) The Seller shall hold regular duly noticed meetings of
its Board of Directors and make and retain minutes of such
meetings.
(xi) The Seller shall have bills of sale (or similar
instruments of assignment) and, if appropriate, UCC-1 financing
statements, with respect to all assets purchased from any of the
Other Corporations.
(xii) The Seller shall not engage in any transaction with any
of the Other Corporations, except as permitted by this Agreement
and as contemplated by the Originator Purchase Agreement.
(xiii)The Seller shall comply with (and cause to be true and
correct) each of the facts and assumptions listed on pages 3
through 7 of the opinion of Morgan, Lewis & Bockius LLP delivered
pursuant to Section 3.02(g) and designated as Annex C to this
Agreement.
(m) Originator Purchase Agreement. The Seller will not amend,
waive or modify any provision of the Originator Purchase Agreement or waive
the occurrence of any "Event of Termination" under the Originator Purchase
Agreement, without in each case the prior written consent of the Agent. The
Seller will perform all of its obligations under the Originator Purchase
Agreement in all material respects and will enforce the Originator Purchase
Agreement in accordance with its terms in all material respects.
(n) Nature of Business. The Seller will not engage in any
business other than the purchase of Receivables, Related Security and
Collections from the Originators and the transactions contemplated by this
Agreement. The Seller will not create or form any Subsidiary.
(o) Mergers, Etc. The Seller will not merge with or into or
consolidate with or into, or convey, transfer, lease or otherwise dispose
of (whether in one transaction or in a series of transactions), all or
substantially all of its assets (whether now owned or hereafter acquired)
to, or acquire all or substantially all of the assets or capital stock or
other ownership interest of, or enter into any joint venture or partnership
agreement with, any Person, other than as contemplated by this Agreement
and the Originator Purchase Agreement.
(p) Distributions, Etc. The Seller will not declare or make any
dividend payment or other distribution of assets, properties, cash, rights
or obligations to its members, or return any capital to its members as
such, or purchase, retire, defease, redeem or otherwise acquire for value
or make any payment in respect of any membership interest of the Seller or
any warrants, rights or options to acquire any such interests, now or
hereafter outstanding; provided, however, that the Seller may declare and
pay dividends to its members so long as (i) no Event of Termination shall
then exist or would occur as a result thereof, (ii) such dividends are in
compliance with all applicable law including the law of the State of
California, and (iii) such dividends have been approved by all necessary
and appropriate corporate action of the Seller.
(q) Debt. The Seller will not incur any Debt, other than any Debt
incurred pursuant to this Agreement.
(r) Operating Agreement. The Seller will not amend or delete
Sections 1.05, 2.06, 4.03, 7.01, 8.08 and 8.11 of its Operating Agreement.
(s) Tangible Net Worth. The Seller will maintain Tangible Net
Worth at all times equal to at least 5% of the Outstanding Balance of the
Receivables at such time.
(t) Notices to Insurer Within 30 days of the New Closing Date
with respect to non-Governmental Entity Obligors the Collections from whom
comprise 70% of Collections from all non-Governmental Entity Obligors at
such time, and within 60 days of the New Closing Date with respect to all
other non-Governmental Entity Obligors, the Seller shall deliver, or cause
to be delivered, to the Agent completed Notices to Insurers (including
addressed stamped envelopes) for each such non-Governmental Entity Obligor,
to be delivered by the Agent to each such Obligor on the Obligor
Notification Date, in a manner satisfactory to the Agent in all respects.
SECTION 5.02. Covenant of the Parent, the Seller and each
Originator. Until the latest of the Facility Termination Date or the date
on which no Capital of or Yield on any Receivable Interest shall be
outstanding or the date all other amounts owed by the Seller hereunder to
the Investors, the Banks or the Agent are paid in full, each of the Parent,
the Seller and each Originator will, at their respective expense, from time
to time during regular business hours as requested by the Agent, permit the
Agent or its agents or representatives (including independent public
accountants, which may be the Parent, the Seller's or any Originator's
independent public accountants), (i) to conduct periodic audits of the
Receivables, the Related Security and the related books and records and
collections systems of the Parent, the Seller or any Originator, as the
case may be (provided, that, the Agent may, in lieu of performing such
audit, accept the special procedures report of the Seller's independent
public accountants to the extent (i) the Agent and such accountants agree
upon the scope of such special procedures report and (ii) the results of
such special procedures report are reasonably satisfactory to the Agent,
otherwise the Agent shall have the right to audit not more often than twice
during any 12- month period (unless an Incipient Event of Termination or
Event of Termination has occurred and is continuing, in which case the
foregoing limitation shall not apply)), (ii) to examine and make copies of
and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the
control of the Parent, the Seller or any Originator, as the case may be,
relating to Pool Receivables and the Related Security, including, without
limitation, the Contracts, and (iii) to visit the offices and properties of
the Parent, the Seller or any Originator, as the case may be, for the
purpose of examining such materials described in clause (ii) above, and to
discuss matters relating to Pool Receivables and the Related Security or
the Parent's the Seller's or any Originator's performance under the
Transaction Documents or under the Contracts with any of the officers or
employees of the Parent, the Seller or any Originator, as the case may be,
having knowledge of such matters. In addition, upon the Agent's request at
least once per year, the Seller will, at its expense, appoint independent
public accountants (which may, with the consent of the Agent, be the
Seller's regular independent public accountants), or utilize the Agent's
representatives or auditors, to prepare and deliver to the Agent a written
report with respect to the Receivables and the Credit and Collection Policy
(including, in each case, the systems, procedures and records relating
thereto) on a scope and in a form reasonably requested by the Agent.
ARTICLE VI
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES
SECTION 6.01. Designation of Collection Agent. The servicing,
administration and collection of the Pool Receivables shall be conducted by
the Collection Agent so designated hereunder from time to time. Until the
Agent gives notice to the Seller of the designation of a new Collection
Agent in accordance with the next sentence, the Parent is hereby designated
as, and hereby agrees to perform the duties and obligations of, the
Collection Agent pursuant to the terms hereof. The Agent at any time after
the occurrence of a Special Event may designate as Collection Agent any
Person (including itself) to succeed the Parent or any successor Collection
Agent, if such Person shall consent and agree to the terms hereof. If the
Agent designates itself as Collection Agent, the Agent shall implement such
procedures as it deems necessary and appropriate to maximize collection of
the Receivables, subject to reasonable industry standards for the
collection of healthcare receivables. The Collection Agent may subcontract
with Rite Aid HDQTRS Corp or may, with the prior consent of the Agent,
subcontract with any other Person, for the servicing, administration or
collection of the Pool Receivables. Any such subcontract shall not affect
the Collection Agent's liability for performance of its duties and
obligations pursuant to the terms hereof.
SECTION 6.02. Duties of Collection Agent.
(a) The Collection Agent shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Pool Receivable
from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy. The Seller and the Agent hereby appoint the
Collection Agent, from time to time designated pursuant to Section 6.01, as
agent for themselves and for the Investors and the Banks to enforce their
respective rights and interests in the Pool Receivables, the Related
Security and the related Contracts. In performing its duties as Collection
Agent, the Collection Agent shall exercise the same care and apply the same
policies as it would exercise and apply if it owned such Receivables and
shall act in the best interests of the Seller, the Investors and the Banks.
(b) The Collection Agent shall administer the Collections in
accordance with the procedures described in Section 2.04.
(c) If no Event of Termination or Incipient Event of Termination
shall have occurred and be continuing, the Parent, while it is the
Collection Agent, may, in accordance with the Credit and Collection Policy,
extend the maturity or adjust the Outstanding Balance of any Receivable as
the Parent deems appropriate to maximize Collections thereof.
(d) The Collection Agent shall hold in trust for the Seller and
each Investor and Bank, in accordance with their respective interests, all
documents, instruments and records (including, without limitation, computer
tapes or disks) which evidence or relate to Pool Receivables. At the
request of the Agent, the Collection Agent shall mark the Seller's master
data processing records evidencing such Pool Receivables and related
Contracts with such a legend.
(e) The Collection Agent shall, as soon as practicable following
receipt, turn over to the Seller any cash collections or other cash
proceeds received with respect to Receivables not constituting Pool
Receivables.
(f) On each Tuesday (or if such day is not a Business Day the
next Business Day), by no later than 5:00 p.m. (New York City time), the
Collection Agent shall provide by telecopy to the Agent, the Weekly Report
for the weekly period ending the previous Saturday.
(g) Prior to the 10th Business Day of each month, the Collection
Agent shall prepare and forward to the Agent a Seller Report relating to
the Receivable Interests outstanding on the last day of the immediately
preceding Month.
The Collection Agent may elect (by written notice to the Agent)
to transmit Weekly Reports and Seller Reports to the Agent by electronic
mail (each an "E-Mail Report") provided, that (i) the Collection Agent
shall (A) make arrangements with VeriSign, Inc. (or another authenticating
organization acceptable to the Agent) to enable the Collection Agent to
generate digital signatures and (B) safeguard the keys, access codes or
other means of generating its digital signature, (ii) each E-Mail Report
shall be (A) formatted as the Agent may designate from time to time and
shall be digitally signed and (B) sent to the Agent at an electronic mail
address designated by the Agent, and (iii) the Agent (A) shall be
authorized to rely upon such E-Mail Report for purposes of this Agreement
to the same extent as if the contents thereof had been otherwise delivered
to the Agent in accordance with the terms of this Agreement and (B) may,
upon notice in writing to the Collection Agent and the Seller, terminate
the right of the Collection Agent to transmit E-Mail Reports.
SECTION 6.03. Certain Rights of the Agent. (a) The Agent may
notify the Obligors of Pool Receivables, at any time and at the Seller's
expense, of the ownership of Receivable Interests under this Agreement. On
or after the Obligor Notification Date, the Agent may deliver the Notice to
Insurers to be delivered to the Agent pursuant to Section 5.01(t) hereof.
(b) At any time following the designation of a Collection Agent
other than the Parent or any Originator pursuant to Section 6.01 or
following an Event of Termination or an Incipient Event of Termination:
(i) The Agent may direct, to the extent permitted under
applicable law, the Obligors of Pool Receivables that all
payments thereunder be made directly to the Agent or its
designee.
(ii) At the Agent's request and at the Seller's expense,
the Seller shall notify each Obligor of Pool Receivables of the
ownership of Receivable Interests under this Agreement and
direct, to the extent permitted under applicable law, that
payments be made directly to the Agent or its designee.
(iii) At the Agent's request and at the Seller's expense,
the Seller and the Collection Agent shall (A) assemble all of the
documents, instruments and other records (including, without
limitation, computer tapes and disks) that evidence or relate to
the Pool Receivables and the related Contracts and Related
Security, or that are otherwise necessary or desirable to collect
the Pool Receivables and, to the extent permitted under
applicable law, shall make the same available to the Agent at a
place selected by the Agent or its designee, and (B) segregate
all cash, checks and other instruments received by it from time
to time constituting Collections of Pool Receivables in a manner
acceptable to the Agent and, promptly upon receipt, remit all
such cash, checks and instruments, duly indorsed or with duly
executed instruments of transfer, to the Agent or its designee.
(iv) The Seller authorizes the Agent to take any and all
steps in the Seller's name and on behalf of the Seller that are
necessary or desirable, in the determination of the Agent and
otherwise permitted under applicable law, to collect amounts due
under the Pool Receivables, including, without limitation,
endorsing the Seller's name on checks and other instruments
representing Collections of Pool Receivables and enforcing the
Pool Receivables and the Related Security and related Contracts.
SECTION 6.04. Rights and Remedies. (a) If the Collection Agent
fails to perform any of its obligations under this Agreement, the Agent may
(but shall not be required to) itself perform, or cause performance of,
such obligation; and the Agent's costs and expenses incurred in connection
therewith shall be payable by the Seller (if the Collection Agent that
fails to so perform is the Seller or its designee).
(b) The Parent, the Seller and the applicable Originator shall
perform their respective obligations under the Contracts related to the
Pool Receivables to the same extent as if Receivable Interests had not been
sold and the exercise by the Agent on behalf of the Investors and the Banks
of their rights under this Agreement shall not release the Collection Agent
or the Seller from any of their duties or obligations with respect to any
Pool Receivables or related Contracts. Neither the Agent, the Investors nor
the Banks shall have any obligation or liability with respect to any Pool
Receivables or related Contracts, nor shall any of them be obligated to
perform the obligations of the Seller thereunder.
(c) In the event of any conflict between the provisions of
Article VI of this Agreement and Article VI of the Originator Purchase
Agreement, the provisions of this Agreement shall control.
SECTION 6.05. Further Actions Evidencing Purchases. The Parent,
the Seller and each Originator agrees from time to time, at its expense, to
promptly execute and deliver all further instruments and documents, and to
take all further actions, that may be reasonably necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or more fully
evidence the Receivable Interests purchased hereunder, or to enable the
Investors, the Banks or the Agent to exercise and enforce their respective
rights and remedies hereunder. Without limiting the foregoing, the Parent
and each Originator will upon the request of the Agent (i) execute and file
such financing or continuation statements, or amendments thereto, and such
other instruments and documents, that may be reasonably necessary or
desirable, or that the Agent may reasonably request, to perfect, protect or
evidence such Receivable Interests; and (ii) mark its master data
processing records evidencing such Pool Receivables with such a legend.
SECTION 6.06. Covenants of the Collection Agent and the
Originator.
(a) Audits. The Collection Agent will, from time to time during
regular business hours as requested by the Agent, permit the Agent, or its
agents or representatives (including independent public accountants, which
may be the Collection Agent's independent public accountants), (i) to
conduct periodic audits of the Receivables, the Related Security and the
related books and records and collections systems of the Collection Agent
(provided, that, the Agent may, in lieu of performing such audit, accept
the special procedures report of the Seller's independent public
accountants to the extent (i) the Agent and such accountants agree upon the
scope of such special procedures report and (ii) the results of such
special procedures report are reasonably satisfactory to the Agent,
otherwise the Agent shall have the right to audit not more often than twice
during any 12-month period (unless an Incipient Event of Termination or
Event of Termination has occurred and is continuing, in which case the
foregoing limitation shall not apply)), (ii) to examine and make copies of
and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the
control of the Collection Agent relating to Pool Receivables and the
Related Security, including, without limitation, the Contracts, and (iii)
to visit the offices and properties of the Collection Agent for the purpose
of examining such materials described in clause (ii) above, and to discuss
matters relating to Pool Receivables and the Related Security or the
Collection Agent's performance hereunder with any of the officers or
employees of the Collection Agent having knowledge of such matters.
(b) Change in Credit and Collection Policy. No Originator (nor
the Parent) will, without the prior written consent of the Agent, make any
change in the Credit and Collection Policy that would impair the
collectibility of any Pool Receivable or the ability of the Parent or any
Originator (if it is acting as Collection Agent) to perform its obligations
under this Agreement.
(c) Change in Accounts. Neither the Collection Agent nor the
Originator will (i) make any changes to Schedule I hereto or (ii) amend any
instruction to any Obligor (other than to provide a Notice to Insurers, in
form and substance acceptable to the Agent, to all Obligors who are not
Governmental Entities on or before the Obligor Notification Date) or any
Deposit Account Bank with respect to any Deposit Account without the prior
written consent of the Agent.
(d) Collections. (i) In the event that the Collection Agent or
any Originator receives any Collections, the Collection Agent or the
Originator, as the case may be, agrees to hold all such Collections in
trust and to deliver (via overnight courier or wire transfer, as the case
may be) such Collections to the Purchaser Lock-Box or deposit such
Collections to the Purchaser Deposit Account as soon as practicable, but in
no event later than one Business Day after receipt thereof.
(ii) In the event that any Affiliate of the Originator
receives any Collections, the Originator agrees to cause such
Affiliate to hold all such Collections in trust and to cause such
Affiliate to deliver (via overnight courier or wire transfer, as
the case may be) such Collections the to Purchaser Lock-Box or
deposit such Collections to the Purchaser Deposit Account as soon
as practicable, but in no event later than one Business Day after
receipt thereof.
(e) Deposits to Lock-Boxes or Deposit Accounts. Neither the
Collection Agent nor the Originator will deposit or otherwise credit, or
cause to be so deposited or credited, or consent or fail to object to any
such deposit or credit known to it, cash or cash proceeds other than
Collections to any Lock-Box or Deposit Account.
(f) Collections from PCS-originated Receivables. The Collection
Agent and the Originator shall segregate, or cause to be segregated, within
two Business Days of receipt thereof by PCS, all Collections from
PCS-originated Receivables which have been purchased by the Seller pursuant
to the Originator Purchase Agreement, from any other funds collected or
held by PCS, and shall deposit, or cause to be deposited, all such
Collections in the Purchaser Deposit Account on the day such Collections
are so segregated, all in a manner approved by the Agent in its sole
discretion.
SECTION 6.06A. Representations of the Collection Agent. The
Collection Agent hereby represents and warrants as follows:
(a) Lock Boxes, Deposit Accounts. Specified on Schedule I hereto
(as amended by the Collection Agent from time to time upon the prior
written consent of the Agent) are (i) the Lock Box numbers and (ii) the
names, addresses and ABA numbers of all the Deposit Account Banks, together
with the account numbers of the Deposit Accounts and the name of a contact
person at each Deposit Account Bank.
(b) Payment Instructions. The Collection Agent or the Seller has
instructed (i) on or before the New Closing Date, all Obligors to make all
payments to the Originator Deposit Account and the Originator Lock-Box and
(ii) on or before the Obligor Notification Date, all Obligors who are not
Governmental Entities, and only such Obligors to make all payments to the
Purchaser Deposit Account and the Purchaser Lock-Box, and all such
instructions have not been modified or revoked by the Seller (other than
the modification described in clause (ii) of this paragraph) and all such
instructions that have been given are in full force and effect.
(c) Weekly Reports and Seller Reports. Each Weekly Report, Seller
Report and E-Mail Report delivered by the Collection Agent pursuant to this
Agreement shall be true and correct in all material respects as of the date
such report or certificate is delivered.
SECTION 6.07. Indemnities by the Collection Agent. Without
limiting any other rights that the Agent, any Investor, any Bank or any of
their respective Affiliates (each, a "Special Indemnified Party") may have
hereunder or under applicable law, and in consideration of its appointment
as Collection Agent, the Collection Agent hereby agrees to indemnify each
Special Indemnified Party from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all of the foregoing
being collectively referred to as "Special Indemnified Amounts") arising
out of or resulting from any of the following (excluding, however, (a)
Special Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Special Indemnified Party, (b)
recourse for uncollectible Receivables or (c) any income or franchise taxes
or any other tax or fee measured by income incurred by such Special
Indemnified Party arising out of or as a result of this Agreement or the
ownership of Receivable Interests or in respect of any Receivable or any
Contract):
(i) any representation or warranty or statement made
or deemed made by the Collection Agent under or in connection with this
Agreement which shall have been incorrect in any material respect when
made;
(ii) the failure by the Collection Agent to comply
with any applicable law, rule or regulation with respect to any Pool
Receivable or Contract; or the failure of any Pool Receivable or
Contract to conform to any such applicable law, rule or regulation;
(iii) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable laws
with respect to any Receivables in, or purporting to be in, the
Receivables Pool, the Contracts and the Related Security and
Collections in respect thereof, whether at the time of any purchase or
reinvestment or at any subsequent time;
(iv) any failure of the Collection Agent to perform
its duties or obligations in accordance with the provisions of this
Agreement;
(v) the commingling of Collections of Pool
Receivables at any time by the Collection Agent with other funds;
(vi) any action or omission by the Collection Agent
reducing or impairing the rights of the Investors or the Banks with
respect to any Pool Receivable or the value of any Pool Receivable;
(vii) any Collection Agent Fees or other costs and
expenses payable to any replacement Collection Agent, to the extent in
excess of the Collection Agent Fees payable to the Collection Agent
hereunder; or
(viii)any claim brought by any Person other than a
Special Indemnified Party arising from any activity by the Collection
Agent or its Affiliates in servicing, administering or collecting any
Receivable.
SECTION 6.08. Establishment of Deposit Accounts.
(a) Purchaser Deposit Account. On or prior to the New Closing
Date, the Collection Agent, for the benefit of the Beneficiaries, shall
establish and maintain or cause to be established and maintained in the
name of the Seller, for the benefit, and under the sole dominion and
control of the Agent, with a financial institution acceptable to the Agent
a segregated non-interest bearing deposit account and a corresponding
lock-box (such lock-box being the "Purchaser Lock-Box", such account being
the "Purchaser Deposit Account" and such institution holding such account
being the "Purchaser Deposit Account Bank"), such account bearing a
designation clearly indicating that the funds deposited therein are held by
the Agent for the benefit of the Beneficiaries and entitled "Citicorp North
America, Inc., as Agent - Purchaser Deposit Account for the Rite Aid
Receivables Purchase Agreement". All Collections received in the Purchaser
Lock-Box shall immediately be deposited into the Purchaser Deposit Account.
The Agent shall possess all right, title and interest in and to all funds
from time to time on deposit in the Purchaser Deposit Account and in all
proceeds thereof. The Purchaser Deposit Account shall be under the sole
dominion and control of the Agent for the benefit of the Beneficiaries, and
neither the Seller, nor any Person claiming by, through or under the
Seller, shall have any right, title or interest in, or any right to
withdraw any amount from, the Purchaser Deposit Account. Except as
expressly provided in this Agreement, the Collection Agent agrees that it
shall have no right of set-off or banker's lien against, and no right to
otherwise deduct from, any funds held in the Purchaser Deposit Account for
any amount owed to it by any Beneficiary. After the Obligor Notification
Date, the Collection Agent shall cause Collections from Persons other than
Governmental Entities to be deposited directly into the Purchaser Deposit
Account on each Business Day. The Collection Agent shall cause all
Collections in the Originator Deposit Account to be deposited to the
Purchaser Deposit Account as promptly as possible and in any event no later
than the day on which such Collections become available funds in the
Originator Deposit Account. The Seller will require each Originator to
deliver (via overnight courier or wire transfer, as the case may be) any
Collections received by it to the Purchaser Lock-Box or deposit any
Collections received by it into the Purchaser Deposit Account, within one
Business Day following the Business Day on which such Collections are so
received. Notwithstanding the foregoing, if and to the extent that funds
that are not Collections are deposited into the Purchaser Deposit Account,
the Collection Agent shall direct in writing the Agent to withdraw such
funds from the Purchaser Deposit Account and deposit them in the Seller's
Account.
If, at any time, the institution holding the Purchaser Deposit
Account ceases to be acceptable to the Agent, the Collection Agent, upon
receiving such notice from the Agent, for the benefit of the Beneficiaries
shall within 15 Business Days (i) establish a new Purchaser Deposit Account
meeting the conditions specified above with a financial institution
acceptable to the Agent, (ii) transfer any cash and/or any investments held
therein or with respect thereto to such new Purchaser Deposit Account and
(iii) in the case of any new Purchaser Deposit Account, deliver to all
Deposit Account Banks instructions directing such Deposit Account Banks to
deposit all Collections into such new Purchaser Deposit Account, and from
the date such new Purchaser Deposit Account is established, it shall be the
"Purchaser Deposit Account".
(b) Collection Accounts for Collections from Governmental
Entities. On or prior to the New Closing Date, the Collection Agent shall
establish and maintain or cause to be established and maintained (i) a
lock-box to which (A) from the New Closing Date through the Obligor
Notification Date, all Obligors (other than Obligors of PCS- originated
Receivables ) and (B) from and after the Obligor Notification Date,
Obligors who are Governmental Entities, and only such Obligors, shall remit
payments with respect to any Receivable (such lock-box being a "Originator
Lock-Box") and (ii) in the name of the Seller, with an financial
institution acceptable to the Agent, an account ("Originator Deposit
Account") into which all Collections from received in such Originator
Lock-Box shall be deposited. From the New Closing Date through the Obligor
Notification Date all Obligors and from and after the Obligor Notification
Date Obligors who are Governmental Entities, shall be directed to remit
payments with respect to their Receivables to the Originator LockBox or
deposited into the Originator Deposit Account. The Originator Deposit
Account shall be under the sole dominion and control of the Seller. The
Seller shall give each Originator Deposit Account Bank a revocable
instruction to remit all Collections received in such account to the
Purchaser Deposit Account. The Collection Agent shall transfer Collections
received in the Originator Deposit Account to the Purchaser Deposit Account
in the manner set forth in Section 6.08(a). The Originator Deposit Account
shall be maintained with documentation and instructions in form and
substance satisfactory to the Agent. Such documentation shall provide,
among other things, that available amounts shall be immediately transferred
to the Purchaser Deposit Account.
(c) Changes to Deposit Accounts or Lock-Boxes. The Collection
Agent will neither (i) make any change in any Lock-Box numbers, the name,
address or ABA number of any Deposit Account Bank or the account number of
any Deposit Account from that set forth in Schedule I hereto nor (ii) amend
any instruction to any Obligor (other than the modification described in
clause (ii) of paragraph (b) of Section 6.06A) or any instruction to or
agreement with any Deposit Account Bank with respect to any Lock-Box or
Deposit Account unless the Agent shall have given its prior written consent
to such change or amendment.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur and be continuing:
(a) The Collection Agent (if the Parent, any Originator or any of
their respective Affiliates) (i) shall fail to perform or observe any term,
covenant or agreement under this Agreement (other than as referred to in
clause (ii) of this subsection (a)) and such failure shall remain
unremedied for twenty Business Days or (ii) shall fail to make when due any
payment or deposit to be made by it under this Agreement; or
(b) The Parent, the Seller or any Originator shall fail (i) to
transfer to the Agent when requested any rights, pursuant to this
Agreement, which the Parent, the Seller or any Originator then has as
Collection Agent, or (ii) to make any payment required under Section 2.04;
or
(c) Any representation or warranty made or deemed made by the
Seller, the Parent or the Collection Agent (or any of their respective
officers) under or in connection with this Agreement or any other
Transaction Document or any information or report (including, without
limitation, the Weekly Report, the Seller Report and the E-Mail Report)
delivered by the Seller or the Collection Agent pursuant to this Agreement
or any other Transaction Document shall prove to have been incorrect or
untrue in any material respect when made or deemed made or delivered and,
if capable of remedy, shall remain unremedied for 10 days after the date on
which any officer of the Seller, the Parent or the Collection Agent, as
applicable, shall have knowledge thereof; or
(d) (1) The Parent, the Seller or any Originator shall fail to
perform or observe any other term, covenant (other than Section 5.01(s)) or
agreement contained in this Agreement or any other Transaction Document on
its part to be performed or observed and such failure shall remain
unremedied for a period of twenty Business Days; provided, however, that,
the failure of the Seller to comply with Sections 5.01(d), (e), (f), (g),
(l), (m), (n), (o), (p), (q) and (r) hereof shall not be subject to the
foregoing cure period; or (2) The Seller shall fail to observe the covenant
contained in Section 5.01(s) and such failure to comply shall remain
unremedied by the earlier to occur of (x) the Business Day immediately
following the delivery of the Seller Report in accordance with the
provisions of this Agreement and (y) twenty Business Days; or
(e) The Seller or the Originator shall fail to pay any principal
of or premium or interest on any of its Debt which is outstanding in a
principal amount of at least $25,000,000 in the aggregate when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument (except, during the
Reporting Extension Period, if such event occurs or condition exists under
any Public Debt as a result of the failure of the Parent to file or deliver
financial statements or reports substantially the same as those described
in Sections 5.01(k)(i), 5.01(k)(ii) and 5.01(k)(xiv) above), if the effect
of such event or condition is to accelerate, or to permit the acceleration
of, the maturity of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such Debt shall be required to be made,
in each case prior to the stated maturity thereof; or
(f) Any purchase or any reinvestment pursuant to this Agreement
shall for any reason (other than pursuant to the terms hereof) cease to
create, or any Receivable Interest shall for any reason cease to be, a
valid and perfected first priority undivided percentage ownership interest
to the extent of the pertinent Receivable Interest in each applicable Pool
Receivable and the Related Security and Collections with respect thereto;
or the security interest created pursuant to Section 2.10 shall for any
reason cease to be a valid and perfected first priority security interest
in the collateral security referred to in that section; or
(g) The Parent, Seller or any Originator shall generally not pay
its respective debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Seller or the Originator seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not instituted
by it), either such proceeding shall remain undismissed or unstayed for a
period of 45 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or the Parent, Seller or any Originator shall take any corporate action to
authorize any of the actions set forth above in this subsection (g); or
(h) The Parent shall directly or indirectly, make or agree to
make any payment to or for the account of any holder of Public Debt, or any
trustee or other representative of any such holder, on account of principal
of, interest on or fees in respect of such Public Debt, except as required
by the terms of such Public Debt as in effect on the Amendment Closing
Date; or
(i) Either (x) the average of the Default Ratio for any
consecutive three Month period shall exceed 6%, (y) the average of the
Dilution Ratio for any consecutive three Month period shall exceed 5% or
(z) the average of the Loss-to-Liquidation Ratio for any consecutive three
Month period shall exceed 1.5%; or
(j) The Net Receivables Pool Balance shall be less than the Required
Weekly Net Receivables Pool Balance upon the termination of a Cure Period; or
(k) There shall have occurred any material adverse change in the
financial condition or operations of the Parent, the Seller or any
Originator since August 28, 1999; or there shall have occurred any event
which may materially adversely affect the collectibility of the Receivables
Pool or the ability of the Seller or the Collection Agent to collect Pool
Receivables or otherwise perform its obligations under this Agreement; or
(l) An "Event of Termination" or "Facility Termination Date"
shall occur under the Originator Purchase Agreement, or the Originator
Purchase Agreement shall cease to be in full force and effect; or
(m) All of the outstanding equity interests of the Seller shall
cease to be owned, directly or indirectly, by the Originators; or
(n) The Parent shall (i) allow aggregate amount of Consolidated
Capital Expenditures for any period set forth below to exceed the amount
set forth below opposite such period:
FISCAL YEAR ENDING ON OR
CLOSEST TO AMOUNT
February 29, 2000 $620,000,000
February 28, 2001 $295,000,000
(ii) at no time shall the ratio of (a) Consolidated Debt at
such time to (b) Total Capital at such time, exceed 0.695; provided
that upon any sale of the capital stock of PCS, such maximum ratio
shall be reset at the level which produces the result that the amount
of additional Debt that the Parent may incur within the limits of this
ratio immediately after giving effect to such sale and the repayment of
any Debt required in connection therewith is equal to the amount of
additional Debt that the Parent could incur within the limits of this
ratio immediately before giving effect to such sale and the repayment
of any Debt required in connection therewith;
(iii) the Parent will not, and will not permit any of its
Subsidiaries to, incur or at any time be liable with respect to any
Debt except:
(A) Debt under the Amended Credit Agreement;
(B) Debt outstanding on December 2, 1999;
(C) Debt incurred to refinance Debt referred to in clause
(A) or clause (B) above, provided that the amount thereof that is
at the time outstanding or committed is not increased and the
maturity thereof is not shortened; and
(D) Debt not permitted by clauses (A), (B) or (C) above in
an aggregate principal amount at any time outstanding not to
exceed $25,000,000;
(iv) at no time during any period set forth below shall the
Fixed Charge Coverage Ratio be less than the ratio set forth below
opposite such period:
FISCAL QUARTER ENDING
ON OR CLOSEST TO RATIO
November 30, 1999 1.35
February 29, 2000 1.30
May 31, 2000 and
thereafter 1.25
; or
(o) The Parent Guaranty shall cease to be in full force and
effect;
then, and in any such event, any or all of the following actions may be
taken by notice to the Seller: (x) the Investors holding a majority of the
outstanding Receivable Interests at such time or the Agent may declare the
Facility Termination Date to have occurred (in which case the Facility
Termination Date shall be deemed to have occurred), (y) the Agent may
declare the Commitment Termination Date to have occurred (in which case the
Commitment Termination Date shall be deemed to have occurred), and (z)
without limiting any right under this Agreement to replace the Collection
Agent, the Agent may designate another Person to succeed the Parent as the
Collection Agent; provided, that, automatically upon the occurrence of any
event (without any requirement for the passage of time or the giving of
notice) described in paragraph (g) of this Section 7.01, the Facility
Termination Date and the Commitment Termination Date shall occur, the
Parent (if it is then serving as the Collection Agent) shall cease to be
the Collection Agent, and the Agent or its designee shall become the
Collection Agent. Upon any such declaration or designation or upon such
automatic termination, the Investors, the Banks and the Agent shall have,
in addition to the rights and remedies which they may have under this
Agreement, all other rights and remedies provided after default under the
UCC and under other applicable law, which rights and remedies shall be
cumulative.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Investor and each
Bank hereby appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them as Agent under or in connection
with this Agreement (including, without limitation, the Agent's servicing,
administering or collecting Pool Receivables as Collection Agent), except
for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Agent: (a) may consult with
legal counsel (including counsel for the Seller and the Collection Agent),
independent certified public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (b) makes no warranty or representation to any Investor or Bank
(whether written or oral) and shall not be responsible to any Investor or
Bank for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (c) shall not have any
duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement on the part of the
Seller or the Collection Agent or to inspect the property (including the
books and records) of the Seller or the Collection Agent; (d) shall not be
responsible to any Investor or Bank for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto;
and (e) shall incur no liability under or in respect of this Agreement by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by telecopier or
telex) believed by it to be genuine and signed or sent by the proper party
or parties.
SECTION 8.03. CNAI and Affiliates. The obligation of Citibank to
purchase Receivable Interests under this Agreement may be satisfied by CNAI
or any of its Affiliates. With respect to any Receivable Interest or
interest therein owned by it, CNAI shall have the same rights and powers
under this agreement as any Bank and may exercise the same as though it
were not the Agent. CNAI and any of its Affiliates may generally engage in
any kind of business with the Seller, the Collection Agent or any Obligor,
any of their respective Affiliates and any Person who may do business with
or own securities of the Seller, the Collection Agent or any Obligor or any
of their respective Affiliates, all as if CNAI were not the Agent and
without any duty to account therefor to the Investors or the Banks.
SECTION 8.04. Bank's Purchase Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent, any of its
Affiliates or any other Bank and based on such documents and information as
it has deemed appropriate, made its own evaluation and decision to enter
into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent, any of its Affiliates or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or
not taking action under this Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Indemnities by the Seller. Without limiting any
other rights that the Agent, the Investors, the Banks or any of their
respective Affiliates (each, an "Indemnified Party") may have hereunder or
under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all of the foregoing
being collectively referred to as "Indemnified Amounts") arising out of or
resulting from this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Receivable Interests or in respect of any
Receivable or any Contract, excluding, however, (a) Indemnified Amounts to
the extent resulting from gross negligence or willful misconduct on the
part of such Indemnified Party, (b) recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Receivables or
(c) any income or franchise taxes incurred by such Indemnified Party
arising out of or as a result of this Agreement or the ownership of
Receivable Interests or in respect of any Receivable or any Contract.
Without limiting or being limited by the foregoing, the Seller shall pay on
demand to each Indemnified Party any and all amounts necessary to indemnify
such Indemnified Party from and against any and all Indemnified Amounts
relating to or resulting from any of the following:
(i) the creation of an undivided percentage ownership
interest in any Receivable which purports to be part of the Net
Receivables Pool Balance but which is not at the date of the
creation of such interest an Eligible Receivable or which
thereafter ceases to be an Eligible Receivable;
(ii) any representation or warranty or statement made
or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement and the other Transaction
Documents which shall have been incorrect in any material respect
when made;
(iii) the failure by the Parent, the Seller or any
Originator to comply with any applicable law, rule or regulation
with respect to any Pool Receivable or the related Contract; or
the failure of any Pool Receivable or the related Contract to
conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Investors or the
Banks, as the case may be, (a) a perfected undivided percentage
ownership interest, to the extent of each Receivable Interest, in
the Receivables in, or purporting to be in, the Receivables Pool
and the Related Security and Collections in respect thereof, or
(b) a perfected security interest as provided in Section 2.10, in
each case free and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables in, or purporting
to be in, the Receivables Pool and the Related Security and
Collections in respect thereof, whether at the time of any
purchase or reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other
than discharge in bankruptcy of the Obligor) of the Obligor to
the payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense based
on such Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim resulting
from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such
merchandise or services or relating to collection activities with
respect to such Receivable (if such collection activities were
performed by the Seller or any of its Affiliates acting as
Collection Agent);
(vii) any failure of the Seller to perform its duties
or obligations in accordance with the provisions hereof or to
perform its duties or obligations under the Contracts;
(viii)any products liability or other claim arising
out of or in connection with merchandise, insurance or services
which are the subject of any Contract;
(ix) the commingling of Collections of Pool Receivables
at any time with other funds;
(x) any investigation, litigation or proceeding
related to this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Receivable Interests or in
respect of any Receivable or Related Security or Contract;
(xi) any failure of the Seller to comply with its
covenants contained in Section 5.01; or
(xii) any claim brought by any Person other than an
Indemnified Party arising from any activity by the Seller or any
Affiliate of the Seller in servicing, administering or collecting
any Receivable.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Seller
therefrom shall be effective unless in a writing signed by the Agent, as
agent for the Investors and the Banks (and, in the case of any amendment,
also signed by the Seller), and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or
consent shall, unless in writing and signed by the Collection Agent in
addition to the Agent, affect the rights or duties of the Collection Agent
under this Agreement. No failure on the part of the Investors, the Banks or
the Agent to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right.
SECTION 10.02. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and faxed or delivered, to each party
hereto, at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. Notices and communications by
facsimile shall be effective when sent (and shall be followed by hard copy
sent by regular mail), and notices and communications sent by other means
shall be effective when received.
SECTION 10.03. Assignability. (a) This Agreement and the
Investors' rights and obligations herein (including ownership of each
Receivable Interest) shall be assignable by the Investors and their
successors and assigns. Each assignor of a Receivable Interest or any
interest therein shall notify the Agent and the Seller of any such
assignment. Each assignor of a Receivable Interest or any interest therein
may, in connection with the assignment or participation, disclose to the
assignee or participant any information relating to the Seller, including
the Receivables, furnished to such assignor by or on behalf of the Seller
or by the Agent; provided, that, prior to any such disclosure, the
assignee or participant agrees to preserve the confidentiality of any
confidential information relating to the Seller received by it from any of
the foregoing entities.
(b) Each Bank may assign to any Eligible Assignee or to any other
Bank all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Bank Commitment and
any Receivable Interests or interests therein owned by it); provided,
however, a Bank shall not make an assignment hereunder prior to the
occurrence of an Event of Termination if, solely as a result of such
assignment, the assignee would be entitled to request compensation pursuant
to Section 2.08 or 2.09 hereof immediately following such assignment in an
amount greater than that to which the assignor Bank was entitled
immediately prior to such assignment (unless such potential assignee waived
any right with respect to any greater amount available to such Person). The
parties to each such assignment shall execute and deliver to the Agent an
Assignment and Acceptance. In addition, Citibank or any of its Affiliates
may assign any of its rights (including, without limitation, rights to
payment of Capital and Yield) under this Agreement to any Federal Reserve
Bank without notice to or consent of the Seller or the Agent.
(c) This Agreement and the rights and obligations of the Agent
herein shall be assignable by the Agent and its successors and assigns.
(d) The Seller may not assign its rights or obligations hereunder
or any interest herein without the prior written consent of the Agent.
SECTION 10.04. Costs, Expenses and Taxes. (a) In addition to the
rights of indemnification granted under Section 9.01 hereof, the Seller
agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic
auditing and the other activities contemplated in Section 5.02 of this
Agreement, any Asset Purchase Agreement and the other documents and
agreements to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, CNAI,
CAFCO, CRC, Citibank and their respective Affiliates with respect thereto
and with respect to advising the Agent, CNAI, CAFCO, CRC, Citibank and
their respective Affiliates as to their rights and remedies under this
Agreement, and all costs and expenses, if any (including reasonable counsel
fees and expenses), of the Agent, CNAI, the Investors, the Banks and their
respective Affiliates, in connection with the enforcement of this Agreement
and the other documents and agreements to be delivered hereunder.
(b) In addition, the Seller shall pay (i) any and all commissions
of placement agents and dealers in respect of commercial paper notes issued
to fund the purchase or maintenance of any Receivable Interest, (ii) any
and all costs and expenses of any issuing and paying agent or other Person
responsible for the administration of CAFCO's and CRC's commercial paper
program in connection with the preparation, completion, issuance, delivery
or payment of commercial paper notes issued to fund the purchase or
maintenance of any Receivable Interest, and (iii) any and all stamp and
other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements
to be delivered hereunder, and agrees to save each Indemnified Party
harmless from and against any liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees.
SECTION 10.05. No Proceedings. Each of the Seller, the Agent, the
Collection Agent, each Investor, each Bank, each assignee of a Receivable
Interest or any interest therein and each entity which enters into a
commitment to purchase Receivable Interests or interests therein hereby
agrees that it will not institute against CAFCO or CRC any proceeding of
the type referred to in Section 7.01(g) so long as any commercial paper or
other senior indebtedness issued by CAFCO or CRC, as applicable, shall be
outstanding or there shall not have elapsed one year plus one day since the
last day on which any such commercial paper or other senior indebtedness
shall have been outstanding.
SECTION 10.06. Confidentiality. (a) Unless otherwise required by
applicable law, the Parent, the Seller and each Originator agrees to
maintain the confidentiality (and to cause their respective officers,
directors, employees, agents and representatives to maintain the
confidentiality) of this Agreement in communications with third parties and
otherwise; provided, however, this Agreement may be disclosed to (i) to
such of the Parent's, Seller's and Originators' officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the transactions contemplated
by this Agreement or the administration of this Agreement or the other
Transaction Documents (subject to confidentiality obligations equivalent to
those set forth herein), (ii) third parties to the extent such disclosure
is made pursuant to a written agreement of confidentiality in form and
substance reasonably satisfactory to the Agent, and (iii) the Seller's
legal counsel and auditors if they agree to hold it confidential.
(b) Unless otherwise required by applicable law, the Agent, the
Investors and the Banks agree to keep confidential (and to cause their
respective officers, directors, employees, agents and representatives to
keep confidential) all non-public information, materials and documents
furnished to the Agent or any Lender (the "Information"). Notwithstanding
the foregoing, the Agent, each Investor and each Bank shall be permitted to
disclose Information (i) to such of its officers, directors, employees,
agents and representatives as need to know such Information in connection
with its participation in any of the transactions contemplated by this
Agreement or the administration of this Agreement or the other Transaction
Documents (subject to confidentiality obligations equivalent to those set
forth herein); (ii) to the extent required by applicable laws and
regulations or by any subpoena or similar legal process, or requested by
any governmental agency or authority; (iii) to the extent such Information
(A) becomes publicly available other than as a result of a breach of this
Agreement, (B) becomes available to the Agent, such Investor or such Bank
on a non-confidential basis from a source other than the Seller, the
Parent, any Originator or any of their respective subsidiaries or (C) was
available to the Agent, such Investor or such Bank on a non-confidential
basis prior to its disclosure to the Agent, such Investor or such Bank by
the Seller, the Parent, any Originator or any of their respective
subsidiaries; or (iv) to the extent that any of the Seller, the Parent, any
Originator or any of their respective subsidiaries shall have consented to
such disclosure in writing.
SECTION 10.07. Patient Confidentiality. The Agent hereby agrees
on behalf of itself, the Investors and the Banks and any of their designees
or assigns to, and shall take all reasonable steps to, comply with all
applicable state or federal laws or administrative regulations regarding
the confidentiality of patient records and patient medical information it
receives in connection with the transactions described in this Agreement.
SECTION 10.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT
TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE INVESTORS AND THE
BANKS IN THE RECEIVABLES, THE ORIGINATOR PURCHASE AGREEMENT, OR REMEDIES
HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
SECTION 10.09. No Novation. The parties hereto acknowledge and
agree that the grant of the security interest hereunder shall not affect
the validity of the security interest granted under the Original
Receivables Purchase Agreement, which security interest shall, at all
times, continue to be attached, perfected and enforceable pursuant to the
terms of the Original Receivables Purchase Agreement as amended and
restated herein. The parties hereto further acknowledge and agree that the
execution, delivery or effectiveness of this Agreement shall not extinguish
the obligations of the Seller under the Original Receivables Purchase
Agreement or discharge or release the lien or priority of any security
therefor. Nothing herein contained shall be construed as a substitution or
novation of the obligations outstanding under the Original Receivables
Purchase Agreement, which shall remain in full force and effect, except as
modified hereby.
SECTION 10.10. Execution in Counterparts. This Agreement 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 when taken together
shall constitute one and the same agreement.
SECTION 10.11. Survival of Termination. The provisions of
Sections 2.08, 2.09, 6.07, 9.01, 10.04, 10.05 and 10.06 shall survive any
termination of this Agreement.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties have caused this Amended and
Restated Receivables Purchase Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above written.
SELLER: RITE AID FUNDING LLC
By:________________________________
Name:
Title:
30 Hunter Lane
Camp Hill, PA 17011
Attention:
Facsimile No:
INVESTOR: CORPORATE ASSET FUNDING
COMPANY, INC.
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By:____________________________
Name:
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: U.S. Securitization
Facsimile No. 914-899-7890
INVESTOR: CORPORATE RECEIVABLES CORPORATION
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By:________________________
Name:
Vice President
450 Mamaroneck Avenue
Harrison, NY 10528
Attention: U.S. Securitization
Facsimile No. 914-899-7890
AGENT: CITICORP NORTH AMERICA, INC., as Agent
By:___________________________
Name:
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: U.S. Securitization
Facsimile No. 914-899-7890
BANK: CITIBANK, N.A.
By:___________________________
Name:
Title: Vice President
Percentage Interest: 100%
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Facsimile No. 914-899-7890
PARENT AND RITE AID CORPORATION
COLLECTION AGENT:
By:___________________________
Name:
Title:
30 Hunter Lane
Camp Hill, PA 17011
Attn:
Facsimile No:
RITE AID CORPORATION RESTRICTED
STOCK AND STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT, made as of the 5th day of December, 1999 (the
"Effective Date"), by and between (the "Company") and Robert G. Miller (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an
employment agreement, dated as of the Effective Date (the "Employment
Agreement"), pursuant to which the Executive will serve as Chairman and
Chief Executive Officer of the Company; and
WHEREAS, the Employment Agreement provides that, effective as
of the Effective Date, the Company shall grant to the Executive the Option
and the Restricted Stock (as hereinafter defined), subject to the terms and
conditions of this Agreement and the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Option and Restricted Stock . (a) The Company
hereby grants to the Executive the right and option (the "Option") to
purchase, on the terms and conditions set forth herein, subject however to
the acceleration and exercise provisions of Section 5 of the Employment
Agreement and all other applicable provisions of the Employment Agreement,
all or any part of an aggregate of 3,000,000 shares of the Company's common
stock, par value $1.00 per share ("Common Stock") (such Common Stock, as
adjusted hereunder, being referred to as the "Option Shares"). The purchase
price per share of the Option Shares shall be equal to the lesser of (A)
the average of the closing prices of the Common Stock on the New York Stock
Exchange ("NYSE") over the 20 consecutive trading days immediately
preceding the Effective Date and (B) the closing price of the Common Stock
on the NYSE on the Effective Date (or, if the Effective Date is not a
trading day, the trading day immediately preceding the Effective Date)
(such price, as adjusted hereunder, being referred to as the "Option
Price"). The number of Option Shares and the Option Price shall be subject
to adjustment as provided in Section 8 hereof. Subject to earlier
termination as provided in the Employment Agreement, the term of the Option
(the "Term") shall commence on the Effective Date and terminate on the
tenth anniversary of the Effective Date. The Company shall at all times
during the Term of the Option reserve for issuance a sufficient number of
shares of Common Stock to permit exercise of the Option in full.
(b) The Company hereby grants to the Executive, on the
terms and conditions set forth herein, subject however to the acceleration
and forfeiture provisions of the Employment Agreement and all other
applicable provisions of the Employment Agreement, an aggregate of 600,000
shares of restricted Common Stock (the "Restricted Stock"). The Restricted
Stock and any interest therein, may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, prior to the lapse of restrictions provided
for in Section 3 hereof. Except as otherwise provided herein, the Executive
shall possess all incidents of ownership of the Restricted Stock granted
hereunder, including the right to receive dividends with respect to such
Restricted Stock and the right to vote such Restricted Stock.
(c) The Company represents and warrants to Executive that
on or prior to the Effective Date all actions necessary to exempt the grant
of the Option and the Restricted Stock under Rule 16b-3(d) under the
Securities Exchange Act of 1934, as amended, have been taken by the
Company.
(d) The Company represents and warrants to Executive that
the issuance of the Option and the Restricted Stock will be made pursuant
to an available exemption from registration and qualification under all
applicable federal and state securities or Blue Sky laws.
2. Registration of Option Shares and Restricted Stock; Listing
Obligations. (a) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the resale of the Restricted Stock to be registered under the
Securities Act of 1933, as amended (the "Securities Act") and registered or
qualified under applicable state securities laws, so that the Common Stock
issuable upon exercise of the Option and the Restricted Stock shall be
freely tradeable. The Company shall thereafter use its best efforts to
maintain the continuing effectiveness of such registration and
qualification for so long as the Executive or any Permitted Transferee (as
hereinafter defined) holds (i) the Option (or any portion thereof), (ii)
any of the Option Shares acquired upon exercise thereof or (iii) any of the
Restricted Stock (whether or not the restrictions thereon have lapsed), or
until such earlier date as counsel to the Company, reasonably acceptable to
Executive, provides the Company a written opinion (a copy of which shall
promptly be provided to Executive) satisfactory to Executive to the effect
that all Option Shares theretofore issued and subsequently issuable upon
exercise of the Option and all shares of Restricted Stock may otherwise be
freely sold under United States federal and other applicable law without
regard to volume limitations or other conditions.
(b) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the Restricted Stock to be listed on all exchanges on which the
Common Stock is from time to time listed. The Company shall thereafter use
its best efforts to maintain the continued listing of such Common Stock and
Restricted Stock for so long as the Executive or any Permitted Transferee
holds (i) the Option (or any portion thereof), (ii) any of the Option
Shares acquired upon exercise thereof or (iii) any of the Restricted Stock
(whether or not the restrictions thereon have lapsed).
3. Vesting and Exercisability.
(a) Regular Vesting Schedule. Subject to the provisions
of this Agreement and except as provided in Section 5 of the Employment
Agreement, the Option shall become vested and exercisable, and all
restrictions shall lapse with respect to the Restricted Stock, in each
case, in thirty-six (36) equal monthly installments commencing on the date
which is one month following the Effective Date.
(b) Acceleration of Vesting and Lapse of Restriction.
Upon the occurrence of a Change in Control of the Company (as defined in
Appendix A hereto), the Option shall become immediately vested and fully
exercisable and all restrictions on the transfer of the Restricted Stock
shall immediately lapse in full.
(c) Except as provided in Section 5 of the Employment
Agreement, any portion of the Option that has become vested and exercisable
shall remain vested and exercisable until the end of the full ten-year
Term of the Option.
(d) Certain Definitions. For purposes of this Agreement,
all capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to such terms under the Employment Agreement.
4. Method of Exercising Option; Gross-Up; Section 83(b)
Election.
(a) The Option may be exercised from time to time, in
whole or in part, as to that portion of the Option that has from time to
time become vested and exercisable. Full payment for the Option Shares
purchased shall be made at the time of any exercise under this Agreement.
The option price shall be payable to the Company either (i) in United
States dollars in cash or by check, bank draft, or postal or express money
order, or (ii) through the delivery of shares of Common Stock owned by the
Executive for at least six months prior to the date of exercise having a
Fair Market Value equal to the full Option Price, or (iii) by a combination
of (i) and (ii) above. For purposes of this Agreement "Fair Market Value"
shall mean the closing price of the Common Stock on the NYSE on the trading
day immediately prior to the date of exercise or if the Common Stock is not
then listed on the NYSE, Fair Market Value shall be as determined pursuant
to good faith negotiations between the Executive and the Company. At the
Option holder's discretion, subject to reasonable procedures adopted by the
Company, the Option may also be exercised on a cashless basis through a
broker, whereby irrevocable instructions are delivered to the broker to
sell that number of shares equal in value to the aggregate Option Price of
the Option Shares with respect to which the Option is then being exercised
and pay the proceeds to the Company. Subject to the terms and conditions
hereof, the Option shall be exercisable by notice to the Company on the
form provided by the Company upon request of the Executive. In the event
the Option is being exercised by any person or persons other than the
Executive, the notice shall be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise such right
under this Agreement.
(b) At the time of exercise of the Option, the Executive
shall pay to the Company such amount as may be necessary to satisfy the
Company's obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise (i) by tendering to the Company a
check in the amount of such withholding, (ii) by electing to have withheld
upon exercise shares of Common Stock having an aggregate Fair Market Value
equal to the amount of such tax withholding or (iii) by a combination of
(i) and (ii).
(c) The Executive hereby agrees to make an election
pursuant to Section 83(b) of the Code (the "Election") within the thirty
(30) day period commencing on the Effective Date to include the value of
the Restricted Stock as of the Effective Date in the Executive's gross
income for federal income tax purposes. In connection with the Election,
the Company shall, within the time period prescribed by law for withholding
and/or payment of estimated or other taxes by reason of such inclusion,
make an additional payment (the "Restricted Stock Gross-Up Payment") to the
Executive in an amount such that, after giving effect to the imposition of
all applicable federal, state and local income, employment and any other
taxes or impositions on such payment (the "Aggregate Tax"), the Executive
retains a net amount equal to the aggregate amount of all federal, state
and local income, employment and any other taxes or impositions incurred by
Executive by reason of such inclusion. For purposes of determining the
amount of the Restricted Stock Gross-Up Payment, Executive shall be deemed
to pay federal income, employment and any other tax for his taxable year in
which such inclusion occurs and his taxable year in which such Restricted
Stock Gross-Up Payment is made at the highest applicable marginal rate of
federal, state and local income, employment or other applicable taxation in
such year. The amount of the Restricted Stock Gross-Up Payment shall be
determined by the Company's outside auditor, who will timely furnish the
Company and Executive with a written statement (together with full
supporting and other relevant material) setting forth the amount of the
required Restricted Stock Gross-Up Payment. The Executive shall promptly
notify the Company of his filing of the Election. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Aggregate Tax is more or less than was initially taken
into account hereunder, then each of the Company and the Executive agree to
pay to the other party, as applicable, an amount (the "Make Up Amount")
such that the amount of the Restricted Stock Gross-Up Payment finally
retained by the Executive after giving effect to the Make Up Amount is
equal to the amount contemplated by the second sentence of this paragraph (c).
5. Issuance of Option Shares. As promptly as practicable after
receipt of such written notification of exercise and full payment of the
Option Price and any required tax withholding, the Company shall issue or
transfer to the Executive the number of Option Shares with respect to which
the Option has been exercised (less shares withheld in satisfaction of tax
withholding obligations, if any), and shall deliver to the Executive a
certificate or certificates therefor, registered in the Executive's name.
6. Non-Transferability of Option. The Option is not
transferable by the Executive otherwise than (i) to or from a Permitted
Transferee, (ii) to a designated beneficiary upon death or (iii) by will or
the laws of descent and distribution, and is exercisable during the
Executive's lifetime only by the Executive or a Permitted Transferee (or,
in the event of the Executive's or a Permitted Transferee's adjudicated
incapacity, the Executive's or Permitted Transferee's personal
representative). No other assignment or transfer of all or any part of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the assignee
or transferee any interest or right herein whatsoever and no assignment or
transfer of all or any part of the Option to a Permitted Transferee shall
be given effect unless such Permitted Transferee acknowledges in a writing
satisfactory to the Company that the Option (and any Option Shares acquired
pursuant thereto) remains subject to the provisions of this Agreement and
the Employment Agreement. For purposes of this Agreement, "Permitted
Transferee" shall mean (i) any member of Executive's immediate family and
(ii) any living trust or other entity established by Executive or any
Permitted Transferee for estate planning purposes. By way of clarification,
transfers of the Option shall be permitted from any Permitted Transferee to
Executive or between Permitted Transferees.
7. No Rights as Shareholder with Respect to Option. Neither the
Executive nor any transferee of the Option shall have any of the rights of
a shareholder with respect to any Option Shares until such time as the
Option shall have been duly exercised as provided herein, and no adjustment
shall be made for cash distributions in respect of such Option Shares for
which the record date is prior to such date.
8. Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than regular cash dividends, the compensation committee
(the "Compensation Committee") of the Board of Directors of the Company
shall make such substitutions in or adjustments to the number and/or kind
of shares of Common Stock or other property subject to, and the Option
Price of, the Option as shall be equitable under the circumstances of such
change.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Executive hereby agrees that Executive shall not exercise the
Option, and that the Company shall not be obligated to issue or transfer
any shares to the Executive hereunder, if the exercise thereof or the
issuance or transfer of such shares shall constitute a violation of any
provisions of any applicable law or regulation of any governmental
authority; provided that nothing in this Section 9 shall be deemed to limit
the Company's liability hereunder for any act or omission which would cause
the issuance or transfer of such shares to give rise to such a violation.
10. Acquisition for Purpose of Investment. The Executive hereby
represents and warrants that the Restricted Stock and any Option Shares
acquired pursuant to the exercise of the Option are or will be acquired for
his own account solely for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Securities Act"). The
Executive hereby acknowledges that to the extent that from time to time the
Restricted Stock and Option Shares have not been registered under the
Securities Act, such Restricted Stock and Option Shares may be sold or
disposed of by the Executive in the absence of such registration only
pursuant to an exemption from the registration requirements of the
Securities Act, provided that nothing in this Section 10 shall be deemed to
limit the Company's obligations under Section 2.
11. Legend; Lapse of Restrictions; Forfeiture.
(a) The Executive acknowledges that the sale, transfer
and other disposition of the Restricted Stock are subject to the
restrictions set forth in Section 1(b) hereof. The Executive agrees to the
placement on certificates representing the Restricted Stock of a legend
(the "Legend"), substantially as set forth below:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions, including forfeiture
provisions and restrictions against transfer (the
"Restrictions"), contained in a Restricted Stock and Stock
Option Award Agreement and an Employment Agreement, each dated
as of December 4, 1999, between the registered owner and Rite
Aid Corporation. Any attempt to dispose of these shares in
contravention of the Restrictions, including by way of sale,
assignment, transfer, pledge, hypothecation or otherwise, shall
be null and void and without effect.
(b) Upon each lapse of restrictions relating to the
shares of Restricted Stock granted hereunder, the Company shall promptly
issue to the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(a), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed. If certificates representing such Restricted Stock shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
(c) Until such time as the Company has caused the Option
Shares and Restricted Stock to be registered under the Securities Act, each
share of Restricted Stock delivered to the Executive and each Option Share
acquired pursuant to the exercise of the Option shall bear an additional
legend, substantially as set forth below:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). These securities have been acquired for
investment and not with a view toward distribution or resale,
and may not be sold, offered for sale, transferred, assigned or
pledged in the absence of an effective registration statement
for such shares under the Securities Act and all applicable
state securities laws or an exemption from such registration
requirements.
(d) Upon the registration of the Option Shares and
Restricted Stock, as the case may be, the Company shall promptly issue to
the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(c), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed or Option Shares acquired pursuant to the exercise of the Option. If
certificates representing such Restricted Stock or Option Shares shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
12. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier addressed
as follows:
If to the Executive:
Robert G. Miller
0305 SW Montgomery #F508
Portland, OR 07201
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this Section 12. Notices and communications shall be
effective when actually received by the addressee.
13. Successors. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto. No rights
or obligations of the Company under this Agreement may be assigned or
transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any successor to its
business and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law or otherwise.
14. No Right to Employment. The granting of the Option and the
Restricted Stock shall not be construed as granting Executive any right to
continued employment by the Company or its subsidiaries. Subject to the
terms of the Employment Agreement, the right of the Company and its
subsidiaries to terminate Executive's employment at any time and for any
reason, is specifically reserved.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules relating to conflicts of laws.
16. Entire Agreement. This Agreement and the relevant
provisions of the Employment Agreement comprise the entire agreement
between the parties hereto with respect to the subject matter hereof, and
may be modified or terminated only by the written consent of the parties
hereto.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
_____________________________
Name: Leonard Green
Title: Chairman of the Board
_____________________________
Robert G. Miller
APPENDIX A
A "Change in Control of the Company" shall be deemed to have
occurred if, as the result of a single transaction or a series of
transactions, the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding voting securities; or
(2) Incumbent Directors cease at any time and for any
reason to constitute a majority of the number of directors then
serving on the Board. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the Effective Date or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors
at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors to the
Board); or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation as appropriate, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(4) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under
Section 12 of the
Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
RITE AID CORPORATION RESTRICTED
STOCK AND STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT, made as of the 5th day of December, 1999 (the
"Effective Date"), by and between (the "Company") and Mary F. Sammons (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an
employment agreement, dated as of the Effective Date (the "Employment
Agreement"), pursuant to which the Executive will serve as President and
Chief Operating Officer of the Company; and
WHEREAS, the Employment Agreement provides that, effective as
of the Effective Date, the Company shall grant to the Executive the Option
and the Restricted Stock (as hereinafter defined), subject to the terms and
conditions of this Agreement and the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Option and Restricted Stock . (a) The Company
hereby grants to the Executive the right and option (the "Option") to
purchase, on the terms and conditions set forth herein, subject however to
the acceleration and exercise provisions of Section 5 of the Employment
Agreement and all other applicable provisions of the Employment Agreement,
all or any part of an aggregate of 2,000,000 shares of the Company's common
stock, par value $1.00 per share ("Common Stock") (such Common Stock, as
adjusted hereunder, being referred to as the "Option Shares"). The purchase
price per share of the Option Shares shall be equal to the lesser of (A)
the average of the closing prices of the Common Stock on the New York Stock
Exchange ("NYSE") over the 20 consecutive trading days immediately
preceding the Effective Date and (B) the closing price of the Common Stock
on the NYSE on the Effective Date (or, if the Effective Date is not a
trading day, the trading day immediately preceding the Effective Date)
(such price, as adjusted hereunder, being referred to as the "Option
Price"). The number of Option Shares and the Option Price shall be subject
to adjustment as provided in Section 8 hereof. Subject to earlier
termination as provided in the Employment Agreement, the term of the Option
(the "Term") shall commence on the Effective Date and terminate on the
tenth anniversary of the Effective Date. The Company shall at all times
during the Term of the Option reserve for issuance a sufficient number of
shares of Common Stock to permit exercise of the Option in full.
(b) The Company hereby grants to the Executive, on the
terms and conditions set forth herein, subject however to the acceleration
and forfeiture provisions of the Employment Agreement and all other
applicable provisions of the Employment Agreement, an aggregate of 200,000
shares of restricted Common Stock (the "Restricted Stock"). The Restricted
Stock and any interest therein, may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, prior to the lapse of restrictions provided
for in Section 3 hereof. Except as otherwise provided herein, the Executive
shall possess all incidents of ownership of the Restricted Stock granted
hereunder, including the right to receive dividends with respect to such
Restricted Stock and the right to vote such Restricted Stock.
(c) The Company represents and warrants to Executive that
on or prior to the Effective Date all actions necessary to exempt the grant
of the Option and the Restricted Stock under Rule 16b-3(d) under the
Securities Exchange Act of 1934, as amended, have been taken by the
Company.
(d) The Company represents and warrants to Executive that
the issuance of the Option and the Restricted Stock will be made pursuant
to an available exemption from registration and qualification under all
applicable federal and state securities or Blue Sky laws.
2. Registration of Option Shares and Restricted Stock; Listing
Obligations. (a) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the resale of the Restricted Stock to be registered under the
Securities Act of 1933, as amended (the "Securities Act") and registered or
qualified under applicable state securities laws, so that the Common Stock
issuable upon exercise of the Option and the Restricted Stock shall be
freely tradeable. The Company shall thereafter use its best efforts to
maintain the continuing effectiveness of such registration and
qualification for so long as the Executive or any Permitted Transferee (as
hereinafter defined) holds (i) the Option (or any portion thereof), (ii)
any of the Option Shares acquired upon exercise thereof or (iii) any of the
Restricted Stock (whether or not the restrictions thereon have lapsed), or
until such earlier date as counsel to the Company, reasonably acceptable to
Executive, provides the Company a written opinion (a copy of which shall
promptly be provided to Executive) satisfactory to Executive to the effect
that all Option Shares theretofore issued and subsequently issuable upon
exercise of the Option and all shares of Restricted Stock may otherwise be
freely sold under United States federal and other applicable law without
regard to volume limitations or other conditions.
(b) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the Restricted Stock to be listed on all exchanges on which the
Common Stock is from time to time listed. The Company shall thereafter use
its best efforts to maintain the continued listing of such Common Stock and
Restricted Stock for so long as the Executive or any Permitted Transferee
holds (i) the Option (or any portion thereof), (ii) any of the Option
Shares acquired upon exercise thereof or (iii) any of the Restricted Stock
(whether or not the restrictions thereon have lapsed).
3. Vesting and Exercisability.
(a) Regular Vesting Schedule. Subject to the provisions
of this Agreement and except as provided in Section 5 of the Employment
Agreement, the Option shall become vested and exercisable, and all
restrictions shall lapse with respect to the Restricted Stock, in each
case, in thirty-six (36) equal monthly installments commencing on the date
which is one month following the Effective Date.
(b) Acceleration of Vesting and Lapse of Restriction.
Upon the occurrence of a Change in Control of the Company (as defined in
Appendix A hereto), the Option shall become immediately vested and fully
exercisable and all restrictions on the transfer of the Restricted Stock
shall immediately lapse in full.
(c) Except as provided in Section 5 of the Employment
Agreement, any portion of the Option that has become vested and exercisable
shall remain vested and exercisable until the end of the full ten-year
Term of the Option.
(d) Certain Definitions. For purposes of this Agreement,
all capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to such terms under the Employment Agreement.
4. Method of Exercising Option; Gross-Up; Section 83(b)
Election.
(a) The Option may be exercised from time to time, in
whole or in part, as to that portion of the Option that has from time to
time become vested and exercisable. Full payment for the Option Shares
purchased shall be made at the time of any exercise under this Agreement.
The option price shall be payable to the Company either (i) in United
States dollars in cash or by check, bank draft, or postal or express money
order, or (ii) through the delivery of shares of Common Stock owned by the
Executive for at least six months prior to the date of exercise having a
Fair Market Value equal to the full Option Price, or (iii) by a combination
of (i) and (ii) above. For purposes of this Agreement "Fair Market Value"
shall mean the closing price of the Common Stock on the NYSE on the trading
day immediately prior to the date of exercise or if the Common Stock is not
then listed on the NYSE, Fair Market Value shall be as determined pursuant
to good faith negotiations between the Executive and the Company. At the
Option holder's discretion, subject to reasonable procedures adopted by the
Company, the Option may also be exercised on a cashless basis through a
broker, whereby irrevocable instructions are delivered to the broker to
sell that number of shares equal in value to the aggregate Option Price of
the Option Shares with respect to which the Option is then being exercised
and pay the proceeds to the Company. Subject to the terms and conditions
hereof, the Option shall be exercisable by notice to the Company on the
form provided by the Company upon request of the Executive. In the event
the Option is being exercised by any person or persons other than the
Executive, the notice shall be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise such right
under this Agreement.
(b) At the time of exercise of the Option, the Executive
shall pay to the Company such amount as may be necessary to satisfy the
Company's obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise (i) by tendering to the Company a
check in the amount of such withholding, (ii) by electing to have withheld
upon exercise shares of Common Stock having an aggregate Fair Market Value
equal to the amount of such tax withholding or (iii) by a combination of
(i) and (ii).
(c) The Executive hereby agrees to make an election
pursuant to Section 83(b) of the Code (the "Election") within the thirty
(30) day period commencing on the Effective Date to include the value of
the Restricted Stock as of the Effective Date in the Executive's gross
income for federal income tax purposes. In connection with the Election,
the Company shall, within the time period prescribed by law for withholding
and/or payment of estimated or other taxes by reason of such inclusion,
make an additional payment (the "Restricted Stock Gross-Up Payment") to the
Executive in an amount such that, after giving effect to the imposition of
all applicable federal, state and local income, employment and any other
taxes or impositions on such payment (the "Aggregate Tax"), the Executive
retains a net amount equal to the aggregate amount of all federal, state
and local income, employment and any other taxes or impositions incurred by
Executive by reason of such inclusion. For purposes of determining the
amount of the Restricted Stock Gross-Up Payment, Executive shall be deemed
to pay federal income, employment and any other tax for his taxable year in
which such inclusion occurs and his taxable year in which such Restricted
Stock Gross-Up Payment is made at the highest applicable marginal rate of
federal, state and local income, employment or other applicable taxation in
such year. The amount of the Restricted Stock Gross-Up Payment shall be
determined by the Company's outside auditor, who will timely furnish the
Company and Executive with a written statement (together with full
supporting and other relevant material) setting forth the amount of the
required Restricted Stock Gross-Up Payment. The Executive shall promptly
notify the Company of his filing of the Election. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Aggregate Tax is more or less than was initially taken
into account hereunder, then each of the Company and the Executive agree to
pay to the other party, as applicable, an amount (the "Make Up Amount")
such that the amount of the Restricted Stock Gross-Up Payment finally
retained by the Executive after giving effect to the Make Up Amount is
equal to the amount contemplated by the second sentence of this paragraph
(c).
5. Issuance of Option Shares. As promptly as practicable after
receipt of such written notification of exercise and full payment of the
Option Price and any required tax withholding, the Company shall issue or
transfer to the Executive the number of Option Shares with respect to which
the Option has been exercised (less shares withheld in satisfaction of tax
withholding obligations, if any), and shall deliver to the Executive a
certificate or certificates therefor, registered in the Executive's name.
6. Non-Transferability of Option. The Option is not
transferable by the Executive otherwise than (i) to or from a Permitted
Transferee, (ii) to a designated beneficiary upon death or (iii) by will or
the laws of descent and distribution, and is exercisable during the
Executive's lifetime only by the Executive or a Permitted Transferee (or,
in the event of the Executive's or a Permitted Transferee's adjudicated
incapacity, the Executive's or Permitted Transferee's personal
representative). No other assignment or transfer of all or any part of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the assignee
or transferee any interest or right herein whatsoever and no assignment or
transfer of all or any part of the Option to a Permitted Transferee shall
be given effect unless such Permitted Transferee acknowledges in a writing
satisfactory to the Company that the Option (and any Option Shares acquired
pursuant thereto) remains subject to the provisions of this Agreement and
the Employment Agreement. For purposes of this Agreement, "Permitted
Transferee" shall mean (i) any member of Executive's immediate family and
(ii) any living trust or other entity established by Executive or any
Permitted Transferee for estate planning purposes. By way of clarification,
transfers of the Option shall be permitted from any Permitted Transferee to
Executive or between Permitted Transferees.
7. No Rights as Shareholder with Respect to Option. Neither the
Executive nor any transferee of the Option shall have any of the rights of
a shareholder with respect to any Option Shares until such time as the
Option shall have been duly exercised as provided herein, and no adjustment
shall be made for cash distributions in respect of such Option Shares for
which the record date is prior to such date.
8. Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than regular cash dividends, the compensation committee
(the "Compensation Committee") of the Board of Directors of the Company
shall make such substitutions in or adjustments to the number and/or kind
of shares of Common Stock or other property subject to, and the Option
Price of, the Option as shall be equitable under the circumstances of such
change.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Executive hereby agrees that Executive shall not exercise the
Option, and that the Company shall not be obligated to issue or transfer
any shares to the Executive hereunder, if the exercise thereof or the
issuance or transfer of such shares shall constitute a violation of any
provisions of any applicable law or regulation of any governmental
authority; provided that nothing in this Section 9 shall be deemed to limit
the Company's liability hereunder for any act or omission which would cause
the issuance or transfer of such shares to give rise to such a violation.
10. Acquisition for Purpose of Investment. The Executive hereby
represents and warrants that the Restricted Stock and any Option Shares
acquired pursuant to the exercise of the Option are or will be acquired for
his own account solely for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Securities Act"). The
Executive hereby acknowledges that to the extent that from time to time the
Restricted Stock and Option Shares have not been registered under the
Securities Act, such Restricted Stock and Option Shares may be sold or
disposed of by the Executive in the absence of such registration only
pursuant to an exemption from the registration requirements of the
Securities Act, provided that nothing in this Section 10 shall be deemed to
limit the Company's obligations under Section 2.
11. Legend; Lapse of Restrictions; Forfeiture.
(a) The Executive acknowledges that the sale, transfer
and other disposition of the Restricted Stock are subject to the
restrictions set forth in Section 1(b) hereof. The Executive agrees to the
placement on certificates representing the Restricted Stock of a legend
(the "Legend"), substantially as set forth below:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions, including forfeiture
provisions and restrictions against transfer (the
"Restrictions"), contained in a Restricted Stock and Stock
Option Award Agreement and an Employment Agreement, each dated
as of December 4, 1999, between the registered owner and Rite
Aid Corporation. Any attempt to dispose of these shares in
contravention of the Restrictions, including by way of sale,
assignment, transfer, pledge, hypothecation or otherwise, shall
be null and void and without effect.
(b) Upon each lapse of restrictions relating to the
shares of Restricted Stock granted hereunder, the Company shall promptly
issue to the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(a), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed. If certificates representing such Restricted Stock shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
(c) Until such time as the Company has caused the Option
Shares and Restricted Stock to be registered under the Securities Act, each
share of Restricted Stock delivered to the Executive and each Option Share
acquired pursuant to the exercise of the Option shall bear an additional
legend, substantially as set forth below:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). These securities have been acquired for
investment and not with a view toward distribution or resale,
and may not be sold, offered for sale, transferred, assigned or
pledged in the absence of an effective registration statement
for such shares under the Securities Act and all applicable
state securities laws or an exemption from such registration
requirements.
(d) Upon the registration of the Option Shares and
Restricted Stock, as the case may be, the Company shall promptly issue to
the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(c), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed or Option Shares acquired pursuant to the exercise of the Option. If
certificates representing such Restricted Stock or Option Shares shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
12. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier addressed
as follows:
If to the Executive:
Mary Sammons
Mary F. Sammons
3508 S.W. Gale Avenue
Portland, Oregon 97201
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this Section 12. Notices and communications shall be
effective when actually received by the addressee.
13. Successors. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto. No rights
or obligations of the Company under this Agreement may be assigned or
transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any successor to its
business and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law or otherwise.
14. No Right to Employment. The granting of the Option and the
Restricted Stock shall not be construed as granting Executive any right to
continued employment by the Company or its subsidiaries. Subject to the
terms of the Employment Agreement, the right of the Company and its
subsidiaries to terminate Executive's employment at any time and for any
reason, is specifically reserved.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules relating to conflicts of laws.
16. Entire Agreement. This Agreement and the relevant
provisions of the Employment Agreement comprise the entire agreement
between the parties hereto with respect to the subject matter hereof, and
may be modified or terminated only by the written consent of the parties
hereto.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
_____________________________
Name: Leonard Green
Title: Chairman of the Board
_____________________________
Mary Sammons
APPENDIX A
A "Change in Control of the Company" shall be deemed to have
occurred if, as the result of a single transaction or a series of
transactions, the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding voting securities; or
(2) Incumbent Directors cease at any time and for any
reason to constitute a majority of the number of directors then
serving on the Board. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the Effective Date or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors
at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors to the
Board); or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation as appropriate, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(4) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under Section 12
of the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
RITE AID CORPORATION RESTRICTED
STOCK AND STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT, made as of the 5th day of December, 1999 (the
"Effective Date"), by and between (the "Company") and David R. Jessick (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an
employment agreement, dated as of the Effective Date (the "Employment
Agreement"), pursuant to which the Executive will serve as Senior Executive
Vice President and Chief Administrative Officer of the Company; and
WHEREAS, the Employment Agreement provides that, effective as
of the Effective Date, the Company shall grant to the Executive the Option
and the Restricted Stock (as hereinafter defined), subject to the terms and
conditions of this Agreement and the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Option and Restricted Stock . (a) The Company
hereby grants to the Executive the right and option (the "Option") to
purchase, on the terms and conditions set forth herein, subject however to
the acceleration and exercise provisions of Section 5 of the Employment
Agreement and all other applicable provisions of the Employment Agreement,
all or any part of an aggregate of 1,000,000 shares of the Company's common
stock, par value $1.00 per share ("Common Stock") (such Common Stock, as
adjusted hereunder, being referred to as the "Option Shares"). The purchase
price per share of the Option Shares shall be equal to the lesser of (A)
the average of the closing prices of the Common Stock on the New York Stock
Exchange ("NYSE") over the 20 consecutive trading days immediately
preceding the Effective Date and (B) the closing price of the Common Stock
on the NYSE on the Effective Date (or, if the Effective Date is not a
trading day, the trading day immediately preceding the Effective Date)
(such price, as adjusted hereunder, being referred to as the "Option
Price"). The number of Option Shares and the Option Price shall be subject
to adjustment as provided in Section 8 hereof. Subject to earlier
termination as provided in the Employment Agreement, the term of the Option
(the "Term") shall commence on the Effective Date and terminate on the
tenth anniversary of the Effective Date. The Company shall at all times
during the Term of the Option reserve for issuance a sufficient number of
shares of Common Stock to permit exercise of the Option in full.
(b) The Company hereby grants to the Executive, on the
terms and conditions set forth herein, subject however to the acceleration
and forfeiture provisions of the Employment Agreement and all other
applicable provisions of the Employment Agreement, an aggregate of 100,000
shares of restricted Common Stock (the "Restricted Stock"). The Restricted
Stock and any interest therein, may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, prior to the lapse of restrictions provided
for in Section 3 hereof. Except as otherwise provided herein, the Executive
shall possess all incidents of ownership of the Restricted Stock granted
hereunder, including the right to receive dividends with respect to such
Restricted Stock and the right to vote such Restricted Stock.
(c) The Company represents and warrants to Executive that
on or prior to the Effective Date all actions necessary to exempt the grant
of the Option and the Restricted Stock under Rule 16b-3(d) under the
Securities Exchange Act of 1934, as amended, have been taken by the
Company.
(d) The Company represents and warrants to Executive that
the issuance of the Option and the Restricted Stock will be made pursuant
to an available exemption from registration and qualification under all
applicable federal and state securities or Blue Sky laws.
2. Registration of Option Shares and Restricted Stock; Listing
Obligations. (a) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the resale of the Restricted Stock to be registered under the
Securities Act of 1933, as amended (the "Securities Act") and registered or
qualified under applicable state securities laws, so that the Common Stock
issuable upon exercise of the Option and the Restricted Stock shall be
freely tradeable. The Company shall thereafter use its best efforts to
maintain the continuing effectiveness of such registration and
qualification for so long as the Executive or any Permitted Transferee (as
hereinafter defined) holds (i) the Option (or any portion thereof), (ii)
any of the Option Shares acquired upon exercise thereof or (iii) any of the
Restricted Stock (whether or not the restrictions thereon have lapsed), or
until such earlier date as counsel to the Company, reasonably acceptable to
Executive, provides the Company a written opinion (a copy of which shall
promptly be provided to Executive) satisfactory to Executive to the effect
that all Option Shares theretofore issued and subsequently issuable upon
exercise of the Option and all shares of Restricted Stock may otherwise be
freely sold under United States federal and other applicable law without
regard to volume limitations or other conditions.
(b) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the Restricted Stock to be listed on all exchanges on which the
Common Stock is from time to time listed. The Company shall thereafter use
its best efforts to maintain the continued listing of such Common Stock and
Restricted Stock for so long as the Executive or any Permitted Transferee
holds (i) the Option (or any portion thereof), (ii) any of the Option
Shares acquired upon exercise thereof or (iii) any of the Restricted Stock
(whether or not the restrictions thereon have lapsed).
3. Vesting and Exercisability.
(a) Regular Vesting Schedule. Subject to the provisions
of this Agreement and except as provided in Section 5 of the Employment
Agreement, the Option shall become vested and exercisable, and all
restrictions shall lapse with respect to the Restricted Stock, in each
case, in thirty-six (36) equal monthly installments commencing on the date
which is one month following the Effective Date.
(b) Acceleration of Vesting and Lapse of Restriction.
Upon the occurrence of a Change in Control of the Company (as defined in
Appendix A hereto), the Option shall become immediately vested and fully
exercisable and all restrictions on the transfer of the Restricted Stock
shall immediately lapse in full.
(c) Except as provided in Section 5 of the Employment
Agreement, any portion of the Option that has become vested and exercisable
shall remain vested and exercisable until the end of the full ten-year
Term of the Option.
(d) Certain Definitions. For purposes of this Agreement,
all capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to such terms under the Employment Agreement.
4. Method of Exercising Option; Gross-Up; Section
83(b) Election.
(a) The Option may be exercised from time to time, in
whole or in part, as to that portion of the Option that has from time to
time become vested and exercisable. Full payment for the Option Shares
purchased shall be made at the time of any exercise under this Agreement.
The option price shall be payable to the Company either (i) in United
States dollars in cash or by check, bank draft, or postal or express money
order, or (ii) through the delivery of shares of Common Stock owned by the
Executive for at least six months prior to the date of exercise
having a Fair Market Value equal to the full Option Price, or (iii) by a
combination of (i) and (ii) above. For purposes of this Agreement "Fair
Market Value" shall mean the closing price of the Common Stock on the NYSE
on the trading day immediately prior to the date of exercise or if the
Common Stock is not then listed on the NYSE, Fair Market Value shall be as
determined pursuant to good faith negotiations between the Executive and
the Company. At the Option holder's discretion, subject to reasonable
procedures adopted by the Company, the Option may also be exercised on a
cashless basis through a broker, whereby irrevocable instructions are
delivered to the broker to sell that number of shares equal in value to the
aggregate Option Price of the Option Shares with respect to which the
Option is then being exercised and pay the proceeds to the Company. Subject
to the terms and conditions hereof, the Option shall be exercisable by
notice to the Company on the form provided by the Company upon request of
the Executive. In the event the Option is being exercised by any person or
persons other than the Executive, the notice shall be accompanied by proof,
satisfactory to the Company, of the right of such person or persons to
exercise such right under this Agreement.
(b) At the time of exercise of the Option, the Executive
shall pay to the Company such amount as may be necessary to satisfy the
Company's obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise (i) by tendering to the Company a
check in the amount of such withholding, (ii) by electing to have withheld
upon exercise shares of Common Stock having an aggregate Fair Market Value
equal to the amount of such tax withholding or (iii) by a combination of
(i) and (ii).
(c) The Executive hereby agrees to make an election
pursuant to Section 83(b) of the Code (the "Election") within the thirty
(30) day period commencing on the Effective Date to include the value of
the Restricted Stock as of the Effective Date in the Executive's gross
income for federal income tax purposes. In connection with the Election,
the Company shall, within the time period prescribed by law for withholding
and/or payment of estimated or other taxes by reason of such inclusion,
make an additional payment (the "Restricted Stock Gross-Up Payment") to the
Executive in an amount such that, after giving effect to the imposition of
all applicable federal, state and local income, employment and any other
taxes or impositions on such payment (the "Aggregate Tax"), the Executive
retains a net amount equal to the aggregate amount of all federal, state
and local income, employment and any other taxes or impositions incurred by
Executive by reason of such inclusion. For purposes of determining the
amount of the Restricted Stock Gross-Up Payment, Executive shall be deemed
to pay federal income, employment and any other tax for his taxable year in
which such inclusion occurs and his taxable year in which such Restricted
Stock Gross-Up Payment is made at the highest applicable marginal rate of
federal, state and local income, employment or other applicable taxation in
such year. The amount of the Restricted Stock Gross-Up Payment shall be
determined by the Company's outside auditor, who will timely furnish the
Company and Executive with a written statement (together with full
supporting and other relevant material) setting forth the amount of the
required Restricted Stock Gross-Up Payment. The Executive shall promptly
notify the Company of his filing of the Election. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Aggregate Tax is more or less than was initially taken
into account hereunder, then each of the Company and the Executive agree to
pay to the other party, as applicable, an amount (the "Make Up Amount")
such that the amount of the Restricted Stock Gross-Up Payment finally
retained by the Executive after giving effect to the Make Up Amount is
equal to the amount contemplated by the second sentence of this paragraph
(c).
5. Issuance of Option Shares. As promptly as practicable after
receipt of such written notification of exercise and full payment of the
Option Price and any required tax withholding, the Company shall issue or
transfer to the Executive the number of Option Shares with respect to which
the Option has been exercised (less shares withheld in satisfaction of tax
withholding obligations, if any), and shall deliver to the Executive a
certificate or certificates therefor, registered in the Executive's name.
6. Non-Transferability of Option. The Option is not
transferable by the Executive otherwise than (i) to or from a Permitted
Transferee, (ii) to a designated beneficiary upon death or (iii) by will or
the laws of descent and distribution, and is exercisable during the
Executive's lifetime only by the Executive or a Permitted Transferee (or,
in the event of the Executive's or a Permitted Transferee's adjudicated
incapacity, the Executive's or Permitted Transferee's personal
representative). No other assignment or transfer of all or any part of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the assignee
or transferee any interest or right herein whatsoever and no assignment or
transfer of all or any part of the Option to a Permitted Transferee shall
be given effect unless such Permitted Transferee acknowledges in a writing
satisfactory to the Company that the Option (and any Option Shares acquired
pursuant thereto) remains subject to the provisions of this Agreement and
the Employment Agreement. For purposes of this Agreement, "Permitted
Transferee" shall mean (i) any member of Executive's immediate family and
(ii) any living trust or other entity established by Executive or any
Permitted Transferee for estate planning purposes. By way of clarification,
transfers of the Option shall be permitted from any Permitted Transferee to
Executive or between Permitted Transferees.
7. No Rights as Shareholder with Respect to Option. Neither the
Executive nor any transferee of the Option shall have any of the rights of
a shareholder with respect to any Option Shares until such time as the Option
shall have been duly exercised as provided herein, and no adjustment shall
be made for cash distributions in respect of such Option Shares for which
the record date is prior to such date.
8. Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than regular cash dividends, the compensation committee
(the "Compensation Committee") of the Board of Directors of the Company
shall make such substitutions in or adjustments to the number and/or kind
of shares of Common Stock or other property subject to, and the Option
Price of, the Option as shall be equitable under the circumstances of such
change.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Executive hereby agrees that Executive shall not exercise the
Option, and that the Company shall not be obligated to issue or transfer
any shares to the Executive hereunder, if the exercise thereof or the
issuance or transfer of such shares shall constitute a violation of any
provisions of any applicable law or regulation of any governmental
authority; provided that nothing in this Section 9 shall be deemed to limit
the Company's liability hereunder for any act or omission which would cause
the issuance or transfer of such shares to give rise to such a violation.
10. Acquisition for Purpose of Investment. The Executive hereby
represents and warrants that the Restricted Stock and any Option Shares
acquired pursuant to the exercise of the Option are or will be acquired for
his own account solely for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Securities Act"). The
Executive hereby acknowledges that to the extent that from time to time the
Restricted Stock and Option Shares have not been registered under the
Securities Act, such Restricted Stock and Option Shares may be sold or
disposed of by the Executive in the absence of such registration only
pursuant to an exemption from the registration requirements of the
Securities Act, provided that nothing in this Section 10 shall be deemed to
limit the Company's obligations under Section 2.
11. Legend; Lapse of Restrictions; Forfeiture.
(a) The Executive acknowledges that the sale, transfer
and other disposition of the Restricted Stock are subject to the
restrictions set forth in Section 1(b) hereof. The Executive agrees to the
placement on certificates representing the Restricted Stock of a legend
(the "Legend"), substantially as set forth below:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions, including forfeiture
provisions and restrictions against transfer (the
"Restrictions"), contained in a Restricted Stock and Stock
Option Award Agreement and an Employment Agreement, each dated
as of December 4, 1999, between the registered owner and Rite
Aid Corporation. Any attempt to dispose of these shares in
contravention of the Restrictions, including by way of sale,
assignment, transfer, pledge, hypothecation or otherwise, shall
be null and void and without effect.
(b) Upon each lapse of restrictions relating to the
shares of Restricted Stock granted hereunder, the Company shall promptly
issue to the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(a), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed. If certificates representing such Restricted Stock shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
(c) Until such time as the Company has caused the Option
Shares and Restricted Stock to be registered under the Securities Act, each
share of Restricted Stock delivered to the Executive and each Option Share
acquired pursuant to the exercise of the Option shall bear an additional
legend, substantially as set forth below:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). These securities have been acquired for
investment and not with a view toward distribution or resale,
and may not be sold, offered for sale, transferred, assigned or
pledged in the absence of an effective registration statement
for such shares under the Securities Act and all applicable
state securities laws or an exemption from such registration
requirements.
(d) Upon the registration of the Option Shares and
Restricted Stock, as the case may be, the Company shall promptly issue to
the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(c), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed or Option Shares acquired pursuant to the exercise of the Option. If
certificates representing such Restricted Stock or Option Shares shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
12. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier addressed
as follows:
If to the Executive:
David R. Jessick
16025 N.E. Eilers Road
Aurora OR 97002
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this Section 12. Notices and communications shall be
effective when actually received by the addressee.
13. Successors. This Agreement shall be binding upon the
heirs, executors, administrators and successors of the parties hereto. No
rights or obligations of the Company under this Agreement may be assigned
or transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any successor to its
business and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law or otherwise.
14. No Right to Employment. The granting of the Option and the
Restricted Stock shall not be construed as granting Executive any right to
continued employment by the Company or its subsidiaries. Subject to the
terms of the Employment Agreement, the right of the Company and its
subsidiaries to terminate Executive's employment at any time and for any
reason, is specifically reserved.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules relating to conflicts of laws.
16. Entire Agreement. This Agreement and the relevant
provisions of the Employment Agreement comprise the entire agreement
between the parties hereto with respect to the subject matter hereof, and
may be modified or terminated only by the written consent of the parties
hereto.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
___________________________________
Name: Leonard Green
Title: Chairman of the Board
___________________________________
David R. Jessick
APPENDIX A
A "Change in Control of the Company" shall be deemed to have
occurred if, as the result of a single transaction or a series of
transactions, the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding voting securities; or
(2) Incumbent Directors cease at any time and for any
reason to constitute a majority of the number of directors then
serving on the Board. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the Effective Date or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors
at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors to the
Board); or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation as appropriate, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(4) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under
Section 12 of the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
RITE AID CORPORATION RESTRICTED
STOCK AND STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT, made as of the 5th day of December, 1999 (the
"Effective Date"), by and between (the "Company") and John T. Standley (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an
employment agreement, dated as of the Effective Date (the "Employment
Agreement"), pursuant to which the Executive will serve as Executive Vice
President and Chief Financial Officer of the Company; and
WHEREAS, the Employment Agreement provides that, effective as
of the Effective Date, the Company shall grant to the Executive the Option
and the Restricted Stock (as hereinafter defined), subject to the terms and
conditions of this Agreement and the Employment Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Option and Restricted Stock . (a) The Company
hereby grants to the Executive the right and option (the "Option") to
purchase, on the terms and conditions set forth herein, subject however to
the acceleration and exercise provisions of Section 5 of the Employment
Agreement and all other applicable provisions of the Employment Agreement,
all or any part of an aggregate of 1,000,000 shares of the Company's common
stock, par value $1.00 per share ("Common Stock") (such Common Stock, as
adjusted hereunder, being referred to as the "Option Shares"). The purchase
price per share of the Option Shares shall be equal to the lesser of (A)
the average of the closing prices of the Common Stock on the New York Stock
Exchange ("NYSE") over the 20 consecutive trading days immediately
preceding the Effective Date and (B) the closing price of the Common Stock
on the NYSE on the Effective Date (or, if the Effective Date is not a
trading day, the trading day immediately preceding the Effective Date)
(such price, as adjusted hereunder, being referred to as the "Option
Price"). The number of Option Shares and the Option Price shall be subject
to adjustment as provided in Section 8 hereof. Subject to earlier
termination as provided in the Employment Agreement, the term of the Option
(the "Term") shall commence on the Effective Date and terminate on the
tenth anniversary of the Effective Date. The Company shall at all times
during the Term of the Option reserve for issuance a sufficient number of
shares of Common Stock to permit exercise of the Option in full.
(b) The Company hereby grants to the Executive, on the
terms and conditions set forth herein, subject however to the acceleration
and forfeiture provisions of the Employment Agreement and all other
applicable provisions of the Employment Agreement, an aggregate of 100,000
shares of restricted Common Stock (the "Restricted Stock"). The Restricted
Stock and any interest therein, may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws
of descent and distribution, prior to the lapse of restrictions provided
for in Section 3 hereof. Except as otherwise provided herein, the Executive
shall possess all incidents of ownership of the Restricted Stock granted
hereunder, including the right to receive dividends with respect to such
Restricted Stock and the right to vote such Restricted Stock.
(c) The Company represents and warrants to Executive that
on or prior to the Effective Date all actions necessary to exempt the grant
of the Option and the Restricted Stock under Rule 16b-3(d) under the
Securities Exchange Act of 1934, as amended, have been taken by the
Company.
(d) The Company represents and warrants to Executive that
the issuance of the Option and the Restricted Stock will be made pursuant
to an available exemption from registration and qualification under all
applicable federal and state securities or Blue Sky laws.
2. Registration of Option Shares and Restricted Stock; Listing
Obligations. (a) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the resale of the Restricted Stock to be registered under the
Securities Act of 1933, as amended (the "Securities Act") and registered or
qualified under applicable state securities laws, so that the Common Stock
issuable upon exercise of the Option and the Restricted Stock shall be
freely tradeable. The Company shall thereafter use its best efforts to
maintain the continuing effectiveness of such registration and
qualification for so long as the Executive or any Permitted Transferee (as
hereinafter defined) holds (i) the Option (or any portion thereof), (ii)
any of the Option Shares acquired upon exercise thereof or (iii) any of the
Restricted Stock (whether or not the restrictions thereon have lapsed), or
until such earlier date as counsel to the Company, reasonably acceptable to
Executive, provides the Company a written opinion (a copy of which shall
promptly be provided to Executive) satisfactory to Executive to the effect
that all Option Shares theretofore issued and subsequently issuable upon
exercise of the Option and all shares of Restricted Stock may otherwise be
freely sold under United States federal and other applicable law without
regard to volume limitations or other conditions.
(b) As soon as practicable after the Effective Date, the
Company shall, at its sole expense, cause the Common Stock subject to the
Option and the Restricted Stock to be listed on all exchanges on which the
Common Stock is from time to time listed. The Company shall thereafter use
its best efforts to maintain the continued listing of such Common Stock and
Restricted Stock for so long as the Executive or any Permitted Transferee
holds (i) the Option (or any portion thereof), (ii) any of the Option
Shares acquired upon exercise thereof or (iii) any of the Restricted Stock
(whether or not the restrictions thereon have lapsed).
3. Vesting and Exercisability.
(a) Regular Vesting Schedule. Subject to the provisions
of this Agreement and except as provided in Section 5 of the Employment
Agreement, the Option shall become vested and exercisable, and all
restrictions shall lapse with respect to the Restricted Stock, in each
case, in thirty-six (36) equal monthly installments commencing on the date
which is one month following the Effective Date.
(b) Acceleration of Vesting and Lapse of Restriction.
Upon the occurrence of a Change in Control of the Company (as defined in
Appendix A hereto), the Option shall become immediately vested and fully
exercisable and all restrictions on the transfer of the Restricted Stock
shall immediately lapse in full.
(c) Except as provided in Section 5 of the Employment
Agreement, any portion of the Option that has become vested and exercisable
shall remain vested and exercisable until the end of the full ten-year
Term of the Option.
(d) Certain Definitions. For purposes of this Agreement,
all capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to such terms under the Employment Agreement.
4. Method of Exercising Option; Gross-Up; Section
83(b) Election.
(a) The Option may be exercised from time to time, in
whole or in part, as to that portion of the Option that has from time to
time become vested and exercisable. Full payment for the Option Shares
purchased shall be made at the time of any exercise under this Agreement.
The option price shall be payable to the Company either (i) in United
States dollars in cash or by check, bank draft, or postal or express money
order, or (ii) through the delivery of shares of Common Stock owned by the
Executive for at least six months prior to the date of exercise having a
Fair Market Value equal to the full Option Price, or (iii) by a combination
of (i) and (ii) above. For purposes of this Agreement "Fair Market Value"
shall mean the closing price of the Common Stock on the NYSE on the trading
day immediately prior to the date of exercise or if the Common Stock is not
then listed on the NYSE, Fair Market Value shall be as determined pursuant
to good faith negotiations between the Executive and the Company. At the
Option holder's discretion, subject to reasonable procedures adopted by the
Company, the Option may also be exercised on a cashless basis through a
broker, whereby irrevocable instructions are delivered to the broker to
sell that number of shares equal in value to the aggregate Option Price of
the Option Shares with respect to which the Option is then being exercised
and pay the proceeds to the Company. Subject to the terms and conditions
hereof, the Option shall be exercisable by notice to the Company on the
form provided by the Company upon request of the Executive. In the event
the Option is being exercised by any person or persons other than the
Executive, the notice shall be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise such right
under this Agreement.
(b) At the time of exercise of the Option, the Executive
shall pay to the Company such amount as may be necessary to satisfy the
Company's obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise (i) by tendering to the Company a
check in the amount of such withholding, (ii) by electing to have withheld
upon exercise shares of Common Stock having an aggregate Fair Market Value
equal to the amount of such tax withholding or (iii) by a combination of
(i) and (ii).
(c) The Executive hereby agrees to make an election
pursuant to Section 83(b) of the Code (the "Election") within the thirty
(30) day period commencing on the Effective Date to include the value of
the Restricted Stock as of the Effective Date in the Executive's gross
income for federal income tax purposes. In connection with the Election,
the Company shall, within the time period prescribed by law for withholding
and/or payment of estimated or other taxes by reason of such inclusion,
make an additional payment (the "Restricted Stock Gross-Up Payment") to the
Executive in an amount such that, after giving effect to the imposition of
all applicable federal, state and local income, employment and any other
taxes or impositions on such payment (the "Aggregate Tax"), the Executive
retains a net amount equal to the aggregate amount of all federal, state
and local income, employment and any other taxes or impositions incurred by
Executive by reason of such inclusion. For purposes of determining the
amount of the Restricted Stock Gross-Up Payment, Executive shall be deemed
to pay federal income, employment and any other tax for his taxable year in
which such inclusion occurs and his taxable year in which such Restricted
Stock Gross-Up Payment is made at the highest applicable marginal rate of
federal, state and local income, employment or other applicable taxation in
such year. The amount of the Restricted Stock Gross-Up Payment shall be
determined by the Company's outside auditor, who will timely furnish the
Company and Executive with a written statement (together with full
supporting and other relevant material) setting forth the amount of the
required Restricted Stock Gross-Up Payment. The Executive shall promptly
notify the Company of his filing of the Election. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that the Aggregate Tax is more or less than was initially taken
into account hereunder, then each of the Company and the Executive agree to
pay to the other party, as applicable, an amount (the "Make Up Amount")
such that the amount of the Restricted Stock Gross-Up Payment finally
retained by the Executive after giving effect to the Make Up Amount is
equal to the amount contemplated by the second sentence of this paragraph
(c).
5. Issuance of Option Shares. As promptly as practicable after
receipt of such written notification of exercise and full payment of the
Option Price and any required tax withholding, the Company shall issue or
transfer to the Executive the number of Option Shares with respect to which
the Option has been exercised (less shares withheld in satisfaction of tax
withholding obligations, if any), and shall deliver to the Executive a
certificate or certificates therefor, registered in the Executive's name.
6. Non-Transferability of Option. The Option is not
transferable by the Executive otherwise than (i) to or from a Permitted
Transferee, (ii) to a designated beneficiary upon death or (iii) by will or
the laws of descent and distribution, and is exercisable during the
Executive's lifetime only by the Executive or a Permitted Transferee (or,
in the event of the Executive's or a Permitted Transferee's adjudicated
incapacity, the Executive's or Permitted Transferee's personal
representative). No other assignment or transfer of all or any part of the
Option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the assignee
or transferee any interest or right herein whatsoever and no assignment or
transfer of all or any part of the Option to a Permitted Transferee shall
be given effect unless such Permitted Transferee acknowledges in a writing
satisfactory to the Company that the Option (and any Option Shares acquired
pursuant thereto) remains subject to the provisions of this Agreement and
the Employment Agreement. For purposes of this Agreement, "Permitted
Transferee" shall mean (i) any member of Executive's immediate family and
(ii) any living trust or other entity established by Executive or any
Permitted Transferee for estate planning purposes. By way of clarification,
transfers of the Option shall be permitted from any Permitted Transferee to
Executive or between Permitted Transferees.
7. No Rights as Shareholder with Respect to Option. Neither the
Executive nor any transferee of the Option shall have any of the rights of
a shareholder with respect to any Option Shares until such time as the
Option shall have been duly exercised as provided herein, and no adjustment
shall be made for cash distributions in respect of such Option Shares for
which the record date is prior to such date.
8. Adjustments. In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than regular cash dividends, the compensation committee
(the "Compensation Committee") of the Board of Directors of the Company
shall make such substitutions in or adjustments to the number and/or kind
of shares of Common Stock or other property subject to, and the Option
Price of, the Option as shall be equitable under the circumstances of such
change.
9. Compliance with Law. Notwithstanding any of the provisions
hereof, the Executive hereby agrees that Executive shall not exercise the
Option, and that the Company shall not be obligated to issue or transfer
any shares to the Executive hereunder, if the exercise thereof or the
issuance or transfer of such shares shall constitute a violation of any
provisions of any applicable law or regulation of any governmental
authority; provided that nothing in this Section 9 shall be deemed to limit
the Company's liability hereunder for any act or omission which would cause
the issuance or transfer of such shares to give rise to such a violation.
10. Acquisition for Purpose of Investment. The Executive hereby
represents and warrants that the Restricted Stock and any Option Shares
acquired pursuant to the exercise of the Option are or will be acquired for
his own account solely for the purpose of investment and not with a view
to, or for sale in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (the "Securities Act"). The
Executive hereby acknowledges that to the extent that from time to time the
Restricted Stock and Option Shares have not been registered under the
Securities Act, such Restricted Stock and Option Shares may be sold or
disposed of by the Executive in the absence of such registration only
pursuant to an exemption from the registration requirements of the
Securities Act, provided that nothing in this Section 10 shall be deemed to
limit the Company's obligations under Section 2.
11. Legend; Lapse of Restrictions; Forfeiture.
(a) The Executive acknowledges that the sale, transfer
and other disposition of the Restricted Stock are subject to the
restrictions set forth in Section 1(b) hereof. The Executive agrees to the
placement on certificates representing the Restricted Stock of a legend
(the "Legend"), substantially as set forth below:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions, including forfeiture
provisions and restrictions against transfer (the
"Restrictions"), contained in a Restricted Stock and Stock
Option Award Agreement and an Employment Agreement, each dated
as of December 4, 1999, between the registered owner and Rite
Aid Corporation. Any attempt to dispose of these shares in
contravention of the Restrictions, including by way of sale,
assignment, transfer, pledge, hypothecation or otherwise, shall
be null and void and without effect.
(b) Upon each lapse of restrictions relating to the
shares of Restricted Stock granted hereunder, the Company shall promptly
issue to the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(a), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed. If certificates representing such Restricted Stock shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
(c) Until such time as the Company has caused the Option
Shares and Restricted Stock to be registered under the Securities Act, each
share of Restricted Stock delivered to the Executive and each Option Share
acquired pursuant to the exercise of the Option shall bear an additional
legend, substantially as set forth below:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"). These securities have been acquired for
investment and not with a view toward distribution or resale,
and may not be sold, offered for sale, transferred, assigned or
pledged in the absence of an effective registration statement
for such shares under the Securities Act and all applicable
state securities laws or an exemption from such registration
requirements.
(d) Upon the registration of the Option Shares and
Restricted Stock, as the case may be, the Company shall promptly issue to
the Executive or the Executive's personal representative a stock
certificate representing a number of shares of Common Stock, free of the
restrictive legend described in Section 11(c), equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed or Option Shares acquired pursuant to the exercise of the Option. If
certificates representing such Restricted Stock or Option Shares shall have
theretofore been delivered to the Executive, such certificates shall be
returned to the Company, complete with any necessary signatures or
instruments of transfer prior to the issuance by the Company of such
unlegended shares of Common Stock.
12. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier addressed
as follows:
If to the Executive:
John T. Standley
at the most recent address on
file at the Company's payroll office
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this Section 12. Notices and communications shall be
effective when actually received by the addressee.
13. Successors. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto. No rights
or obligations of the Company under this Agreement may be assigned or
transferred except that the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any successor to its
business and/or assets (by merger, purchase or otherwise) which executes
and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law or otherwise.
14. No Right to Employment. The granting of the Option and the
Restricted Stock shall not be construed as granting Executive any right to
continued employment by the Company or its subsidiaries. Subject to the
terms of the Employment Agreement, the right of the Company and its
subsidiaries to terminate Executive's employment at any time and for any
reason, is specifically reserved.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
regard to its rules relating to conflicts of laws.
16. Entire Agreement. This Agreement and the relevant
provisions of the Employment Agreement comprise the entire agreement
between the parties hereto with respect to the subject matter hereof, and
may be modified or terminated only by the written consent of the parties
hereto.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
_____________________________
Name: Leonard Green
Title: Chairman of the Board
_____________________________
John T. Standley
APPENDIX A
A "Change in Control of the Company" shall be deemed to have
occurred if, as the result of a single transaction or a series of
transactions, the event set forth in any one of the following paragraphs
shall have occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then
outstanding voting securities; or
(2) Incumbent Directors cease at any time and for any
reason to constitute a majority of the number of directors then
serving on the Board. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the Effective Date or
(B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Incumbent Directors
at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors to the
Board); or
(3) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation as appropriate, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(4) the stockholders of the Company approve a plan of
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under
Section 12 of the
Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act, except that a Person shall not be deemed to be the Beneficial
Owner of any securities which are properly filed on a Form 13G.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Rite Aid Corporation, a Delaware
corporation (the "Company"), and Robert G. Miller (the "Executive"), is
dated as of the 5th day of December, 1999 (the "Effective Date").
W I T N E S S E T H
WHEREAS, the Company and the Executive have agreed that the
employment of the Executive is essential to the successful implementation
of the Company's long term business strategy; and
WHEREAS, the Company wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the
Company, in the capacities and on the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. TERM. Subject to earlier termination in accordance with the
provisions of Section 4, the term of Executive's employment under this
Agreement (the "Employment Period") shall commence as of the Effective Date
and end on the third anniversary thereof, provided, however, that on each
anniversary of the Effective Date (each such date, a "Renewal Date"), an
additional year shall be added to the Employment Period, unless notice of
non-renewal has been delivered by one party to the other party at least 180
days prior to such Renewal Date.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as the Chairman (the "Chairman") of the Board of
Directors of the Company (the "Board") and as Chief Executive Officer of
the Company, with such duties and responsibilities as are customarily
assigned to such position, and such other duties and responsibilities
appropriate to such office as may from time to time be assigned to him by
the Board. Executive shall report solely to the Board and subject to the
Board's consent, which consent shall not unreasonably be withheld, shall
have the sole right to appoint and terminate the appointment of the
Company's executive officers. On the Effective Date, Executive shall be (i)
appointed as a member of the Board, to serve as a member of the class of
directors with the longest remaining term as of the Effective Date, and
(ii) elected Chairman. Subsequently, during the Employment Period, the
Company shall cause the Executive to be included in the slate of persons
nominated to serve as directors on the Board upon each expiration of
Executive's term as a director of the Company and shall use its best
efforts to have the Executive reelected to the Board and as Chairman. In
addition, following the Effective Date, the Executive shall be entitled to
submit to the Board (or an appropriate Board committee) the names of two
individuals (which individuals shall not be employees of the Company and
shall have no affiliation with the Executive) for consideration for
appointment to the Board. The Board (or such committee) shall, in due
course, consider such individuals in good faith. In the event that the
Board (or a committee thereof) does not approve either or both of such
individuals, the Executive shall be entitled to submit the names of one or
more alternative individuals (who shall also not be employees of the
Company or have any affiliation with the Executive) for consideration until
the Board (or a committee thereof) shall have approved two such individuals
for appointment to the Board (each such individual together with each
successor thereto who is appointed or elected in accordance with the
provisions of this section, being referred to herein as a "New Independent
Director"). In addition, during the Employment Period, upon each expiration
of the term (or other termination of service) of a New Independent Director
as a director of the Company, the Company shall cause such New Independent
Director (or any successor nominated in accordance with the provisions
hereof) to be included in the slate of persons nominated to serve as
directors on the Board and shall use its best efforts to have such New
Independent Director (or such successor) elected or reelected to the Board,
as applicable. Following termination of the Executive's employment for any
reason, the Executive shall immediately resign from the Board and from all
other offices and positions he holds with the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote substantially his full attention and time during business
hours to the business and affairs of the Company and shall carry out such
responsibilities faithfully and efficiently. Notwithstanding the foregoing,
to the extent consistent with the performance of his duties and
responsibilities hereunder, the Executive may serve on corporate, industry,
civic or charitable boards and committees and shall be permitted to make
and manage his personal investments.
(c) Other than for necessary travel in connection with the
performance of his duties hereunder, the Executive shall be based in
Portland, Oregon, and shall not at any time be required to relocate his
primary residence from the Portland metropolitan area, regardless of the
location from time to time of the Company's principal headquarters. The
Company shall provide suitable office space, staff and equipment to enable
the Executive to discharge his duties from such location.
3. COMPENSATION. (a) BASE SALARY. During the Employment Period,
the Company shall pay Executive an annual base salary ("Annual Base
Salary") of not less than $1,250,000. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time (but in no event less
frequently than monthly). During the Employment Period, the Annual Base
Salary shall be reviewed periodically by the Compensation Committee of the
Board (the "Compensation Committee") for possible increase. Any increase in
the Annual Base Salary shall not limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as from time to time so
increased.
(b) INCENTIVE COMPENSATION. To compensate Executive for lost
bonus opportunities with his prior employer for 1999, the Company shall pay
to the Executive, on or about April 1, 2000, a guaranteed bonus in respect
of calendar year 1999 in the amount of $600,000 (the "1999 Guaranteed
Bonus"). Commencing with the Company's 2000 fiscal year, the Executive
shall participate during the Employment Period in annual cash incentive
compensation plans (each, an "Annual Bonus Plan"), as adopted and approved
by the Board or the Compensation Committee from time to time, with targets
based upon the Company's business plan developed by the Executive and the
Board. The Executive's annual target bonus opportunity pursuant to such
plans (the "Annual Target Bonus") shall equal at least 100% of the Annual
Base Salary in effect for the Executive at the beginning of such fiscal
year.
(c) OTHER BENEFITS. During the Employment Period, except as and
to the extent otherwise provided herein, (1) the Executive shall be
entitled to participate in all applicable fringe benefit and perquisite
programs and savings and retirement plans (including non-qualified
supplemental executive retirement plans), practices, policies and programs
of the Company on the same basis as all other senior executives of the
Company; and (2) the Executive and/or the Executive's eligible dependents,
as the case may be, shall be eligible for participation in, and shall
receive benefits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company on the same basis and subject
to the same terms and conditions, as all other senior executives of the
Company. Without limiting the generality of the foregoing, during the
Employment Period the Company shall provide Executive with (i) an annual
financial and tax planning allowance of $10,000; (ii) a car allowance of
$1500 per month; (iii) use of Company-owned aircraft for business and
personal travel; (iv) reimbursement for the annual dues at a country club
of Executive's choice; and (v) subject to the immediately succeeding
sentence, term life insurance covering the Executive's life and long term
disability insurance, in each case in a face amount equal to $3,000,000.
The Executive agrees to cooperate with the Company in obtaining such life
and disability insurance, including submitting to a physical examination if
required to do so by the insurance carrier. The beneficiary of each of the
aforementioned policies shall be designated by the Executive and if not so
designated shall be his estate. The Company shall promptly reimburse
Executive for (x) all necessary and reasonable business expenses, including
first-class travel and hotel accommodations, incurred by the Executive in
connection with the discharge of his duties hereunder, and (y) all
reasonable costs and expenses incurred by Executive in the course of
meeting with Company directors and officers, performing due diligence and
with respect to all other matters undertaken in connection with the Company
and/or its business prior to the Effective Date. The Executive shall be
entitled to five weeks' vacation per year in accordance with the Company's
vacation policy for senior executives. During the Employment Period, the
Company shall provide the Executive with a suitable apartment in the
vicinity of the Company's principal headquarters in Harrisburg,
Pennsylvania. Following any termination of the Executive's employment with
the Company, other than (a) a termination for Cause (as hereinafter
defined) or (b) a termination by the Executive other than for Good Reason
(as hereinafter defined) prior to the first anniversary of the Effective
Date, the Company shall make an annual payment to the Executive for his
life (and thereafter to his surviving spouse for her life) equal to the
cost to the Executive of purchasing medical coverage substantially
comparable in all material respects to the coverage provided by the Company
to its senior executives (and their spouses and dependents) immediately
prior to such termination. Notwithstanding the foregoing, the payment
described in the preceding sentence shall not be made to the Executive with
respect to any period during which the Company provides such medical
coverage to the Executive and his spouse and dependents pursuant to Section
5(a) or 5(b) hereof.
(d) DEFERRED COMPENSATION; SERVICE CREDIT. As of the Effective
Date, the Company shall establish a non-qualified deferred compensation
plan (the "New Deferred Compensation Plan") for the benefit of the
Executive. As of the first day of each month during the Employment Period,
the Company shall credit Executive's account under the New Deferred
Compensation Plan with an amount equal to $20,000. The Executive shall be
fully vested at all times in his account balance under the New Deferred
Compensation Plan. Promptly following the Effective Date, the Company and
Executive shall negotiate in good faith and agree upon the specific terms
of the New Deferred Compensation Plan, including the applicable investment
vehicle and terms and schedule of payments. In addition, as of the
Effective Date, the Executive and the Company shall enter into the
customary deferred compensation agreement provided to senior executives by
the Company and the Executive shall be deemed to have, as of the Effective
Date, fifteen years of service with the Company for purposes of such
agreement. Such deferred compensation agreement shall provide benefits
which are commensurate with Executive's position and consistent with the
Company's past practice.
(e) EQUITY AWARDS. As of the Effective Date, the Company shall
grant to the Executive (i) an option (the "Option") to purchase 3,000,000
shares of the Company's common stock, par value $1.00 per share ("Company
Stock") and (ii) 600,000 shares of restricted Company Stock (the
"Restricted Stock"), on the terms and conditions set forth in that certain
Restricted Stock and Stock Option Award Agreement (the "Stock Agreement")
attached hereto as Exhibit A and incorporated herein by this reference,
subject in each case however to the acceleration and exercise provisions of
Section 5 hereof and all other applicable provisions of this Agreement. In
the case of any conflict between the terms and conditions of this Agreement
and the terms and conditions of the Stock Agreement, the terms and
conditions of this Agreement shall govern.
(f) INDEMNIFICATION. The Company shall (a) indemnify and hold
Executive harmless, to the full extent permitted under applicable law, for,
from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions, in respect
thereof) (i) related to or arising out of the Executive's employment with
and service as a director and an officer of the Company (including with
respect to the appointment of officers and other employees) and (ii)
related to or arising out of the termination of Executive's employment with
his prior employer and any subsidiary or affiliate thereof, including
without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company and the employment by the Company of any Covered Executive
(as hereinafter defined); and (b) pay all reasonable costs, expenses and
attorney's fees incurred by Executive in connection with or relating to the
defense of any such loss, claim, cost, expense, damage, liability or
action. Following any termination of the Executive's employment or service
with the Company, the Company shall cause any director and officer
liability insurance policies applicable to the Executive prior to such
termination to remain in effect for six (6) years following the Termination
Date.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. The Company shall be entitled to
terminate the Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that Executive has been
unable, for six consecutive months, to perform the Executive's duties under
this Agreement, as a result of physical or mental illness or injury. The
effective date of any termination of Executive's employment for Disability
is referred to herein as the "Disability Effective Date." A termination of
the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive, unless the
Executive returns to full-time performance of the Executive's duties before
the Disability Effective Date. During any period prior to the Disability
Effective Date during which Executive is absent from the full-time
performance of his duties with the Company due to such physical or mental
illness or injury, the Company shall continue to pay Executive his Annual
Base Salary and Executive shall be entitled to receive any bonus payable
under the terms of the applicable Annual Bonus Plan(s) in the ordinary
course pursuant to the terms of such Annual Bonus Plan.
(b) TERMINATION BY THE COMPANY. The Company may terminate the
Executive's employment at any time during the Employment Period for Cause
or without Cause. "Cause" shall mean only an act of fraud, embezzlement or
misappropriation by the Executive, in any such case intended by the
Executive to result in substantial personal enrichment at the expense of
the Company. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the non-employee members of
the Board at a meeting of the Board called and held for such purpose (after
reasonable written notice to Executive setting forth in reasonable detail
the specific conduct of the Executive upon which the Board relies in
reaching its determination and an opportunity for Executive, together with
his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in the
second sentence of this Section 4(b), and Executive shall be entitled to
receive all compensation and benefits hereunder pending the delivery of
such resolution. The effective date of any termination for Cause shall be
the date such resolution is delivered to the Executive.
(c) GOOD REASON. (i) The Executive may terminate employment for
Good Reason or without Good Reason. "Good Reason" shall mean the occurrence
of any one of the following:
A. any (i) adverse alteration in Executive's titles,
positions, status, duties, authorities, reporting relationships or
responsibilities with the Company or its subsidiaries from those
specified in this Agreement, as the same may be augmented from time
to time (it being understood that, if the Company is no longer a
public company, the failure of Executive to hold the position and
duties under Section 2 with any ultimate corporate or other
parent of the Company or any successor shall be deemed to constitute
such Good Reason), (ii) assignment to Executive of any duties or
responsibilities inconsistent with Executive's status as Chairman and
Chief Executive Officer of the Company, (iii) failure of Executive
during the Employment Period to be nominated or re-elected to the
offices of Chairman and Chief Executive Officer or the removal of
Executive from either such office under any circumstances (other than
in connection with the termination of Executive's employment
hereunder) or (iv) failure of the Company to comply with the
provisions of Section 2(a) hereof with respect to New Independent
Directors;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement;
C. any failure by the Company to comply with
Section 2(c) of this Agreement;
D. any failure by the Company to comply with
paragraph (b) of Section 11 of this Agreement;
E. delivery by the Company to the Executive of
a notice of non-renewal of the Employment Period pursuant to Section 1
hereof; or
F. any other material breach of this Agreement by the
Company; provided, however, that the Company shall have the right,
within ten (10) days after receipt of notice from Executive of the
Company's violation of any one of subparagraphs A, B or F, to cure in
full the event or circumstances giving rise to such Good Reason, in
the event of which cure such event or circumstances shall be deemed
not to constitute Good Reason hereunder.
In addition, any termination of employment by the Executive
within the six month period commencing on the date of a Change in Control
of the Company (as defined in the Stock Agreement) shall be treated as a
termination of employment by the Executive for Good Reason. A termination
of employment by the Executive for Good Reason shall be effectuated by
giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct
of the Company that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies, provided, that Executive's
continued employment shall not be deemed to constitute consent to, or a
waiver of rights with respect to, any act, omission or other grounds
constituting Good Reason hereunder. For clarity, it is understood that the
requirement of setting forth such specific conduct and specific
provisions(s) is intended (i) to permit the Company to make a reasonable
evaluation of Executive's claim of termination for Good Reason and (ii) to
permit the Company, where applicable, to cure such conduct, but not to
require Executive to specify each act, omission or other grounds
constituting Good Reason, there being no intention of the parties that
failure to so specify will function as an estoppel with respect to any
claim by Executive. A termination of employment by the Executive for Good
Reason shall be effective on the latest of (i) the fifth business day
following the expiration of the Company's cure period described above, if
applicable, (ii) the date specified by Executive in the Notice of
Termination for Good Reason or (iii) 45 days following the date the Notice
of Termination for Good Reason is delivered to the Company.
(ii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 90 days' written notice of such termination, and shall be effective
on the date specified by Executive in such notice, provided, however, that
no such notice period shall be required with respect to any such
termination as to which such written notice of termination is delivered to
the Company following a Change in Control of the Company.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date
on which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason becomes effective, as the case may be. On the Date of Termination,
the Employment Period shall terminate.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE OR DISABILITY, OR FOR GOOD REASON. If, during the Employment
Period, the Company terminates the Executive's employment for any reason
other than Cause or Disability, or the Executive terminates his employment
for Good Reason;
(1) the Company shall pay to the Executive, not later than ten (10)
days following the Date of Termination, (i) an amount equal to three
times the sum of (x) the Executive's then current Annual Base Salary
(without giving effect to any reductions thereof) plus (y) the
Executive's then current Annual Target Bonus; (ii) (A) any accrued
but unpaid amounts of the Executive's Annual Base Salary through the
Date of Termination, (B) any bonus under any Annual Bonus Plan
accrued but unpaid through the Date of Termination (including without
limitation any such bonus payable on a date following the
Date of Termination with respect to a fiscal year or other applicable
measuring period completed prior to the Date of Termination), (C) any
other compensation and benefits accrued (and, where applicable,
vested) through the Date of Termination under the terms of the
Company's compensation and benefit plans, programs or arrangements
(including without limitation vacation benefits and the deferred
compensation arrangements referenced in Section 3(d) hereof) as in
effect immediately prior to the Date of Termination (or, if in any
case providing a greater benefit to Executive, as in effect
immediately prior to an event constituting Good Reason) and (D) any
amounts of reimbursable business expenses incurred through the Date
of Termination (all of the items in this clause (ii) are hereinafter
referred to collectively as the "Accrued Benefits"); (iii) an amount
equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn under the Annual Bonus
Plan for the bonus measurement period during which the Date of
Termination occurs, and (B) a fraction, the numerator of which is the
number of days from the first day of such period through the Date of
Termination and the denominator of which is the total number of days
in such measurement period, together with a similarly pro rated bonus
with respect to any applicable long term incentive plan then in
effect; (iv) an amount equal to the sum of the deferred compensation
amounts which would otherwise have been credited to the Executive
pursuant to the New Deferred Compensation Plan had Executive
continued employment with the Company through the end of the then
remaining Employment Period (measured as of the Date of Termination
without regard to any subsequent renewals thereof), without reduction
in any such case to a net or other present value; and (v) if not
theretofore paid, the 1999 Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination (or, at Executive's sole discretion, medical
coverage provided to the Executive immediately prior to the
occurrence of any event constituting Good Reason) shall continue to
be provided by the Company to the Executive (and, if applicable, his
spouse and dependents) for three years following the Date of
Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i)
the Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied
in full (with performance goals being deemed to have been satisfied
at targeted levels).
(b) DEATH AND DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period;
(1) the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's estate or legal
representative), in a lump sum in cash within ten (10) days after the
Date of Termination, the sum of the following amounts: (i) the
Accrued Benefits; (ii) an amount equal to the product of (A) the
maximum annual bonus that the Executive would have been eligible to
earn under the Annual Bonus Plan for the bonus measurement period
during which the Date of Termination occurs, and (B) a fraction, the
numerator of which is the number of days from the first day of such
period through the Date of Termination and the denominator of which
is the total number of days in such measurement period, together with
a similarly pro rated bonus with respect to any applicable long term
incentive plan then in effect; and (iii) if not theretofore paid, the
1999 Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination shall continue to be provided by the Company
(i) in the event of Disability, to the Executive (and, if applicable,
his spouse and dependents) or (ii) in the event of Executive's death,
to his surviving spouse (and, if applicable, his dependents), for
three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i)
the Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied
in full (with performance goals being deemed to have been satisfied
at targeted levels).
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause during the Employment Period, (1) the
Company shall pay to the Executive the Accrued Benefits within ten (10)
days after the Date of Termination; (2) any portion of the Option or any
other then outstanding stock option that has not been exercised prior to
the Date of Termination shall immediately terminate; and (3) any portion of
the Restricted Stock or any other restricted stock or other equity
incentive awards as to which the restrictions have not lapsed or as to
which any other conditions shall not have been satisfied prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(d) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive's employment is terminated by Executive (other than for Good
Reason) during the Employment Period;
(1) the Company shall pay to the Executive the Accrued Benefits,
within ten (10) days after the Date of Termination;
(2) any portion of the Option or any other then outstanding stock
option that has not vested and become exercisable prior to the Date
of Termination shall immediately terminate and any portion of the
Option or any other then outstanding stock option that has vested and
become exercisable prior to the Date of Termination shall remain
vested and exercisable for a period of ninety (90) days following the
Date of Termination, at the end of which period such portion of the
option shall terminate, provided, however, that if the Date of
Termination shall be on or after the third anniversary of the
Effective Date, the entire Option shall remain vested and exercisable
throughout the remainder of its ten-year term; and
(3) the restrictions on the Restricted Stock shall continue to lapse
in accordance with the terms of the Stock Agreement as if Executive's
employment with the Company had continued uninterrupted until such
restrictions had lapsed in full; provided, however, that in the event
Executive's employment is terminated by Executive (other than for
Good Reason) prior to the first anniversary of the Effective Date any
portion of the Restricted Stock as to which the restrictions have not
lapsed pursuant to the terms of the Stock Agreement prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(e) (i) In the event that any payment or benefit received or to
be received by the Executive pursuant to the terms of this agreement or of
any other plan, arrangement or agreement of the Company (or any affiliate)
(collectively, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), as determined as provided below, the Company shall
pay to the Executive, at the time specified in Section 5(e)(ii) below, an
additional amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of the Excise Tax on Payments
and any federal, state and local income and employment or other tax and the
Excise Tax upon the Gross-Up Payment, and any interest, penalties or
additions to tax payable by the Executive with respect thereto, shall be
equal to the total Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amounts of such Excise
Tax, (1) the total amount of the Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, except to the extent
that, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable
to Executive and selected by the accounting firm which was, immediately
prior to the event giving rise to the Payment, the Company's independent
auditor (the "Auditor"), a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code, or such "excess parachute payments" (in whole or in part) are
not subject to the Excise Tax, (2) the amount of the Payments that shall be
treated as subject to the Excise Tax shall be equal to the lesser of (A)
the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after
applying clause (1) hereof), and (3) the value of any noncash benefits or
any deferred payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest
marginal rates of federal income taxation applicable to the individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of the Executive's
residence in the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i)
hereof shall be made upon the earlier of (i) ten days following the Date of
Termination or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that the Excise Tax is
less than the amount taken into account under Section 5(e)(i) hereof, the
Executive shall repay to the Company within thirty (30) days of the
Executive's receipt of notice of such final determination the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the portion of the Gross-Up Payment being
repaid by the Executive if and to the extent that such repayment results in
a reduction in Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by the Executive on the
amount of such repayment. If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that the
Excise Tax exceeds the amount taken into account hereunder (including
without limitation by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment pursuant to Section
5(e)(i) in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion. The Executive and
the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Payments.
(iv) In the event of any change in, or further interpretation
of, sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall be entitled, by written notice to the
Company, to request an opinion of Tax Counsel regarding the application of
such change to any of the foregoing, and the Company shall use its best
efforts to cause such opinion to be rendered as promptly as practicable.
All fees and expenses of the Auditor and Tax Counsel incurred in connection
with this Agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any
of its affiliated companies.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others whether in respect of claims made
under this Agreement or otherwise. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment. In no event shall any amounts, benefits
or other compensation payable or otherwise provided to Executive hereunder
be reduced in respect of, or the Company's obligations to Executive
hereunder be affected by, or any other form of "clawback" provision apply
to, the payment to Executive at any time of any amounts, benefits or other
compensation in respect of his employment with any prior employer.
8. CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION. During
the Employment Period and for a period of three years following the
applicable Date of Termination, the Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Confidential
Information") and the Executive shall not communicate, divulge or
disseminate Confidential Information at any time during such period to
anyone other than the Company, appropriate Company personnel and those
other persons designated by the Company, except (i) with the prior written
consent of the Company, (ii) as otherwise required by law or legal process,
(iii) on behalf of the Company in the furtherance of its business or in the
course of performing Executive's duties to the Company or (iv) in the
course of any adversarial proceeding against the Company. During the
Employment Period (and if during the Employment Period (A) the Executive
terminates his employment with the Company without Good Reason or (B) the
Executive is terminated by the Company for Cause, then for one year after
the Date of Termination), (i) the Executive shall not, without the written
consent of the Board, directly or indirectly, knowingly engage or be
interested in (as owner, partner, stockholder, employee, director, officer,
agent, consultant or otherwise), with or without compensation, any
Competitor of the Company, (ii) the Executive shall not, without the
written consent of the Board, directly or indirectly solicit or recruit any
person (other than persons employed in a clerical or other nonprofessional
position) who is then employed by the Company or who was employed by the
Company or any of its subsidiaries or affiliates at any time during the
six-month period preceding the Date of Termination for the purpose of being
employed by the Executive, by any entity or person on whose behalf the
Executive is acting as an agent, representative or employee or by any
Competitor of the Company and (iii) the Executive shall not, without the
written consent of the Board, directly or indirectly, solicit, entice,
persuade or induce any person or entity doing business with the Company and
its subsidiaries and affiliates, to terminate such relationship or to
refrain from extending or renewing the same. For purposes of this Section
8, the term "Competitor of the Company" shall mean any entity a majority of
whose business involves the ownership and operation of retail drug stores,
provided, however, that such term shall not include any entity a majority
of whose business involves the business of the retail sale or wholesale
distribution of food and related products (including, without limitation,
health and beauty care and general merchandise products and all other
products sold to the supermarket industry), regardless of whether such
entity sells certain products of a type found in retail drug stores and
regardless of whether one or more divisions or subsidiaries of such entity,
standing alone, would otherwise be a Competitor of the Company. Nothing
herein, however, shall prohibit the Executive from acquiring or holding not
more than five percent of any class of publicly traded securities of any
such business; provided that such securities entitle the Executive to no
more than five percent of the total outstanding votes entitled to be cast
by security holders of such business in matters on which such security
holders are entitled to vote. In the event of a breach or any threatened
breach of the Section 8, Executive agrees that, in addition to any other
remedy available to the Company at law or in equity, the Company shall be
entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any breach or prevent any threatened breach. Executive further
acknowledges that damages would be inadequate and insufficient to
compensate the Company for any breach of this Section 8.
9. GROUP TERMINATION BY SENIOR EXECUTIVES. As a material
inducement to the Company's willingness to enter into this Agreement and
the Stock Agreement, the Executive agrees that he will not deliver to the
Company a notice of termination pursuant to Section 5(c)(ii) hereof within
thirty days of the delivery of a similar notice by any of the persons
listed on Exhibit B hereto (individually each a "Covered Executive" and
collectively, the "Covered Executives") pursuant to the terms of such
Covered Executive's employment agreement with the Company; provided,
however, that the preceding clause shall be void and of no force and effect
from and after the occurrence of a Change in Control of the Company.
10. DISPUTE RESOLUTION; ATTORNEYS' FEES. All disputes arising
under or related to the employment of the Executive by the Company or the
provisions of this agreement shall be settled by arbitration under the
rules of the American Arbitration Association then in effect, such
arbitration to be held in Portland, Oregon, as the sole and exclusive
remedy of either party and judgment on any arbitration award may be entered
in any court of competent jurisdiction. The Company agrees to reimburse all
reasonable legal fees and other expenses incurred by the Executive in any
such dispute if the Executive prevails as to one or more of the material
issues in the dispute. Promptly following the Effective Date, the Company
shall reimburse the Executive for legal fees and expenses incurred by the
Executive in negotiating and entering into this Agreement and the New
Deferred Compensation Agreement (and incidental matters contemplated
hereby) up to a maximum of $37,500.
The Company shall also promptly reimburse the Executive for
legal fees, costs and expenses incurred in any dispute, arbitration or
other litigation relating to or arising out of the termination of
Executive's employment with his prior employer and any subsidiary or
affiliate thereof, including without limitation claims in respect of
amounts payable under any applicable agreement upon or otherwise in
connection with such termination of employment and Executive's commencement
of and continuing employment with the Company (including with respect to
the appointment of officers and other employees) and the employment by the
Company of any Covered Executive.
11. SUCCESSORS. (a) No rights or obligations of Executive under
this Agreement may be assigned or transferred by Executive other than his
rights to payments, benefits or other compensation hereunder, which
(without the prior written consent of the Company) may be transferred only
by will or the laws of descent and distribution or as otherwise provided in
the Stock Agreement. Upon Executive's death, this Agreement and all rights
of Executive hereunder shall inure to the benefit of and be enforceable by
Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any payment,
benefit or other compensation payable hereunder following Executive's death
by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary or beneficiaries, estate or other legal representative(s).
(b) No rights or obligations of the Company under this
Agreement may be assigned or transferred except that the Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
have been required to perform it if no such succession had taken place. As
used in this Agreement, the "Company" shall mean both the Company as
defined above and any successor to its business and/or assets (by merger,
purchase or otherwise) which executes and delivers the agreement provided
for in this Section 11(b) or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law or otherwise.
12. COMPANY REPRESENTATION. The Company represents and warrants
to the Executive that (i) it has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder in full, (ii) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder
have been duly and validly authorized by all necessary corporate action and
(iii) no other corporate proceedings on the part of the Company (including
on the part of the shareholders of the Company) are necessary to authorize
this Agreement or perform such obligations. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
13. MISCELLANEOUS. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Oregon, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, or by a nationally recognized overnight courier addressed as
follows:
If to the Executive:
Robert G. Miller
0305 SW Montgomery #F508
Portland, OR 47201
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 13. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) Except as provided in the Stock Agreement, the rights and
benefits of the Executive under this Agreement may not be anticipated,
assigned, alienated or subject to attachment, garnishment, levy, execution
or other legal or equitable process except as required by law. Except as
provided in the Stock Agreement, any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge
the same shall be void. Payments hereunder shall not be considered assets
of the Executive in the event of insolvency or bankruptcy.
(g) This Agreement (together with the exhibits hereto) sets
forth the entire agreement of the parties hereto in respect of the subject
matter construed herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties,
whether oral or written by any party or any officer or other representative
of such party in respect of such subject matter.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) This Agreement shall survive the termination of the
Employment Period and the termination of Executive's employment hereunder
under any circumstances to the extent necessary to give effect to its
provisions.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
-----------------------------------------
By: Leonard Green
Title: Chairman of the Board
-----------------------------------------
Robert G. Miller
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Rite Aid Corporation, a Delaware
corporation (the "Company"), and Mary F. Sammons (the "Executive"), is
dated as of the 5th day of December, 1999 (the "Effective Date").
W I T N E S S E T H
WHEREAS, the Company and the Executive have agreed that the
employment of the Executive is essential to the successful implementation
of the Company's long term business strategy; and
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in
the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. TERM. Subject to earlier termination in accordance with the
provisions of Section 4, the term of Executive's employment under this
Agreement (the "Employment Period") shall commence as of the Effective Date
and end on the third anniversary thereof, provided, however, that on each
anniversary of the Effective Date (each such date, a "Renewal Date"), an
additional year shall be added to the Employment Period, unless notice of
non-renewal has been delivered by one party to the other party at least 180
days prior to such Renewal Date.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as the President and Chief Operating Officer of the
Company, with such duties and responsibilities as are customarily assigned
to such position, and such other duties and responsibilities appropriate to
such office as may from time to time be assigned to her by the Company's
Chief Executive Officer or the Board of Directors of the Company (the
"Board"). Executive shall report solely to the Chief Executive Officer and
the Board. On the Effective Date, Executive shall be appointed as a member
of the Board, to serve as a member of the class of directors with the
second longest remaining term as of the Effective Date. Subsequently,
during the Employment Period, the Company shall cause the Executive to be
included in the slate of persons nominated to serve as directors on the
Board upon each expiration of Executive's term as a director of the Company
and shall use its best efforts to have the Executive reelected to the
Board. Following termination of the Executive's employment for any reason,
the Executive shall immediately resign from the Board and from all other
offices and positions she holds with the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote substantially her full attention and time during business
hours to the business and affairs of the Company and shall carry out such
responsibilities faithfully and efficiently. Notwithstanding the
foregoing, to the extent consistent with the performance of her duties and
responsibilities hereunder, the Executive may serve on corporate, industry,
civic or charitable boards and committees and shall be permitted to make
and manage her personal investments.
(c) Other than for necessary travel in connection with the
performance of her duties hereunder, the Executive shall be based at the
Company's headquarters in the Harrisburg, Pennsylvania area. The Company
shall reimburse the Executive for the following relocation expenses: (i)
the reasonable costs associated with the selling of the Executive's current
primary residence; (ii) reasonable living expenses for a residence for
Executive and her family in the Harrisburg, Pennsylvania area for a
temporary period; (iii) a reasonable number of round trip visits between
Harrisburg and the city in which the Executive's current residence is
located, including reasonable costs for meals, lodging and transportation
for the Executive and her family during such trips; and (iv) reasonable
costs for moving Executive's household goods and cars to the Harrisburg,
Pennsylvania area. In addition, the Executive may participate in a
relocation service program, and the Company shall share in the expenses of
such program on terms which the parties shall mutually agree upon. The
reimbursement amount described herein shall be "grossed-up" to offset in
full any net increase in Executive's federal, state and local income,
employment and other taxes resulting therefrom (and from such gross-up).
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Company shall pay Executive an annual base salary ("Annual Base
Salary") of not less than $750,000. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time (but in no event less
frequently than monthly). During the Employment Period, the Annual Base
Salary shall be reviewed periodically by the Compensation Committee of the
Board (the "Compensation Committee") for possible increase. Any increase
in the Annual Base Salary shall not limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as from time to time so
increased.
(b) INCENTIVE COMPENSATION. To compensate Executive for lost
bonus opportunities with her prior employer for 1999, the Company shall pay
to the Executive, on or about April 1, 2000, a guaranteed bonus in respect
of calendar year 1999 in the amount of $200,000 (the "1999 Guaranteed
Bonus"). Commencing with the Company's 2000 fiscal year, the Executive
shall participate during the Employment Period in annual cash incentive
compensation plans (each, an "Annual Bonus Plan"), as adopted and approved
by the Board or the Compensation Committee from time to time, with targets
based upon the Company's business plan developed by the Executive and the
Board. The Executive's annual target bonus opportunity pursuant to such
plans (the "Annual Target Bonus") shall equal at least 75% of the Annual
Base Salary in effect for the Executive at the beginning of such fiscal
year.
(c) OTHER BENEFITS. During the Employment Period, except as and
to the extent otherwise provided herein, (1) the Executive shall be
entitled to participate in all applicable fringe benefit and perquisite
programs and savings and retirement plans (including non-qualified
supplemental executive retirement plans), practices, policies and programs
of the Company on the same basis as all other senior executives of the
Company; and (2) the Executive and/or the Executive's eligible dependents,
as the case may be, shall be eligible for participation in, and shall
receive benefits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company on the same basis and subject
to the same terms and conditions, as all other senior executives of the
Company. Without limiting the generality of the foregoing, during the
Employment Period the Company shall provide Executive with (i) an annual
financial and tax planning allowance of $10,000; (ii) a car allowance of
$1,000 per month; (iii) use of Company-owned aircraft for business travel;
(iv) reimbursement for the annual dues at a country club of Executive's
choice; and (v) subject to the immediately succeeding sentence, term life
insurance covering the Executive's life and long term disability insurance,
in each case in a face amount equal to $2,000,000. The Executive agrees to
cooperate with the Company in obtaining such life and disability insurance,
including submitting to a physical examination if required to do so by the
insurance carrier. The beneficiary of each of the aforementioned policies
shall be designated by the Executive and if not so designated shall be her
estate. The Company shall promptly reimburse Executive for (x) all
necessary and reasonable business expenses, including first-class travel
and hotel accommodations, incurred by the Executive in connection with the
discharge of her duties hereunder, and (y) all reasonable costs and
expenses incurred by Executive in the course of meeting with Company
directors and officers, performing due diligence and with respect to all
other matters undertaken in connection with the Company and/or its business
prior to the Effective Date. The Executive shall be entitled to five
weeks' vacation per year in accordance with the Company's vacation policy
for senior executives.
(d) DEFERRED COMPENSATION; SERVICE CREDIT. As of the Effective
Date, the Company shall establish a non-qualified deferred compensation
plan (the "New Deferred Compensation Plan") for the benefit of the
Executive. As of the first day of each month during the Employment Period,
the Company shall credit Executive's account under the New Deferred
Compensation Plan with an amount equal to $15,000. The Executive shall be
fully vested at all times in her account balance under the New Deferred
Compensation Plan. Promptly following the Effective Date, the Company and
Executive shall negotiate in good faith and agree upon the specific terms
of the New Deferred Compensation Plan, including the applicable investment
vehicle and terms and schedule of payments. In addition, as of the
Effective Date, the Executive and the Company shall enter into the
customary deferred compensation agreement provided to senior executives by
the Company and the Executive shall be deemed to have, as of the Effective
Date, fifteen years of service with the Company for purposes of such
agreement. Such deferred compensation agreement shall provide benefits
which are commensurate with Executive's position and consistent with the
Company's past practice.
(e) EQUITY AWARDS. As of the Effective Date, the Company shall
grant to the Executive (i) an option (the "Option") to purchase 2,000,000
shares of the Company's common stock, par value $1.00 per share ("Company
Stock") and (ii) 200,000 shares of restricted Company Stock (the
"Restricted Stock"), on the terms and conditions set forth in that certain
Restricted Stock and Stock Option Award Agreement (the "Stock Agreement")
attached hereto as Exhibit A and incorporated herein by this reference,
subject in each case however to the acceleration and exercise provisions of
Section 5 hereof and all other applicable provisions of this Agreement. In
the case of any conflict between the terms and conditions of this Agreement
and the terms and conditions of the Stock Agreement, the terms and
conditions of this Agreement shall govern.
(f) INDEMNIFICATION. The Company shall (a) indemnify and hold
Executive harmless, to the full extent permitted under applicable law, for,
from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions, in respect
thereof) (i) related to or arising out of the Executive's employment with
and service as a director and an officer of the Company (including with
respect to the appointment of officers and other employees) and (ii)
related to or arising out of the termination of Executive's employment with
her prior employer and any subsidiary or affiliate thereof, including
without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company and the employment by the Company of any Covered Executive
(as hereinafter defined); and (b) pay all reasonable costs, expenses and
attorney's fees incurred by Executive in connection with or relating to the
defense of any such loss, claim, cost, expense, damage, liability or
action. Following any termination of the Executive's employment or service
with the Company, the Company shall cause any director and officer
liability insurance policies applicable to the Executive prior to such
termination to remain in effect for six (6) years following the Termination
Date.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. The Company shall be entitled to
terminate the Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that Executive has been
unable, for six consecutive months, to perform the Executive's duties under
this Agreement, as a result of physical or mental illness or injury. The
effective date of any termination of Executive's employment for Disability
is referred to herein as the "Disability Effective Date." A termination of
the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive, unless the
Executive returns to full-time performance of the Executive's duties before
the Disability Effective Date. During any period prior to the Disability
Effective Date during which Executive is absent from the full-time
performance of her duties with the Company due to such physical or mental
illness or injury, the Company shall continue to pay Executive her Annual
Base Salary and Executive shall be entitled to receive any bonus payable
under the terms of the applicable Annual Bonus Plan(s) in the ordinary
course pursuant to the terms of such Annual Bonus Plan.
(b) TERMINATION BY THE COMPANY. The Company may terminate the
Executive's employment at any time during the Employment Period for Cause
or without Cause. "Cause" shall mean only an act of fraud, embezzlement or
misappropriation by the Executive, in any such case intended by the
Executive to result in substantial personal enrichment at the expense of
the Company. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the non-employee members of
the Board at a meeting of the Board called and held for such purpose (after
reasonable written notice to Executive setting forth in reasonable detail
the specific conduct of the Executive upon which the Board relies in
reaching its determination, and an opportunity for Executive, together with
her counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in the
second sentence of this Section 4(b), and Executive shall be entitled to
receive all compensation and benefits hereunder pending the delivery of
such resolution. The effective date of any termination for Cause shall be
the date such resolution is delivered to Executive.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" shall mean the
occurrence of any one of the following:
A. any (i) adverse alteration in Executive's titles,
positions, status, duties, authorities, reporting relationships or
responsibilities with the Company or its subsidiaries from those
specified in this Agreement, as the same may be augmented from time to
time (it being understood that, if the Company is no longer a public
company, the failure of Executive to hold the position and duties
under Section 2 with any ultimate corporate or other parent of the
Company or any successor shall be deemed to constitute such Good
Reason), (ii) assignment to Executive of any duties or
responsibilities inconsistent with Executive's status as President and
Chief Operating Officer of the Company or (iii) failure of Executive
during the Employment Period to be nominated or re-elected to the
Board or the removal of Executive from the office of President or
Chief Operating Officer or the Board (other than in connection with
the termination of Executive's employment hereunder);
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement;
C. any failure by the Company to comply with Section 2(c)
of this Agreement;
D. any failure by the Company to comply with paragraph (b)
of Section 11 of this Agreement;
E. delivery by the Company to the Executive of a notice of
non-renewal of the Employment Period pursuant to Section 1 hereof; or
F. any other material breach of this Agreement by the
Company; provided, however, that the Company shall have the right,
within ten (10) days after receipt of notice from Executive of the
Company's violation of any one of subparagraphs A, B or F, to cure in
full the event or circumstances giving rise to such Good Reason, in
the event of which cure such event or circumstances shall be deemed
not to constitute Good Reason hereunder.
In addition, any termination of employment by the Executive
within the six month period commencing on the date of a Change in Control
of the Company (as defined in the Stock Agreement) shall be treated as a
termination of employment by the Executive for Good Reason. A termination
of employment by the Executive for Good Reason shall be effectuated by
giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct
of the Company that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies, provided, that Executive's
continued employment shall not be deemed to constitute consent to, or a
waiver of rights with respect to, any act, omission or other grounds
constituting Good Reason hereunder. For clarity, it is understood that the
requirement of setting forth such specific conduct and specific
provisions(s) is intended (i) to permit the Company to make a reasonable
evaluation of Executive's claim of termination for Good Reason and (ii) to
permit the Company, where applicable, to cure such conduct, but not to
require Executive to specify each act, omission or other grounds
constituting Good Reason, there being no intention of the parties that
failure to so specify will function as an estoppel with respect to any
claim by Executive. A termination of employment by the Executive for Good
Reason shall be effective on the latest of (i) the fifth business day
following the expiration of the Company's cure period described above, if
applicable, (ii) the date specified by Executive in the Notice of
Termination for Good Reason or (iii) 45 days following the date the Notice
of Termination for Good Reason is delivered to the Company.
(ii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 90 days' written notice of such termination, and shall be effective
on the date specified by Executive in such notice, provided, however, that
no such notice period shall be required with respect to any such
termination as to which such written notice of termination is delivered to
the Company following a Change in Control of the Company.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date
on which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason becomes effective, as the case may be. On the Date of Termination,
the Employment Period shall terminate.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE OR DISABILITY, OR FOR GOOD REASON. If, during the Employment
Period, the Company terminates the Executive's employment for any reason
other than Cause or Disability, or the Executive terminates her employment
for Good Reason;
(1) the Company shall pay to the Executive, not later than ten (10)
days following the Date of Termination, (i) an amount equal to three
times the sum of (x) the Executive's then current Annual Base Salary
(without giving effect to any reductions thereof) plus (y) the
Executive's then current Annual Target Bonus; (ii) (A) any accrued but
unpaid amounts of the Executive's Annual Base Salary through the Date
of Termination, (B) any bonus under any Annual Bonus Plan accrued but
unpaid through the Date of Termination (including without limitation
any such bonus payable on a date following the Date of Termination
with respect to a fiscal year or other applicable measuring period
completed prior to the Date of Termination), (C) any other
compensation and benefits accrued (and, where applicable, vested)
through the Date of Termination under the terms of the Company's
compensation and benefit plans, programs or arrangements (including
without limitation vacation benefits and the deferred compensation
arrangements referenced in Section 3(d) hereof) as in effect
immediately prior to the Date of Termination (or, if in any case
providing a greater benefit to Executive, as in effect immediately
prior to an event constituting Good Reason) and (D) any amounts of
reimbursable business expenses incurred through the Date of
Termination (all of the items in this clause (ii) are hereinafter
referred to collectively as the "Accrued Benefits"); (iii) an amount
equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn under the Annual Bonus Plan
for the bonus measurement period during which the Date of Termination
occurs, and (B) a fraction, the numerator of which is the number of
days from the first day of such period through the Date of Termination
and the denominator of which is the total number of days in such
measurement period, together with a similarly pro rated bonus with
respect to any applicable long term incentive plan then in effect;
(iv) an amount equal to the sum of the deferred compensation amounts
which would otherwise have been credited to the Executive pursuant to
the New Deferred Compensation Plan had Executive continued employment
with the Company through the end of the then remaining Employment
Period (measured as of the Date of Termination without regard to any
subsequent renewals thereof), without reduction in any such case to a
net or other present value; and (v) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination (or, at Executive's sole discretion, medical
coverage provided to the Executive immediately prior to the occurrence
of any event constituting Good Reason) shall continue to be provided
by the Company to the Executive (and, if applicable, her spouse and
dependents) for three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(b) DEATH AND DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period;
(1) the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative), in a lump sum in cash within ten (10) days after the
Date of Termination, the sum of the following amounts: (i) the Accrued
Benefits; (ii) an amount equal to the product of (A) the maximum
annual bonus that the Executive would have been eligible to earn under
the Annual Bonus Plan for the bonus measurement period during which
the Date of Termination occurs, and (B) a fraction, the numerator of
which is the number of days from the first day of such period through
the Date of Termination and the denominator of which is the total
number of days in such measurement period, together with a similarly
pro rated bonus with respect to any applicable long term incentive
plan then in effect; and (iii) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination shall continue to be provided by the Company
(i) in the event of Disability, to the Executive (and, if applicable,
her spouse and dependents) or (ii) in the event of Executive's death,
to her surviving spouse (and, if applicable, her dependents), for
three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause during the Employment Period, (1) the
Company shall pay to the Executive the Accrued Benefits within ten (10)
days after the Date of Termination; (2) any portion of the Option or any
other then outstanding stock option that has not been exercised prior to
the Date of Termination shall immediately terminate; and (3) any portion of
the Restricted Stock or any other restricted stock or other equity
incentive awards as to which the restrictions have not lapsed or as to
which any other conditions shall not have been satisfied prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(d) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive's employment is terminated by Executive (other than for Good
Reason) during the Employment Period;
(1) the Company shall pay to the Executive the Accrued Benefits,
within ten (10) days after the Date of Termination;
(2) any portion of the Option or any other then outstanding stock
option that has not vested and become exercisable prior to the Date of
Termination shall immediately terminate and any portion of the Option
or any other then outstanding stock option that has vested and become
exercisable prior to the Date of Termination shall remain vested and
exercisable for a period of ninety (90) days following the Date of
Termination, at the end of which period such portion of the option
shall terminate, provided, however, that if the Date of Termination
shall be on or after the third anniversary of the Effective Date, the
entire Option shall remain vested and exercisable throughout the
remainder of its ten-year term; and
(3) the restrictions on the Restricted Stock shall continue to lapse
in accordance with the terms of the Stock Agreement as if Executive's
employment with the Company had continued uninterrupted until such
restrictions had lapsed in full; provided, however, that in the event
Executive's employment is terminated by Executive (other than for Good
Reason) prior to the first anniversary of the Effective Date any
portion of the Restricted Stock as to which the restrictions have not
lapsed pursuant to the terms of the Stock Agreement prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(e) (i) In the event that any payment or benefit received or to
be received by the Executive pursuant to the terms of this agreement or of
any other plan, arrangement or agreement of the Company (or any affiliate)
(collectively, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), as determined as provided below, the Company
shall pay to the Executive, at the time specified in Section 5(e)(ii)
below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of the Excise Tax on
Payments and any federal, state and local income and employment or other
tax and the Excise Tax upon the Gross-Up Payment, and any interest,
penalties or additions to tax payable by the Executive with respect
thereto, shall be equal to the total Payments. For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the
amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to Executive and selected by the accounting firm
which was, immediately prior to the event giving rise to the Payment, the
Company's independent auditor (the "Auditor"), a Payment (in whole or in
part) does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, or such "excess parachute payments" (in
whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof), and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rates of federal income taxation applicable to the individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of the Executive's
residence in the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i)
hereof shall be made upon the earlier of (i) ten days following the Date of
Termination or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that the Excise Tax is
less than the amount taken into account under Section 5(e)(i) hereof, the
Executive shall repay to the Company within thirty (30) days of the
Executive's receipt of notice of such final determination the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the portion of the Gross-Up Payment being
repaid by the Executive if and to the extent that such repayment results in
a reduction in Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by the Executive on the
amount of such repayment. If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that the
Excise Tax exceeds the amount taken into account hereunder (including
without limitation by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment pursuant to Section
5(e)(i) in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the
Payments.
(iv) In the event of any change in, or further interpretation
of, sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall be entitled, by written notice to the
Company, to request an opinion of Tax Counsel regarding the application of
such change to any of the foregoing, and the Company shall use its best
efforts to cause such opinion to be rendered as promptly as practicable.
All fees and expenses of the Auditor and Tax Counsel incurred in connection
with this Agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any
of its affiliated companies.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others whether in respect of claims made
under this Agreement or otherwise. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment. In no event shall any amounts,
benefits or other compensation payable or otherwise provided to Executive
hereunder be reduced in respect of, or the Company's obligations to
Executive hereunder be affected by, or any other form of "clawback"
provision apply to, the payment to Executive at any time of any amounts,
benefits or other compensation in respect of her employment with any prior
employer.
8. CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION. During
the Employment Period and for a period of three years following the
applicable Date of Termination, the Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Confidential
Information") and the Executive shall not communicate, divulge or
disseminate Confidential Information at any time during such period to
anyone other than the Company, appropriate Company personnel and those
other persons designated by the Company, except (i) with the prior written
consent of the Company, (ii) as otherwise required by law or legal process,
(iii) on behalf of the Company in the furtherance of its business or in the
course of performing Executive's duties to the Company or (iv) in the
course of any adversarial proceeding against the Company. During the
Employment Period (and if during the Employment Period (A) the Executive
terminates her employment with the Company without Good Reason or (B) the
Executive is terminated by the Company for Cause, then for one year after
the Date of Termination), (i) the Executive shall not, without the written
consent of the Board, directly or indirectly, knowingly engage or be
interested in (as owner, partner, stockholder, employee, director, officer,
agent, consultant or otherwise), with or without compensation, any
Competitor of the Company, (ii) the Executive shall not, without the
written consent of the Board, directly or indirectly solicit or recruit any
person (other than persons employed in a clerical or other non-professional
position) who is then employed by the Company or who was employed by the
Company or any of its subsidiaries or affiliates at any time during the
six-month period preceding the Date of Termination for the purpose of being
employed by the Executive, by any entity or person on whose behalf the
Executive is acting as an agent, representative or employee or by any
Competitor of the Company and (iii) the Executive shall not, without the
written consent of the Board, directly or indirectly, solicit, entice,
persuade or induce any person or entity doing business with the Company and
its subsidiaries and affiliates, to terminate such relationship or to
refrain from extending or renewing the same. For purposes of this Section
8, the term "Competitor of the Company" shall mean any entity a majority of
whose business involves the ownership and operation of retail drug stores,
provided, however, that such term shall not include any entity a majority
of whose business involves the business of the retail sale or wholesale
distribution of food and related products (including, without limitation,
health and beauty care and general merchandise products and all other
products sold to the supermarket industry), regardless of whether such
entity sells certain products of a type found in retail drug stores and
regardless of whether one or more divisions or subsidiaries of such entity,
standing alone, would otherwise be a Competitor of the Company. Nothing
herein, however, shall prohibit the Executive from acquiring or holding not
more than five percent of any class of publicly traded securities of any
such business; provided that such securities entitle the Executive to no
more than five percent of the total outstanding votes entitled to be cast
by security holders of such business in matters on which such security
holders are entitled to vote. In the event of a breach or any threatened
breach of the Section 8, Executive agrees that, in addition to any other
remedy available to the Company at law or in equity, the Company shall be
entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any breach or prevent any threatened breach. Executive further
acknowledges that damages would be inadequate and insufficient to
compensate the Company for any breach of this Section 8.
9. GROUP TERMINATION BY SENIOR EXECUTIVES. As a material
inducement to the Company's willingness to enter into this Agreement and
the Stock Agreement, the Executive agrees that she will not deliver to the
Company a notice of termination pursuant to Section 5(c)(ii) hereof within
thirty days of the delivery of a similar notice by any of the persons
listed on Exhibit B hereto (individually each a "Covered Executive" and
collectively, the "Covered Executives") pursuant to the terms of such
Covered Executive's employment agreement with the Company; provided,
however, that the preceding clause shall be void and of no force and effect
from and after the occurrence of a Change in Control of the Company.
10. DISPUTE RESOLUTION; ATTORNEYS' FEES. All disputes arising
under or related to the employment of the Executive by the Company or the
provisions of this agreement shall be settled by arbitration under the
rules of the American Arbitration Association then in effect, such
arbitration to be held in Portland, Oregon, as the sole and exclusive
remedy of either party and judgment on any arbitration award may be entered
in any court of competent jurisdiction. The Company agrees to reimburse
all reasonable legal fees and other expenses incurred by the Executive in
any such dispute if the Executive prevails as to one or more of the
material issues in the dispute. Promptly following the Effective Date, the
Company shall reimburse the Executive for legal fees and expenses incurred
by the Executive in negotiating and entering into this Agreement and the
New Deferred Compensation Agreement and incidental matters contemplated
hereby, up to a maximum of $17,500.
The Company shall also promptly reimburse the Executive for legal
fees, costs and expenses incurred in any dispute, arbitration or other
litigation relating to or arising out of the termination of Executive's
employment with her prior employer and any subsidiary or affiliate thereof,
including without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company (including with respect to the appointment of officers and
other employees) and the employment by the Company of any Covered
Executive.
11. SUCCESSORS. (a) No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than
her rights to payments, benefits or other compensation hereunder, which
(without the prior written consent of the Company) may be transferred only
by will or the laws of descent and distribution or as otherwise provided in
the Stock Agreement. Upon Executive's death, this Agreement and all rights
of Executive hereunder shall inure to the benefit of and be enforceable by
Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any payment,
benefit or other compensation payable hereunder following Executive's death
by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of her incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to her
beneficiary or beneficiaries, estate or other legal representative(s).
(b) No rights or obligations of the Company under this Agreement
may be assigned or transferred except that the Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would have been
required to perform it if no such succession had taken place. As used in
this Agreement, the "Company" shall mean both the Company as defined above
and any successor to its business and/or assets (by merger, purchase or
otherwise) which executes and delivers the agreement provided for in this
Section 11(b) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law or otherwise.
12. COMPANY REPRESENTATION. The Company represents and warrants
to the Executive that (i) it has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder in full, (ii) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder
have been duly and validly authorized by all necessary corporate action and
(iii) no other corporate proceedings on the part of the Company (including
on the part of the shareholders of the Company) are necessary to authorize
this Agreement or perform such obligations. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
13. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, or by a nationally recognized overnight courier addressed as
follows:
If to the Executive:
Mary F. Sammons
3508 S.W. Gale Avenue
Portland, Oregon 97201
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 13. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) Except as provided in the Stock Agreement, the rights and
benefits of the Executive under this Agreement may not be anticipated,
assigned, alienated or subject to attachment, garnishment, levy, execution
or other legal or equitable process except as required by law. Except as
provided in the Stock Agreement, any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge
the same shall be void. Payments hereunder shall not be considered assets
of the Executive in the event of insolvency or bankruptcy.
(g) This Agreement (together with the exhibits hereto) sets
forth the entire agreement of the parties hereto in respect of the subject
matter construed herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties,
whether oral or written by any party or any officer or other representative
of such party in respect of such subject matter.
(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) This Agreement shall survive the termination of the
Employment Period and the termination of Executive's employment hereunder
under any circumstances to the extent necessary to give effect to its
provisions.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
-----------------------------------
By: Leonard Green
Title: Chairman of the Board
-----------------------------------
Mary F. Sammons
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Rite Aid Corporation, a Delaware
corporation (the "Company"), and David R. Jessick (the "Executive"), is
dated as of the 5th day of December, 1999 (the "Effective Date").
W I T N E S S E T H
WHEREAS, the Company and the Executive have agreed that the
employment of the Executive is essential to the successful implementation
of the Company's long term business strategy; and
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in
the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. TERM. Subject to earlier termination in accordance with the
provisions of Section 4, the term of Executive's employment under this
Agreement (the "Employment Period") shall commence as of the Effective Date
and end on the third anniversary thereof, provided, however, that on each
anniversary of the Effective Date (each such date, a "Renewal Date"), an
additional year shall be added to the Employment Period, unless notice of
non-renewal has been delivered by one party to the other party at least 180
days prior to such Renewal Date.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as the Senior Executive Vice President and Chief
Administrative Officer of the Company, with such duties and
responsibilities as are customarily assigned to such position, and such
other duties and responsibilities appropriate to such office as may from
time to time be assigned to him by the Company's Chief Executive Officer or
the Board of Directors of the Company (the "Board"). Executive shall
report solely to the Chief Executive Officer of the Company and the Board.
Following termination of the Executive's employment for any reason, the
Executive shall immediately resign from all offices and positions he holds
with the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote substantially his full attention and time during business
hours to the business and affairs of the Company and shall carry out such
responsibilities faithfully and efficiently. Notwithstanding the
foregoing, to the extent consistent with the performance of his duties and
responsibilities hereunder, the Executive may serve on corporate, industry,
civic or charitable boards and committees and shall be permitted to make
and manage his personal investments.
(c) Other than for necessary travel in connection with the
performance of his duties hereunder, the Executive shall be based in
Portland, Oregon, and shall not at any time be required to relocate his
primary residence from the Portland metropolitan area, regardless of the
location from time to time of the Company's principal headquarters. The
Company shall provide suitable office space, staff and equipment to enable
the Executive to discharge his duties from such location.
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Company shall pay Executive an annual base salary ("Annual Base
Salary") of not less than $600,000. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time (but in no event less
frequently than monthly). During the Employment Period, the Annual Base
Salary shall be reviewed periodically by the Compensation Committee of the
Board (the "Compensation Committee") for possible increase. Any increase
in the Annual Base Salary shall not limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as from time to time so
increased.
(b) INCENTIVE COMPENSATION. The Company shall pay to the
Executive, on or about April 1, 2000, a guaranteed bonus in respect of
calendar year 1999 in the amount of $150,000 (the "1999 Guaranteed Bonus").
Commencing with the Company's 2000 fiscal year, the Executive shall
participate during the Employment Period in annual cash incentive
compensation plans (each, an "Annual Bonus Plan"), as adopted and approved
by the Board or the Compensation Committee from time to time, with targets
based upon the Company's business plan developed by the Executive and the
Board. The Executive's annual target bonus opportunity pursuant to such
plans (the "Annual Target Bonus") shall equal at least 60% of the Annual
Base Salary in effect for the Executive at the beginning of such fiscal
year.
(c) OTHER BENEFITS. During the Employment Period, except as and
to the extent otherwise provided herein, (1) the Executive shall be
entitled to participate in all applicable fringe benefit and perquisite
programs and savings and retirement plans (including non-qualified
supplemental executive retirement plans), practices, policies and programs
of the Company on the same basis as all other senior executives of the
Company; and (2) the Executive and/or the Executive's eligible dependents,
as the case may be, shall be eligible for participation in, and shall
receive benefits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company on the same basis and subject
to the same terms and conditions, as all other senior executives of the
Company. Without limiting the generality of the foregoing, during the
Employment Period the Company shall provide Executive with (i) an annual
financial and tax planning allowance of $10,000; (ii) a car allowance of
$1,000 per month; (iii) use of Company-owned aircraft for business travel;
(iv) reimbursement for the annual dues at a country club of Executive's
choice; and (v) subject to the immediately succeeding sentence, term life
insurance covering the Executive's life and long term disability insurance,
in each case in a face amount equal to $1,500,000. The Executive agrees to
cooperate with the Company in obtaining such life and disability insurance,
including submitting to a physical examination if required to do so by the
insurance carrier. The beneficiary of each of the aforementioned policies
shall be designated by the Executive and if not so designated shall be his
estate. The Company shall promptly reimburse Executive for (x) all
necessary and reasonable business expenses, including first-class travel
and hotel accommodations, incurred by the Executive in connection with the
discharge of his duties hereunder, and (y) all reasonable costs and
expenses incurred by Executive in the course of meeting with Company
directors and officers, performing due diligence and with respect to all
other matters undertaken in connection with the Company and/or its business
prior to the Effective Date. The Executive shall be entitled to five
weeks' vacation per year in accordance with the Company's vacation policy
for senior executives. During the Employment Period, the Company shall
provide the Executive with a suitable apartment in the vicinity of the
Company's principal headquarters in Harrisburg, Pennsylvania.
(d) DEFERRED COMPENSATION; SERVICE CREDIT. As of the Effective
Date, the Company shall establish a non-qualified deferred compensation
plan (the "New Deferred Compensation Plan") for the benefit of the
Executive. As of the first day of each month during the Employment Period,
the Company shall credit Executive's account under the New Deferred
Compensation Plan with an amount equal to $10,000. The Executive shall be
fully vested at all times in his account balance under the New Deferred
Compensation Plan. Promptly following the Effective Date, the Company and
Executive shall negotiate in good faith and agree upon the specific terms
of the New Deferred Compensation Plan, including the applicable investment
vehicle and terms and schedule of payments. In addition, as of the
Effective Date, the Executive and the Company shall enter into the
customary deferred compensation agreement provided to senior executives by
the Company and the Executive shall be deemed to have, as of the Effective
Date, fifteen years of service with the Company for purposes of such
agreement. Such deferred compensation agreement shall provide benefits
which are commensurate with Executive's position and consistent with the
Company's past practice
(e) EQUITY AWARDS. As of the Effective Date, the Company shall
grant to the Executive (i) an option (the "Option") to purchase 1,000,000
shares of the Company's common stock, par value $1.00 per share ("Company
Stock") and (ii) 100,000 shares of restricted Company Stock (the
"Restricted Stock"), on the terms and conditions set forth in that certain
Restricted Stock and Stock Option Award Agreement (the "Stock Agreement")
attached hereto as Exhibit A and incorporated herein by this reference,
subject in each case however to the acceleration and exercise provisions of
Section 5 hereof and all other applicable provisions of this Agreement. In
the case of any conflict between the terms and conditions of this Agreement
and the terms and conditions of the Stock Agreement, the terms and
conditions of this Agreement shall govern.
(f) INDEMNIFICATION. The Company shall (a) indemnify and hold
Executive harmless, to the full extent permitted under applicable law, for,
from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions, in respect
thereof) (i) related to or arising out of the Executive's employment with
and service as an officer of the Company (including with respect to the
appointment of officers and other employees) and (ii) related to or arising
out of the termination of Executive's employment with his prior employer
and any subsidiary or affiliate thereof, including without limitation
claims in respect of amounts payable under any applicable agreement upon or
otherwise in connection with such termination of employment and Executive's
commencement of and continuing employment with the Company and the
employment by the Company of any Covered Executive (as hereinafter
defined); and (b) pay all reasonable costs, expenses and attorney's fees
incurred by Executive in connection with or relating to the defense of any
such loss, claim, cost, expense, damage, liability or action. Following
any termination of the Executive's employment or service with the Company,
the Company shall cause any director and officer liability insurance
policies applicable to the Executive prior to such termination to remain in
effect for six (6) years following the Termination Date.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. The Company shall be entitled to
terminate the Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that Executive has been
unable, for six consecutive months, to perform the Executive's duties under
this Agreement, as a result of physical or mental illness or injury. The
effective date of any termination of Executive's employment for Disability
is referred to herein as the "Disability Effective Date." A termination of
the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive, unless the
Executive returns to full-time performance of the Executive's duties before
the Disability Effective Date. During any period prior to the Disability
Effective Date during which Executive is absent from the full-time
performance of his duties with the Company due to such physical or mental
illness or injury, the Company shall continue to pay Executive his Annual
Base Salary and Executive shall be entitled to receive any bonus payable
under the terms of the applicable Annual Bonus Plan(s) in the ordinary
course pursuant to the terms of such Annual Bonus Plan.
(b) TERMINATION BY THE COMPANY. The Company may terminate the
Executive's employment at any time during the Employment Period for Cause
or without Cause. "Cause" shall mean only an act of fraud, embezzlement or
misappropriation by the Executive, in any such case intended by the
Executive to result in substantial personal enrichment at the expense of
the Company. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the non-employee members of
the Board at a meeting of the Board called and held for such purpose (after
reasonable written notice to Executive setting forth in reasonable detail
the specific conduct of the Executive upon which the Board relies in
reaching its determination, and an opportunity for Executive, together with
his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in the
second sentence of this Section 4(b), and Executive shall be entitled to
receive all compensation and benefits hereunder pending the delivery of
such resolution. The effective date of any termination for Cause shall be
the date such resolution is delivered to Executive.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" shall mean the
occurrence of any one of the following:
A. any (i) adverse alteration in Executive's titles,
positions, status, duties, authorities, reporting relationships or
responsibilities with the Company or its subsidiaries from those
specified in this Agreement, as the same may be augmented from time to
time (it being understood that, if the Company is no longer a public
company, the failure of Executive to hold the position and duties
under Section 2 with any ultimate corporate or other parent of the
Company or any successor shall be deemed to constitute such Good
Reason), (ii) assignment to Executive of any duties or
responsibilities inconsistent with Executive's status as Senior
Executive Vice President and Chief Administrative Officer of the
Company or (iii) removal of Executive from either such office under
any circumstances (other than in connection with the termination of
Executive's employment hereunder);
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement;
C. any failure by the Company to comply with Section 2(c)
of this Agreement;
D. any failure by the Company to comply with paragraph (b)
of Section 11 of this Agreement;
E. delivery by the Company to the Executive of a notice of
non-renewal of the Employment Period pursuant to Section 1 hereof; or
F. any other material breach of this Agreement by the
Company; provided, however, that the Company shall have the right,
within ten (10) days after receipt of notice from Executive of the
Company's violation of any one of subparagraphs A, B or F, to cure in
full the event or circumstances giving rise to such Good Reason, in
the event of which cure such event or circumstances shall be deemed
not to constitute Good Reason hereunder.
In addition, any termination of employment by the Executive
within the six month period commencing on the date of a Change in Control
of the Company (as defined in the Stock Agreement) shall be treated as a
termination of employment by the Executive for Good Reason. A termination
of employment by the Executive for Good Reason shall be effectuated by
giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct
of the Company that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies, provided, that Executive's
continued employment shall not be deemed to constitute consent to, or a
waiver of rights with respect to, any act, omission or other grounds
constituting Good Reason hereunder. For clarity, it is understood that the
requirement of setting forth such specific conduct and specific
provisions(s) is intended (i) to permit the Company to make a reasonable
evaluation of Executive's claim of termination for Good Reason and (ii) to
permit the Company, where applicable, to cure such conduct, but not to
require Executive to specify each act, omission or other grounds
constituting Good Reason, there being no intention of the parties that
failure to so specify will function as an estoppel with respect to any
claim by Executive. A termination of employment by the Executive for Good
Reason shall be effective on the latest of (i) the fifth business day
following the expiration of the Company's cure period described above, if
applicable, (ii) the date specified by Executive in the Notice of
Termination for Good Reason or (iii) 45 days following the date the Notice
of Termination for Good Reason is delivered to the Company.
(ii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 90 days' written notice of such termination, and shall be effective
on the date specified by Executive in such notice, provided, however, that
no such notice period shall be required with respect to any such
termination as to which such written notice of termination is delivered to
the Company following a Change in Control of the Company.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date
on which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason becomes effective, as the case may be. On the Date of Termination,
the Employment Period shall terminate.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE OR DISABILITY, OR FOR GOOD REASON. If, during the Employment
Period, the Company terminates the Executive's employment for any reason
other than Cause or Disability, or the Executive terminates his employment
for Good Reason;
(1) the Company shall pay to the Executive, not later than ten (10)
days following the Date of Termination, (i) an amount equal to three
times the sum of (x) the Executive's then current Annual Base Salary
(without giving effect to any reductions thereof) plus (y) the
Executive's then current Annual Target Bonus; (ii) (A) any accrued but
unpaid amounts of the Executive's Annual Base Salary through the Date
of Termination, (B) any bonus under any Annual Bonus Plan accrued but
unpaid through the Date of Termination (including without limitation
any such bonus payable on a date following the Date of Termination
with respect to a fiscal year or other applicable measuring period
completed prior to the Date of Termination), (C) any other
compensation and benefits accrued (and, where applicable, vested)
through the Date of Termination under the terms of the Company's
compensation and benefit plans, programs or arrangements (including
without limitation vacation benefits and the deferred compensation
arrangements referenced in Section 3(d) hereof) as in effect
immediately prior to the Date of Termination (or, if in any case
providing a greater benefit to Executive, as in effect immediately
prior to an event constituting Good Reason) and (D) any amounts of
reimbursable business expenses incurred through the Date of
Termination (all of the items in this clause (ii) are hereinafter
referred to collectively as the "Accrued Benefits"); (iii) an amount
equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn under the Annual Bonus Plan
for the bonus measurement period during which the Date of Termination
occurs, and (B) a fraction, the numerator of which is the number of
days from the first day of such period through the Date of Termination
and the denominator of which is the total number of days in such
measurement period, together with a similarly pro rated bonus with
respect to any applicable long term incentive plan then in effect;
(iv) an amount equal to the sum of the deferred compensation amounts
which would otherwise have been credited to the Executive pursuant to
the New Deferred Compensation Plan had Executive continued employment
with the Company through the end of the then remaining Employment
Period (measured as of the Date of Termination without regard to any
subsequent renewals thereof), without reduction in any such case to a
net or other present value; and (v) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination (or, at Executive's sole discretion, medical
coverage provided to the Executive immediately prior to the occurrence
of any event constituting Good Reason) shall continue to be provided
by the Company to the Executive (and, if applicable, his spouse and
dependents) for three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(b) DEATH AND DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period;
(1) the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative), in a lump sum in cash within ten (10) days after the
Date of Termination, the sum of the following amounts: (i) the Accrued
Benefits; (ii) an amount equal to the product of (A) the maximum
annual bonus that the Executive would have been eligible to earn under
the Annual Bonus Plan for the bonus measurement period during which
the Date of Termination occurs, and (B) a fraction, the numerator of
which is the number of days from the first day of such period through
the Date of Termination and the denominator of which is the total
number of days in such measurement period, together with a similarly
pro rated bonus with respect to any applicable long term incentive
plan then in effect; and (iii) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination shall continue to be provided by the Company
(i) in the event of Disability, to the Executive (and, if applicable,
his spouse and dependents) or (ii) in the event of Executive's death,
to his surviving spouse (and, if applicable, his dependents), for
three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause during the Employment Period, (1) the
Company shall pay to the Executive the Accrued Benefits within ten (10)
days after the Date of Termination; (2) any portion of the Option or any
other then outstanding stock option that has not been exercised prior to
the Date of Termination shall immediately terminate; and (3) any portion of
the Restricted Stock or any other restricted stock or other equity
incentive awards as to which the restrictions have not lapsed or as to
which any other conditions shall not have been satisfied prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(d) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive's employment is terminated by Executive (other than for Good
Reason) during the Employment Period;
(1) the Company shall pay to the Executive the Accrued Benefits,
within ten (10) days after the Date of Termination;
(2) any portion of the Option or any other then outstanding stock
option that has not vested and become exercisable prior to the Date of
Termination shall immediately terminate and any portion of the Option
or any other then outstanding stock option that has vested and become
exercisable prior to the Date of Termination shall remain vested and
exercisable for a period of ninety (90) days following the Date of
Termination, at the end of which period such portion of the option
shall terminate, provided, however, that if the Date of Termination
shall be on or after the third anniversary of the Effective Date, the
entire Option shall remain vested and exercisable throughout the
remainder of its ten-year term; and
(3) the restrictions on the Restricted Stock shall continue to lapse
in accordance with the terms of the Stock Agreement as if Executive's
employment with the Company had continued uninterrupted until such
restrictions had lapsed in full; provided, however, that in the event
Executive's employment is terminated by Executive (other than for Good
Reason) prior to the first anniversary of the Effective Date any
portion of the Restricted Stock as to which the restrictions have not
lapsed pursuant to the terms of the Stock Agreement prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(e) (i) In the event that any payment or benefit received or to
be received by the Executive pursuant to the terms of this agreement or of
any other plan, arrangement or agreement of the Company (or any affiliate)
(collectively, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), as determined as provided below, the Company
shall pay to the Executive, at the time specified in Section 5(e)(ii)
below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of the Excise Tax on
Payments and any federal, state and local income and employment or other
tax and the Excise Tax upon the Gross-Up Payment, and any interest,
penalties or additions to tax payable by the Executive with respect
thereto, shall be equal to the total Payments. For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the
amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to Executive and selected by the accounting firm
which was, immediately prior to the event giving rise to the Payment, the
Company's independent auditor (the "Auditor"), a Payment (in whole or in
part) does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, or such "excess parachute payments" (in
whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof), and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rates of federal income taxation applicable to the individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of the Executive's
residence in the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i)
hereof shall be made upon the earlier of (i) ten days following the Date of
Termination or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that the Excise Tax is
less than the amount taken into account under Section 5(e)(i) hereof, the
Executive shall repay to the Company within thirty (30) days of the
Executive's receipt of notice of such final determination the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the portion of the Gross-Up Payment being
repaid by the Executive if and to the extent that such repayment results in
a reduction in Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by the Executive on the
amount of such repayment. If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that the
Excise Tax exceeds the amount taken into account hereunder (including
without limitation by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment pursuant to Section
5(e)(i) in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the
Payments.
(iv) In the event of any change in, or further interpretation
of, sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall be entitled, by written notice to the
Company, to request an opinion of Tax Counsel regarding the application of
such change to any of the foregoing, and the Company shall use its best
efforts to cause such opinion to be rendered as promptly as practicable.
All fees and expenses of the Auditor and Tax Counsel incurred in connection
with this Agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any
of its affiliated companies.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others whether in respect of claims made
under this Agreement or otherwise. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment. In no event shall any amounts,
benefits or other compensation payable or otherwise provided to Executive
hereunder be reduced in respect of, or the Company's obligations to
Executive hereunder be affected by, or any other form of "clawback"
provision apply to, the payment to Executive at any time of any amounts,
benefits or other compensation in respect of his employment with any prior
employer.
8. CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION. During
the Employment Period and for a period of three years following the
applicable Date of Termination, the Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Confidential
Information") and the Executive shall not communicate, divulge or
disseminate Confidential Information at any time during such period to
anyone other than the Company, appropriate Company personnel and those
other persons designated by the Company, except (i) with the prior written
consent of the Company, (ii) as otherwise required by law or legal process,
(iii) on behalf of the Company in the furtherance of its business or in the
course of performing Executive's duties to the Company or (iv) in the
course of any adversarial proceeding against the Company. During the
Employment Period (and if during the Employment Period (A) the Executive
terminates his employment with the Company without Good Reason or (B) the
Executive is terminated by the Company for Cause, then for one year after
the Date of Termination), (i) the Executive shall not, without the written
consent of the Board, directly or indirectly, knowingly engage or be
interested in (as owner, partner, stockholder, employee, director, officer,
agent, consultant or otherwise), with or without compensation, any
Competitor of the Company, (ii) the Executive shall not, without the
written consent of the Board, directly or indirectly solicit or recruit any
person (other than persons employed in a clerical or other non-professional
position) who is then employed by the Company or who was employed by the
Company or any of its subsidiaries or affiliates at any time during the
six-month period preceding the Date of Termination for the purpose of being
employed by the Executive, by any entity or person on whose behalf the
Executive is acting as an agent, representative or employee or by any
Competitor of the Company and (iii) the Executive shall not, without the
written consent of the Board, directly or indirectly, solicit, entice,
persuade or induce any person or entity doing business with the Company and
its subsidiaries and affiliates, to terminate such relationship or to
refrain from extending or renewing the same. For purposes of this Section
8, the term "Competitor of the Company" shall mean any entity a majority of
whose business involves the ownership and operation of retail drug stores,
provided, however, that such term shall not include any entity a majority
of whose business involves the business of the retail sale or wholesale
distribution of food and related products (including, without limitation,
health and beauty care and general merchandise products and all other
products sold to the supermarket industry), regardless of whether such
entity sells certain products of a type found in retail drug stores and
regardless of whether one or more divisions or subsidiaries of such entity,
standing alone, would otherwise be a Competitor of the Company. Nothing
herein, however, shall prohibit the Executive from acquiring or holding not
more than five percent of any class of publicly traded securities of any
such business; provided that such securities entitle the Executive to no
more than five percent of the total outstanding votes entitled to be cast
by security holders of such business in matters on which such security
holders are entitled to vote. In the event of a breach or any threatened
breach of the Section 8, Executive agrees that, in addition to any other
remedy available to the Company at law or in equity, the Company shall be
entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any breach or prevent any threatened breach. Executive further
acknowledges that damages would be inadequate and insufficient to
compensate the Company for any breach of this Section 8.
9. GROUP TERMINATION BY SENIOR EXECUTIVES. As a material
inducement to the Company's willingness to enter into this Agreement and
the Stock Agreement, the Executive agrees that he will not deliver to the
Company a notice of termination pursuant to Section 5(c)(ii) hereof within
thirty days of the delivery of a similar notice by any of the persons
listed on Exhibit B hereto (individually each a "Covered Executive" and
collectively, the "Covered Executives") pursuant to the terms of such
Covered Executive's employment agreement with the Company; provided,
however, that the preceding clause shall be void and of no force and effect
from and after the occurrence of a Change in Control of the Company.
10. DISPUTE RESOLUTION; ATTORNEYS' FEES. All disputes arising
under or related to the employment of the Executive by the Company or the
provisions of this agreement shall be settled by arbitration under the
rules of the American Arbitration Association then in effect, such
arbitration to be held in Portland, Oregon, as the sole and exclusive
remedy of either party and judgment on any arbitration award may be entered
in any court of competent jurisdiction. The Company agrees to reimburse
all reasonable legal fees and other expenses incurred by the Executive in
any such dispute if the Executive prevails as to one or more of the
material issues in the dispute. Promptly following the Effective Date, the
Company shall reimburse the Executive for legal fees and expenses incurred
by the Executive in negotiating and entering into this Agreement and the
New Deferred Compensation Agreement and incidental matters contemplated
hereby, up to a maximum of $17,500.
The Company shall also promptly reimburse the Executive for legal
fees, costs and expenses incurred in any dispute, arbitration or other
litigation relating to or arising out of the termination of Executive's
employment with his prior employer and any subsidiary or affiliate thereof,
including without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company (including with respect to the appointment of officers
and other employees) and the employment by the Company of any Covered
Executive.
11. SUCCESSORS. (a) No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than
his rights to payments, benefits or other compensation hereunder, which
(without the prior written consent of the Company) may be transferred only
by will or the laws of descent and distribution or as otherwise provided in
the Stock Agreement. Upon Executive's death, this Agreement and all rights
of Executive hereunder shall inure to the benefit of and be enforceable by
Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any payment,
benefit or other compensation payable hereunder following Executive's death
by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary or beneficiaries, estate or other legal representative(s).
(b) No rights or obligations of the Company under this Agreement
may be assigned or transferred except that the Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would have been
required to perform it if no such succession had taken place. As used in
this Agreement, the "Company" shall mean both the Company as defined above
and any successor to its business and/or assets (by merger, purchase or
otherwise) which executes and delivers the agreement provided for in this
Section 11(b) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law or otherwise.
12. COMPANY REPRESENTATION. The Company represents and warrants
to the Executive that (i) it has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder in full, (ii) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder
have been duly and validly authorized by all necessary corporate action and
(iii) no other corporate proceedings on the part of the Company (including
on the part of the shareholders of the Company) are necessary to authorize
this Agreement or perform such obligations. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
13. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Oregon, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, or by a nationally recognized overnight courier addressed as
follows:
If to the Executive:
David R. Jessick
16025 N.E. Eilers Road
Aurora, OR 97002
If to the Company:
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 13. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) Except as provided in the Stock Agreement, the rights and
benefits of the Executive under this Agreement may not be anticipated,
assigned, alienated or subject to attachment, garnishment, levy, execution
or other legal or equitable process except as required by law. Except as
provided in the Stock Agreement, any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge
the same shall be void. Payments hereunder shall not be considered assets
of the Executive in the event of insolvency or bankruptcy.
(g) This Agreement (together with the exhibits hereto) sets
forth the entire agreement of the parties hereto in respect of the subject
matter construed herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties,
whether oral or written by any party or any officer or other representative
of such party in respect of such subject matter.
(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) This Agreement shall survive the termination of the
Employment Period and the termination of Executive's employment hereunder
under any circumstances to the extent necessary to give effect to its
provisions.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
----------------------------------
By: Leonard Green
Title: Chairman of the Board
----------------------------------
David R. Jessick
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Rite Aid Corporation, a Delaware
corporation (the "Company"), and John T. Standley (the "Executive"), is
dated as of the 5th day of December, 1999 (the "Effective Date").
W I T N E S S E T H
WHEREAS, the Company and the Executive have agreed that the
employment of the Executive is essential to the successful implementation
of the Company's long term business strategy; and
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in
the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. TERM. Subject to earlier termination in accordance with the
provisions of Section 4, the term of Executive's employment under this
Agreement (the "Employment Period") shall commence as of the Effective Date
and end on the third anniversary thereof, provided, however, that on each
anniversary of the Effective Date (each such date, a "Renewal Date"), an
additional year shall be added to the Employment Period, unless notice of
non-renewal has been delivered by one party to the other party at least 180
days prior to such Renewal Date.
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as the Executive Vice President and Chief Financial
Officer of the Company, with such duties and responsibilities as are
customarily assigned to such position, and such other duties and
responsibilities appropriate to such office as may from time to time be
assigned to him by the Company's Chief Executive Officer or the Board of
Directors of the Company (the "Board"). Executive shall report solely to
the Company's Senior Executive Vice President and Chief Administrative
Officer, Chairman and Chief Executive Officer and the Board. Following
termination of the Executive's employment for any reason, the Executive
shall immediately resign from all offices and positions he holds with the
Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote substantially his full attention and time during business
hours to the business and affairs of the Company and shall carry out such
responsibilities faithfully and efficiently. Notwithstanding the
foregoing, to the extent consistent with the performance of his duties and
responsibilities hereunder, the Executive may serve on corporate, industry,
civic or charitable boards and committees and shall be permitted to make
and manage his personal investments.
(c) Other than for necessary travel in connection with the
performance of his duties hereunder, the Executive shall be based at the
Company's headquarters in the Harrisburg, Pennsylvania area. The Company
shall reimburse the Executive for the following relocation expenses: (i)
the reasonable costs associated with the selling of the Executive's current
primary residence; (ii) reasonable living expenses for a residence for the
Executive and his family in the Harrisburg, Pennsylvania area for a
temporary period; (iii) a reasonable number of round trip visits between
Harrisburg and the city in which the Executive's current residence is
located, including reasonable costs for meals, lodging and transportation
for the Executive and his family during such trips; and (iv) reasonable
costs for moving Executive's household goods and cars to the Harrisburg,
Pennsylvania area. In addition, the Executive may participate in a
relocation service program, and the Company shall share in the expenses of
such program on terms which the parties shall mutually agree upon. The
reimbursement amount described herein shall be "grossed-up" to offset in
full any net increase in Executive's federal, state and local income,
employment and other taxes resulting therefrom (and from such gross-up).
3. COMPENSATION. (a) BASE SALARY. During the Employment
Period, the Company shall pay Executive an annual base salary ("Annual Base
Salary") of not less than $500,000. The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time (but in no event less
frequently than monthly). During the Employment Period, the Annual Base
Salary shall be reviewed periodically by the Compensation Committee of the
Board (the "Compensation Committee") for possible increase. Any increase
in the Annual Base Salary shall not limit or reduce any other obligation of
the Company under this Agreement. The Annual Base Salary shall not be
reduced after any such increase, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as from time to time so
increased.
(b) INCENTIVE COMPENSATION. To compensate Executive for lost
bonus opportunities with his prior employer for 1999, the Company shall pay
to the Executive, on or about April 1, 2000, a guaranteed bonus in respect
of calendar year 1999 in the amount of $150,000 (the "1999 Guaranteed
Bonus"). Commencing with the Company's 2000 fiscal year, the Executive
shall participate during the Employment Period in annual cash incentive
compensation plans (each, an "Annual Bonus Plan"), as adopted and approved
by the Board or the Compensation Committee from time to time, with targets
based upon the Company's business plan developed by the Executive and the
Board. The Executive's annual target bonus opportunity pursuant to such
plans (the "Annual Target Bonus") shall equal at least 50% of the Annual
Base Salary in effect for the Executive at the beginning of such fiscal
year.
(c) OTHER BENEFITS. During the Employment Period, except as and
to the extent otherwise provided herein, (1) the Executive shall be
entitled to participate in all applicable fringe benefit and perquisite
programs and savings and retirement plans (including non-qualified
supplemental executive retirement plans), practices, policies and programs
of the Company on the same basis as all other senior executives of the
Company; and (2) the Executive and/or the Executive's eligible dependents,
as the case may be, shall be eligible for participation in, and shall
receive benefits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company on the same basis and subject
to the same terms and conditions, as all other senior executives of the
Company. Without limiting the generality of the foregoing, during the
Employment Period the Company shall provide Executive with (i) an annual
financial and tax planning allowance of $10,000; (ii) a car allowance of
$1,000 per month; (iii) use of Company-owned aircraft for business travel;
(iv) reimbursement for the annual dues at a country club of Executive's
choice; and (v) subject to the immediately succeeding sentence, term life
insurance covering the Executive's life and long term disability insurance,
in each case in a face amount equal to $1,500,000. The Executive agrees to
cooperate with the Company in obtaining such life and disability insurance,
including submitting to a physical examination if required to do so by the
insurance carrier. The beneficiary of each of the aforementioned policies
shall be designated by the Executive and if not so designated shall be his
estate. The Company shall promptly reimburse Executive for (x) all
necessary and reasonable business expenses, including first-class travel
and hotel accommodations, incurred by the Executive in connection with the
discharge of his duties hereunder, and (y) all reasonable costs and
expenses incurred by Executive in the course of meeting with Company
directors and officers, performing due diligence and with respect to all
other matters undertaken in connection with the Company and/or its business
prior to the Effective Date. The Executive shall be entitled to five
weeks' vacation per year in accordance with the Company's vacation policy
for senior executives.
(d) DEFERRED COMPENSATION; SERVICE CREDIT. As of the Effective
Date, the Company shall establish a non-qualified deferred compensation
plan (the "New Deferred Compensation Plan") for the benefit of the
Executive. As of the first day of each month during the Employment Period,
the Company shall credit Executive's account under the New Deferred
Compensation Plan with an amount equal to $10,000. The Executive shall be
fully vested at all times in his account balance under the New Deferred
Compensation Plan. Promptly following the Effective Date, the Company and
Executive shall negotiate in good faith and agree upon the specific terms
of the New Deferred Compensation Plan, including the applicable investment
vehicle and terms and schedule of payments. In addition, as of the
Effective Date, the Executive and the Company shall enter into the
customary deferred compensation agreement provided to senior executives by
the Company and the Executive shall be deemed to have, as of the Effective
Date, fifteen years of service with the Company for purposes of such
agreement. Such deferred compensation agreement shall provide benefits
which are commensurate with Executive's position and consistent with the
Company's past practice
(e) EQUITY AWARDS. As of the Effective Date, the Company shall
grant to the Executive (i) an option (the "Option") to purchase 1,000,000
shares of the Company's common stock, par value $1.00 per share ("Company
Stock") and (ii) 100,000 shares of restricted Company Stock (the
"Restricted Stock"), on the terms and conditions set forth in that certain
Restricted Stock and Stock Option Award Agreement (the "Stock Agreement")
attached hereto as Exhibit A and incorporated herein by this reference,
subject in each case however to the acceleration and exercise provisions of
Section 5 hereof and all other applicable provisions of this Agreement. In
the case of any conflict between the terms and conditions of this Agreement
and the terms and conditions of the Stock Agreement, the terms and
conditions of this Agreement shall govern.
(f) INDEMNIFICATION. The Company shall (a) indemnify and hold
Executive harmless, to the full extent permitted under applicable law, for,
from and against any and all losses, claims, costs, expenses, damages,
liabilities or actions (including security holder actions, in respect
thereof) (i) related to or arising out of the Executive's employment with
and service as a director and an officer of the Company (including with
respect to the appointment of officers and other employees) and (ii)
related to or arising out of the termination of Executive's employment with
his prior employer and any subsidiary or affiliate thereof, including
without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company and the employment by the Company of any Covered Executive
(as hereinafter defined); and (b) pay all reasonable costs, expenses and
attorney's fees incurred by Executive in connection with or relating to the
defense of any such loss, claim, cost, expense, damage, liability or
action. Following any termination of the Executive's employment or service
with the Company, the Company shall cause any director and officer
liability insurance policies applicable to the Executive prior to such
termination to remain in effect for six (6) years following the Termination
Date.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. The Company shall be entitled to
terminate the Executive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that Executive has been
unable, for six consecutive months, to perform the Executive's duties under
this Agreement, as a result of physical or mental illness or injury. The
effective date of any termination of Executive's employment for Disability
is referred to herein as the "Disability Effective Date." A termination of
the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the Executive, unless the
Executive returns to full-time performance of the Executive's duties before
the Disability Effective Date. During any period prior to the Disability
Effective Date during which Executive is absent from the full-time
performance of his duties with the Company due to such physical or mental
illness or injury, the Company shall continue to pay Executive his Annual
Base Salary and Executive shall be entitled to receive any bonus payable
under the terms of the applicable Annual Bonus Plan(s) in the ordinary
course pursuant to the terms of such Annual Bonus Plan.
(b) TERMINATION BY THE COMPANY. The Company may terminate the
Executive's employment at any time during the Employment Period for Cause
or without Cause. "Cause" shall mean only an act of fraud, embezzlement or
misappropriation by the Executive, in any such case intended by the
Executive to result in substantial personal enrichment at the expense of
the Company. Notwithstanding the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the non-employee members of
the Board at a meeting of the Board called and held for such purpose (after
reasonable written notice to Executive setting forth in reasonable detail
the specific conduct of the Executive upon which the Board relies in
reaching its determination, and an opportunity for Executive, together with
his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in the
second sentence of this Section 4(b), and Executive shall be entitled to
receive all compensation and benefits hereunder pending the delivery of
such resolution. The effective date of any termination for Cause shall be
the date such resolution is delivered to Executive.
(c) GOOD REASON. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" shall mean the
occurrence of any one of the following:
A. any (i) adverse alteration in Executive's titles,
positions, status, duties, authorities, reporting relationships or
responsibilities with the Company or its subsidiaries from those
specified in this Agreement, as the same may be augmented from time to
time (it being understood that, if the Company is no longer a public
company, the failure of Executive to hold the position and duties
under Section 2 with any ultimate corporate or other parent of the
Company or any successor shall be deemed to constitute such Good
Reason), (ii) assignment to Executive of any duties or
responsibilities inconsistent with Executive's status as Executive
Vice President and Chief Financial Officer of the Company or (iii)
removal of Executive from either such office under any circumstances
(other than in connection with the termination of Executive's
employment hereunder);
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement;
C. any failure by the Company to comply with Section 2(c)
of this Agreement;
D. any failure by the Company to comply with paragraph (b)
of Section 11 of this Agreement;
E. delivery by the Company to the Executive of a notice of
non-renewal of the Employment Period pursuant to Section 1 hereof; or
F. any other material breach of this Agreement by the
Company; provided, however, that the Company shall have the right,
within ten (10) days after receipt of notice from Executive of the
Company's violation of any one of subparagraphs A, B or F, to cure in
full the event or circumstances giving rise to such Good Reason, in
the event of which cure such event or circumstances shall be deemed
not to constitute Good Reason hereunder.
In addition, any termination of employment by the Executive
within the six month period commencing on the date of a Change in Control
of the Company (as defined in the Stock Agreement) shall be treated as a
termination of employment by the Executive for Good Reason. A termination
of employment by the Executive for Good Reason shall be effectuated by
giving the Company written notice ("Notice of Termination for Good Reason")
of the termination, setting forth in reasonable detail the specific conduct
of the Company that constitutes Good Reason and the specific provision(s)
of this Agreement on which the Executive relies, provided, that Executive's
continued employment shall not be deemed to constitute consent to, or a
waiver of rights with respect to, any act, omission or other grounds
constituting Good Reason hereunder. For clarity, it is understood that the
requirement of setting forth such specific conduct and specific
provisions(s) is intended (i) to permit the Company to make a reasonable
evaluation of Executive's claim of termination for Good Reason and (ii) to
permit the Company, where applicable, to cure such conduct, but not to
require Executive to specify each act, omission or other grounds
constituting Good Reason, there being no intention of the parties that
failure to so specify will function as an estoppel with respect to any
claim by Executive. A termination of employment by the Executive for Good
Reason shall be effective on the latest of (i) the fifth business day
following the expiration of the Company's cure period described above, if
applicable, (ii) the date specified by Executive in the Notice of
Termination for Good Reason or (iii) 45 days following the date the Notice
of Termination for Good Reason is delivered to the Company.
(ii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company at
least 90 days' written notice of such termination, and shall be effective
on the date specified by Executive in such notice, provided, however, that
no such notice period shall be required with respect to any such
termination as to which such written notice of termination is delivered to
the Company following a Change in Control of the Company.
(d) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, or the date
on which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason becomes effective, as the case may be. On the Date of Termination,
the Employment Period shall terminate.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OTHER THAN
FOR CAUSE OR DISABILITY, OR FOR GOOD REASON. If, during the Employment
Period, the Company terminates the Executive's employment for any reason
other than Cause or Disability, or the Executive terminates his employment
for Good Reason;
(1) the Company shall pay to the Executive, not later than ten (10)
days following the Date of Termination, (i) an amount equal to three
times the sum of (x) the Executive's then current Annual Base Salary
(without giving effect to any reductions thereof) plus (y) the
Executive's then current Annual Target Bonus; (ii) (A) any accrued but
unpaid amounts of the Executive's Annual Base Salary through the Date
of Termination, (B) any bonus under any Annual Bonus Plan accrued but
unpaid through the Date of Termination (including without limitation
any such bonus payable on a date following the Date of Termination
with respect to a fiscal year or other applicable measuring period
completed prior to the Date of Termination), (C) any other
compensation and benefits accrued (and, where applicable, vested)
through the Date of Termination under the terms of the Company's
compensation and benefit plans, programs or arrangements (including
without limitation vacation benefits and the deferred compensation
arrangements referenced in Section 3(d) hereof) as in effect
immediately prior to the Date of Termination (or, if in any case
providing a greater benefit to Executive, as in effect immediately
prior to an event constituting Good Reason) and (D) any amounts of
reimbursable business expenses incurred through the Date of
Termination (all of the items in this clause (ii) are hereinafter
referred to collectively as the "Accrued Benefits"); (iii) an amount
equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn under the Annual Bonus Plan
for the bonus measurement period during which the Date of Termination
occurs, and (B) a fraction, the numerator of which is the number of
days from the first day of such period through the Date of Termination
and the denominator of which is the total number of days in such
measurement period, together with a similarly pro rated bonus with
respect to any applicable long term incentive plan then in effect;
(iv) an amount equal to the sum of the deferred compensation amounts
which would otherwise have been credited to the Executive pursuant to
the New Deferred Compensation Plan had Executive continued employment
with the Company through the end of the then remaining Employment
Period (measured as of the Date of Termination without regard to any
subsequent renewals thereof), without reduction in any such case to a
net or other present value; and (v) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination (or, at Executive's sole discretion, medical
coverage provided to the Executive immediately prior to the occurrence
of any event constituting Good Reason) shall continue to be provided
by the Company to the Executive (and, if applicable, his spouse and
dependents) for three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(b) DEATH AND DISABILITY. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period;
(1) the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative), in a lump sum in cash within ten (10) days after the
Date of Termination, the sum of the following amounts: (i) the Accrued
Benefits; (ii) an amount equal to the product of (A) the maximum
annual bonus that the Executive would have been eligible to earn under
the Annual Bonus Plan for the bonus measurement period during which
the Date of Termination occurs, and (B) a fraction, the numerator of
which is the number of days from the first day of such period through
the Date of Termination and the denominator of which is the total
number of days in such measurement period, together with a similarly
pro rated bonus with respect to any applicable long term incentive
plan then in effect; and (iii) if not theretofore paid, the 1999
Guaranteed Bonus;
(2) medical coverage provided to the Executive immediately prior to
the Date of Termination shall continue to be provided by the Company
(i) in the event of Disability, to the Executive (and, if applicable,
his spouse and dependents) or (ii) in the event of Executive's death,
to his surviving spouse (and, if applicable, his dependents), for
three years following the Date of Termination;
(3) all of the Executive's then outstanding stock options shall vest
and become fully exercisable as of the Date of Termination and (i) the
Option shall remain fully vested and exercisable throughout the
remainder of its ten-year term and (ii) any other outstanding options
to acquire Company securities shall similarly remain exercisable for
the remainder of their stated term, without regard to any early
termination provisions or other terms and conditions otherwise
applicable to such options; and
(4) all remaining restrictions applicable to the Restricted Stock and
any other restricted stock awards shall immediately lapse and any
performance goals or other conditions applicable to any other equity
incentive awards shall immediately be deemed to have been satisfied in
full (with performance goals being deemed to have been satisfied at
targeted levels).
(c) BY THE COMPANY FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause during the Employment Period, (1) the
Company shall pay to the Executive the Accrued Benefits within ten (10)
days after the Date of Termination; (2) any portion of the Option or any
other then outstanding stock option that has not been exercised prior to
the Date of Termination shall immediately terminate; and (3) any portion of
the Restricted Stock or any other restricted stock or other equity
incentive awards as to which the restrictions have not lapsed or as to
which any other conditions shall not have been satisfied prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(d) BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive's employment is terminated by Executive (other than for Good
Reason) during the Employment Period;
(1) the Company shall pay to the Executive the Accrued Benefits,
within ten (10) days after the Date of Termination;
(2) any portion of the Option or any other then outstanding stock
option that has not vested and become exercisable prior to the Date of
Termination shall immediately terminate and any portion of the Option
or any other then outstanding stock option that has vested and become
exercisable prior to the Date of Termination shall remain vested and
exercisable for a period of ninety (90) days following the Date of
Termination, at the end of which period such portion of the option
shall terminate, provided, however, that if the Date of Termination
shall be on or after the third anniversary of the Effective Date, the
entire Option shall remain vested and exercisable throughout the
remainder of its ten-year term; and
(3) the restrictions on the Restricted Stock shall continue to lapse
in accordance with the terms of the Stock Agreement as if Executive's
employment with the Company had continued uninterrupted until such
restrictions had lapsed in full; provided, however, that in the event
Executive's employment is terminated by Executive (other than for Good
Reason) prior to the first anniversary of the Effective Date any
portion of the Restricted Stock as to which the restrictions have not
lapsed pursuant to the terms of the Stock Agreement prior to the Date
of Termination shall be forfeited as of the Date of Termination.
(e) (i) In the event that any payment or benefit received or to
be received by the Executive pursuant to the terms of this agreement or of
any other plan, arrangement or agreement of the Company (or any affiliate)
(collectively, the "Payments") would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), as determined as provided below, the Company
shall pay to the Executive, at the time specified in Section 5(e)(ii)
below, an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of the Excise Tax on
Payments and any federal, state and local income and employment or other
tax and the Excise Tax upon the Gross-Up Payment, and any interest,
penalties or additions to tax payable by the Executive with respect
thereto, shall be equal to the total Payments. For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the
amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of
the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
except to the extent that, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to Executive and selected by the accounting firm
which was, immediately prior to the event giving rise to the Payment, the
Company's independent auditor (the "Auditor"), a Payment (in whole or in
part) does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, or such "excess parachute payments" (in
whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Payments or (B) the amount of
"excess parachute payments" within the meaning of section 280G(b)(1) of the
Code (after applying clause (1) hereof), and (3) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rates of federal income taxation applicable to the individuals in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of the Executive's
residence in the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account any
limitations applicable to individuals subject to federal income tax at the
highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i)
hereof shall be made upon the earlier of (i) ten days following the Date of
Termination or (ii) the imposition upon the Executive or payment by the
Executive of any Excise Tax.
(iii) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that the Excise Tax is
less than the amount taken into account under Section 5(e)(i) hereof, the
Executive shall repay to the Company within thirty (30) days of the
Executive's receipt of notice of such final determination the portion of
the Gross-Up Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income tax imposed on the portion of the Gross-Up Payment being
repaid by the Executive if and to the extent that such repayment results in
a reduction in Excise Tax and a dollar-for-dollar reduction in the
Executive's taxable income and wages for the purpose of federal, state and
local income taxes) plus any interest received by the Executive on the
amount of such repayment. If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that the
Excise Tax exceeds the amount taken into account hereunder (including
without limitation by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment pursuant to Section
5(e)(i) in respect of such excess within thirty (30) days of the Company's
receipt of notice of such final determination or opinion. The Executive
and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the
Payments.
(iv) In the event of any change in, or further interpretation
of, sections 280G or 4999 of the Code and the regulations promulgated
thereunder, the Executive shall be entitled, by written notice to the
Company, to request an opinion of Tax Counsel regarding the application of
such change to any of the foregoing, and the Company shall use its best
efforts to cause such opinion to be rendered as promptly as practicable.
All fees and expenses of the Auditor and Tax Counsel incurred in connection
with this Agreement shall be borne by the Company.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any
of its affiliated companies.
7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others whether in respect of claims made
under this Agreement or otherwise. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts, benefits and other compensation payable or
otherwise provided to the Executive under any of the provisions of this
Agreement, and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment. In no event shall any amounts,
benefits or other compensation payable or otherwise provided to Executive
hereunder be reduced in respect of, or the Company's obligations to
Executive hereunder be affected by, or any other form of "clawback"
provision apply to, the payment to Executive at any time of any amounts,
benefits or other compensation in respect of his employment with any prior
employer.
8. CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION. During
the Employment Period and for a period of three years following the
applicable Date of Termination, the Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Confidential
Information") and the Executive shall not communicate, divulge or
disseminate Confidential Information at any time during such period to
anyone other than the Company, appropriate Company personnel and those
other persons designated by the Company, except (i) with the prior written
consent of the Company, (ii) as otherwise required by law or legal process,
(iii) on behalf of the Company in the furtherance of its business or in the
course of performing Executive's duties to the Company or (iv) in the
course of any adversarial proceeding against the Company. During the
Employment Period (and if during the Employment Period (A) the Executive
terminates his employment with the Company without Good Reason or (B) the
Executive is terminated by the Company for Cause, then for one year after
the Date of Termination), (i) the Executive shall not, without the written
consent of the Board, directly or indirectly, knowingly engage or be
interested in (as owner, partner, stockholder, employee, director, officer,
agent, consultant or otherwise), with or without compensation, any
Competitor of the Company, (ii) the Executive shall not, without the
written consent of the Board, directly or indirectly solicit or recruit any
person (other than persons employed in a clerical or other non-professional
position) who is then employed by the Company or who was employed by the
Company or any of its subsidiaries or affiliates at any time during the
six-month period preceding the Date of Termination for the purpose of being
employed by the Executive, by any entity or person on whose behalf the
Executive is acting as an agent, representative or employee or by any
Competitor of the Company and (iii) the Executive shall not, without the
written consent of the Board, directly or indirectly, solicit, entice,
persuade or induce any person or entity doing business with the Company and
its subsidiaries and affiliates, to terminate such relationship or to
refrain from extending or renewing the same. For purposes of this Section
8, the term "Competitor of the Company" shall mean any entity a majority of
whose business involves the ownership and operation of retail drug stores,
provided, however, that such term shall not include any entity a majority
of whose business involves the business of the retail sale or wholesale
distribution of food and related products (including, without limitation,
health and beauty care and general merchandise products and all other
products sold to the supermarket industry), regardless of whether such
entity sells certain products of a type found in retail drug stores and
regardless of whether one or more divisions or subsidiaries of such entity,
standing alone, would otherwise be a Competitor of the Company. Nothing
herein, however, shall prohibit the Executive from acquiring or holding not
more than five percent of any class of publicly traded securities of any
such business; provided that such securities entitle the Executive to no
more than five percent of the total outstanding votes entitled to be cast
by security holders of such business in matters on which such security
holders are entitled to vote. In the event of a breach or any threatened
breach of the Section 8, Executive agrees that, in addition to any other
remedy available to the Company at law or in equity, the Company shall be
entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any breach or prevent any threatened breach. Executive further
acknowledges that damages would be inadequate and insufficient to
compensate the Company for any breach of this Section 8.
9. GROUP TERMINATION BY SENIOR EXECUTIVES. As a material
inducement to the Company's willingness to enter into this Agreement and
the Stock Agreement, the Executive agrees that he will not deliver to the
Company a notice of termination pursuant to Section 5(c)(ii) hereof within
thirty days of the delivery of a similar notice by any of the persons
listed on Exhibit B hereto (individually each a "Covered Executive" and
collectively, the "Covered Executives") pursuant to the terms of such
Covered Executive's employment agreement with the Company; provided,
however, that the preceding clause shall be void and of no force and effect
from and after the occurrence of a Change in Control of the Company.
10. DISPUTE RESOLUTION; ATTORNEYS' FEES. All disputes arising
under or related to the employment of the Executive by the Company or the
provisions of this agreement shall be settled by arbitration under the
rules of the American Arbitration Association then in effect, such
arbitration to be held in Portland, Oregon, as the sole and exclusive
remedy of either party and judgment on any arbitration award may be entered
in any court of competent jurisdiction. The Company agrees to reimburse
all reasonable legal fees and other expenses incurred by the Executive in
any such dispute if the Executive prevails as to one or more of the
material issues in the dispute. Promptly following the Effective Date, the
Company shall reimburse the Executive for legal fees and expenses incurred
by the Executive in negotiating and entering into this Agreement and the
New Deferred Compensation Agreement and incidental matters contemplated
hereby, up to a maximum of $17,500.
The Company shall also promptly reimburse the Executive for legal
fees, costs and expenses incurred in any dispute, arbitration or other
litigation relating to or arising out of the termination of Executive's
employment with his prior employer and any subsidiary or affiliate thereof,
including without limitation claims in respect of amounts payable under any
applicable agreement upon or otherwise in connection with such termination
of employment and Executive's commencement of and continuing employment
with the Company (including with respect to the appointment of officers and
other employees) and the employment by the Company of any Covered
Executive.
11. SUCCESSORS. (a) No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than
his rights to payments, benefits or other compensation hereunder, which
(without the prior written consent of the Company) may be transferred only
by will or the laws of descent and distribution or as otherwise provided in
the Stock Agreement. Upon Executive's death, this Agreement and all rights
of Executive hereunder shall inure to the benefit of and be enforceable by
Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any payment,
benefit or other compensation payable hereunder following Executive's death
by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary or beneficiaries, estate or other legal representative(s).
(b) No rights or obligations of the Company under this Agreement
may be assigned or transferred except that the Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would have been
required to perform it if no such succession had taken place. As used in
this Agreement, the "Company" shall mean both the Company as defined above
and any successor to its business and/or assets (by merger, purchase or
otherwise) which executes and delivers the agreement provided for in this
Section 11(b) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law or otherwise.
12. COMPANY REPRESENTATION. The Company represents and warrants
to the Executive that (i) it has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder in full, (ii) the execution and delivery of this
Agreement by the Company and the performance of its obligations hereunder
have been duly and validly authorized by all necessary corporate action and
(iii) no other corporate proceedings on the part of the Company (including
on the part of the shareholders of the Company) are necessary to authorize
this Agreement or perform such obligations. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
13. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, or by a nationally recognized overnight courier addressed as
follows:
If to the Executive:
John T. Standley
at the most recent address on
file at the Company's payroll office
If to the Company:
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 13. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) Except as provided in the Stock Agreement, the rights and
benefits of the Executive under this Agreement may not be anticipated,
assigned, alienated or subject to attachment, garnishment, levy, execution
or other legal or equitable process except as required by law. Except as
provided in the Stock Agreement, any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge
the same shall be void. Payments hereunder shall not be considered assets
of the Executive in the event of insolvency or bankruptcy.
(g) This Agreement (together with the exhibits hereto) sets
forth the entire agreement of the parties hereto in respect of the subject
matter construed herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties,
whether oral or written by any party or any officer or other representative
of such party in respect of such subject matter.
(h) This Agreement may be executed in several counterparts, each
of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
(i) This Agreement shall survive the termination of the
Employment Period and the termination of Executive's employment hereunder
under any circumstances to the extent necessary to give effect to its
provisions.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
RITE AID CORPORATION
----------------------------------
By: Leonard Green
Title: Chairman of the Board
----------------------------------
John T. Standley
CONFIDENTIAL -- FINAL RELEASE -- JANUARY 11, 2000 (2:00 P.M. EST)
TARGET RELEASE DATE JANUARY 11, 2000 AT 4:30 P.M. EST
INVESTORS: MEDIA:
Doug Wilburne Karen Rugen
(717) 975-3710 (717) 730-7766
FOR IMMEDIATE RELEASE
RITE AID ANNOUNCES AGREEMENT WITH LENDERS
REGARDING DEFERRED FINANCIAL REPORTING
PENDING COMPLETION OF REVIEW
BY NEW MANAGEMENT TEAM AND NEW AUDITORS
Camp Hill, PA, January 11, 2000 -- Rite Aid Corporation (NYSF, PSE: RAD)
today announced that it has reached agreements with its lenders under its
credit facilities and other financing arrangements, representing
approximately $3 billion of debt, to implement a deferred financial
reporting program through July 11, 2000. The agreements give the Company's
new management team and its new auditors, Deloitte & Touche LLP, time to
fully review the Company's historical financial information, conclude the
previously announced reaudits for the Company's 1997-99 fiscal years, and
complete audited financial statements for the Company's 2000 fiscal year
ending on February 26, 2000. The Company continues to borrow, as needed,
under its lending agreements for general working capital and to fund the
refinancing of commercial paper issues as they become due.
Rite Aid also announced that it intends to commence a consent solicitation
this week to amend various public debt indentures similarly to extend the
time to make SEC filings through July 11, 2000. Rite Aid said that it has
retained the investment banking firm of Salomon Smith Barney, Inc. and J.P.
Morgan Securities Incorporated to manage the consent solicitations.
Regular quarterly earnings announcements and the filing of the Company's
remaining quarterly and annual reports for fiscal year 2000, including the
filing of the third quarter report for the quarter ending November 27,
1999, will be made at the completion of the review. The Company agreed with
its lenders that these filings would be completed no later than July 11,
2000, which is the regular filing date for the Form 10-Q for the first
quarter the Company's fiscal year and which will be the first full fiscal
quarter under the Company's new management team appointed in December,
1999.
Bob Miller, Chairman and Chief Executive Officer, said, "Given our short
time here at Rite Aid and the required audits now underway by Deloitte &
Touche LLP, we have concluded that the work necessary to file the Company's
fiscal year 2000 third quarter results will not be completed in time to
meet today's SEC filing date and that it is appropriate for the Company to
adopt this deferred financial reporting program. This is the responsible
course of action for Rite Aid to take. We appreciate the strong support by
our lenders of Rite Aid's now management team and today's actions."
Mr. Miller continued, "We are confident and enthusiastic about the
Company's prospects and its ability to achieve levels of operating
profitability in line with the industry in the future. Since our arrival
one month ago, Rite Aid has taken constructive steps in its efforts to
restore profitability mid capitalize on the very real core competencies and
competitive strengths of our business, including putting into place
rigorous financial controls and accounting procedures. We are currently
developing our business plan to take advantage of Rite Aid's core strengths
including its market position, brand name awareness, modern store base and
relevant store format, strong pharmacy business, experienced field
management, efficient infrastructure and strong growth opportunities. These
new agreements with our lenders give us adequate time to review historical
financial matters, including making changes if required, and will allow us
to focus on managing our business successfully. We look forward to doing
so in partnership with and strengthened by the continued support of our
lenders, employees and vendors."
The Company told its lenders that the financial review underway does not
provide any basis for the Company to conclude either that it is not in
compliance with any of the financial or other covenants in its lending
agreements or that the Company cannot satisfy any of the other conditions
to borrowing under the agreements. The Company said that the amendments
approved by its lenders last month to the covenants in its credit
facilities and other financing arrangements give the new management team
appropriate levels of flexibility to pursue an operating strategy aimed at
building revenues and increasing earnings at Rite Aid; those amendments
will be filed with the SEC, along with the agreements with Rite Aid's
lenders announced today and the compensation agreements for the new
management team.
The Company said that the new agreements with its lenders also waive any
technical defaults to its credit facilities and other financing
arrangements that may arise from the deferred financial reporting program
on account of covenants in the Company's public debt documents. All the
waivers remain in effect until ten days prior to the expiration of any
applicable grace period under the terms of the Company's agreements with
its public bondholders but not late than the July 11, 2000 deferred filing
date. The Company said that no grace period is triggered under any of the
Company's public debt documents unless affirmative action is taken by
bondholders or indenture trustees and that if such action were taken, the
Company would then have at least sixty days to resolve any issues raised.
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 22 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 n the forward-looking
statements. Factors that could cause actual results to differ materially
form those expressed or implied in such forward-looking statements include
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 markets
for pharmaceuticals, availability of real estate, construction and start-up
of drugstore and distribution center facilities, and the effects of
technological difficulties. 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.
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