EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (the "Agreement") is entered into as
of October 3, 2001, by and among Rite Aid Corporation, a Delaware corporation
(the "Company"), and Green Equity Investors III, L.P. (the "Exchanging Holder").
WHEREAS, the Company has issued and sold to the Exchanging
Holder, shares of the Company's 8% Series A Cumulative Convertible Pay-In-Kind
Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"),
which was subsequently converted into shares of the Company's 8% Series B
Cumulative Convertible Pay-In-Kind Preferred Stock, par value $1.00 per share
(the "Series B Preferred Stock"); and
WHEREAS, as of September 30, 2001, the Exchanging Holder owns
3,495,990.6242 shares of Series B Preferred Stock, including all accrued and
unpaid dividends which will be paid by the Company in additional shares of
Series B Preferred Stock (the "Series B Shares") and
WHEREAS, pursuant to the Certificate of Designation governing
the Series B Preferred Stock, the Company may not issue shares of its common
stock, par value $1.00 per share (the "Common Stock") that are pari passu to the
Series B Preferred Stock without the prior affirmative vote or consent of the
holders of a majority in interest of the Series B Preferred Stock (the "Series B
Preferred Stock Pari Passu Veto"); and
WHEREAS, the Company, desires to eliminate the Series B
Preferred Stock Pari Passu Veto; and
WHEREAS, pursuant to an offer to exchange, the Company desires
to issue to the Exchanging Holder, and the Exchanging Holder desires to acquire
from the Company, in exchange for all of the Series B Shares, an equal number of
shares of Series D Preferred Stock (the "Series D Shares"), on the terms and
subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration for the Company completing a
refinancing of its senior credit agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. The Exchange.
(a) Exchange. Subject to the terms and conditions hereof,
the Company hereby agrees to issue to the Exchanging Holder one share, including
fractional Shares thereof, of the Company's 8% Series D Cumulative Convertible
Pay-In-Kind Preferred Stock, par value $1.00 per share (the "Series D Preferred
Stock") for every share, including fractional shares, of 8% Series B Pay-In-Kind
Preferred Stock tendered in exchange therefore (the "Exchange").
(b) Rights, Terms, Preferences and Designations of the
Series D Preferred Stock. The Series D Preferred Stock will be governed by a
certificate of designation which will be filed by the Company with the Delaware
Secretary of State on or prior to the Closing Date, and the form of which is
attached Exhibit A hereto (the "Series D Certificate of Designation").
(c) Registration Rights. The Company and the Exchanging
Holder have previously entered into that certain registration rights agreement
dated as of October 27, 2000 and simultaneous with the consummation of the
Exchange, shall enter into an amendment (the "Amendment" and together with this
Agreement, the "Agreements") to the Registration Rights Agreement, the form of
which is attached as Exhibit B hereto, in order to replace all references in the
Registration Rights Agreement to the Series B Preferred Stock and the Series A
Preferred Stock with the Series D Preferred Stock.
2. Closing. The consummation of the Exchange shall take place
at a closing (the "Closing") to be held at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, Four Times Square, New York, New York, at 9:00 a.m. New York
City time, on October 5, 2001, or at such other time and place as the Company
and the Exchanging Holder mutually agree (the "Closing Date"). At the Closing,
the Company shall deliver to the Exchanging Holder certificates representing the
Series D Shares issued in exchange for and cancellation of the Series B Shares.
3. Exchanging Holder Representations. The Exchanging Holder
hereby represents and warrants to the Company as follows:
(a) Authorization. The Exchanging Holder has full
partnership power and authority to execute, deliver and perform its obligations
under the Agreements. The execution and delivery of the Agreements have each
been duly and validly authorized, and all necessary partnership action has been
taken to make the Agreements legal, valid and binding obligations of the
Exchanging Holder, enforceable in accordance with their respective terms, except
that the enforcement hereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and to general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
2
(b) Receipt of Information. The Exchanging Holder has
received and reviewed the Agreements, and has received all such information as
it deems necessary and appropriate to enable it to evaluate the financial risk
inherent in making the Exchange and has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
(c) Title to Series B Shares. Immediately prior to the
Closing, the Exchanging Holder will have title to the Series B Shares, including
all accrued and unpaid dividends, being exchanged by it, free and clear of all
claims, liens, title defects and objections or equities of any kind and nature
whatsoever.
(d) Investment Representations.
(i) The Exchanging Holder is the person who exercises
full investment discretion with respect to the Series B Shares and the
Exchanging Holder has neither purchased nor sold for its account any Series B
Shares since the original issuance thereof.
(ii) The Exchanging Holder is acquiring the Series D
Shares hereunder for its own account, and not as a nominee or agent for any
other person, firm or corporation, and not with a view to the sale or
distribution of all or any part thereof in any transaction that would be in
violation of the securities laws of the United States. The Exchanging Holder
does not have any contract, undertaking, agreement or arrangement with any
person, firm or corporation to sell or transfer to such person, firm or
corporation with respect to any Series D Shares.
(iii) The Exchanging Holder understands that the Series
D Shares acquired hereunder and the shares of the Company's Common Stock into
which the Series D Shares are convertible (such shares of Common Stock, together
with the Series D Shares, the "Exchange Securities") will not be registered
under the Securities Act of 1933, as amended (the "Act"), in part based upon an
exemption from registration predicated on the accuracy and completeness of its
representations and warranties appearing herein. The Exchanging Holder
understands and acknowledges that, as a result, it will not be permitted to
sell, transfer or assign any of the Series D Shares acquired hereunder until
such Exchange Securities are registered or an exemption from the registration
and prospectus delivery requirements of the Act is available.
3
(iv) The Exchanging Holder agrees that in no event will
it make a disposition of any Exchange Securities or any interest therein, unless
such Exchange Securities are registered under the Act or unless and until (A) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, or (B) it shall have furnished the Company with an opinion
of counsel, reasonably satisfactory in form and content to the Company, to the
effect that (x) such disposition will not require registration of such Exchange
Securities under the Act or compliance with applicable state securities laws or
(y) an exemption from the registration requirements of the Act is available and
that all appropriate action necessary for compliance thereunder and under the
applicable state securities laws has been taken.
(v) The Exchanging Holder is an "Accredited Investor"
as such term is defined in Rule 501 of Regulation D promulgated under the Act;
does not require the assistance of an investment advisor or other purchaser
representative to participate in the transactions contemplated by the
Agreements; has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its investment in the
Series D Shares, has the ability to bear the economic risks of its investment
for an indefinite period of time.
(e) Section 3(a)(9) Exemption. The Exchanging Holder
acknowledges that the transaction contemplated hereby is intended to be exempt
from registration by virtue of Section 3(a)(9) of the Securities Act of 1933, as
amended. The Exchanging Holder knows of no reason why such exemption would not
be available for the transaction contemplated hereby.
4. Representations and Warranties of the Company. The Company
represents and warrants to the Exchanging Holder as follows:
(a) Organization, Authority, etc. The Company is a
corporation duly incorporated and validly existing under and by virtue of the
laws of the State of Delaware and has all requisite corporate power to own or
lease and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted; is duly qualified or licensed to do
business and is in good standing as a foreign corporation in all jurisdictions
in which it owns or leases property or in which the conduct of its business
requires it so to qualify or be licensed, except where the failure to be so
licensed or qualified could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect with respect to the Company; and has
all requisite corporate power to enter into the Agreements, to issue the Series
D Preferred Stock and to perform its obligations hereunder and thereunder.
4
(b) Corporate Acts and Proceedings. The execution and
delivery of the Agreements and the transactions contemplated hereby and thereby
have been duly and validly authorized, and all necessary corporate action has
been taken to make the Agreements legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms, except that the
enforcement thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
(c) Valid Issuance. When issued in exchange for the Series
B Shares as provided herein, the Series D Shares acquired hereunder will be duly
and validly issued, fully paid and nonassessable.
5. Expenses. Each of the Company and the Exchanging Holder
will pay its own expenses incurred in connection with the transactions
contemplated hereby.
6. Legends. All certificates representing the Exchange
Securities shall bear the following legends:
5
(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE DISPOSED OF OR TRANSFERRED UNLESS REGISTERED UNDER
SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
(b) Any legend required to be placed thereon by any
applicable state corporation, commercial or securities law.
7. Removal of Restrictions on Transfer. Any legend endorsed on
a certificate representing the Exchange Securities and the stop transfer
instructions and record notations with respect to such Exchange Securities shall
be removed in accordance with the terms and conditions of the Registration
Rights Agreement, as amended.
8. Series D Preferred Stock Directors. The Company and the
Exchanging Holders agree that upon consummation of the Exchange, Xxxxxxx X.
Xxxxx and Xxxxxxxx X. Xxxxxxxx will no longer serve as the Series B Directors,
as such term is defined in the Series D Certificate of Designation, but will
serve, in the same class and without interruption, as the Series D Directors, as
such term is defined in the Series D Certificate of Designation.
9. Miscellaneous.
(a) Amendment. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier, telex, facsimile, telecopier, or similar
writing:
(i) If to the Exchanging Holder to GEI, c/o Xxxxxxx
Xxxxx & Partners, L.P., 0000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, attention: Xxxxxxxx X. Xxxxxxxx, with a copy to Xxxxxx, Xxxx
and Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000,
attention: Xxxxxxxx Xxxxxx Xxxxxxx Esq.; and
6
(ii) If to the Company, to Rite Aid Corporation at 00
Xxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxxxx 00000, attention: Xxxxxx X. Xxxxxx, Esq.,
Senior Executive Vice President and General Counsel, with a copy to Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, Four Times Square, New York, New York
10036-6522, attention: Xxxxx X. Xxxxxx, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
(5) business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one (1) business day after being timely dispatched postage prepaid, if by
same-day or next-day courier; (iv) when answered back, if telexed; (v) when
receipt acknowledged, if sent by facsimile transmission and (vi) if given by any
other means, when delivered at the addresses referred to in this Section. Any of
the above addresses may be changed by notice made in accordance with this
Section 11(b).
(c) Parties in Interest. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not.
(d) Headings. The headings of the sections and paragraphs
of this Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
(e) Choice of Law. It is the intention of the parties that
the internal laws of the State of New York should govern the enforceability and
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties hereto, regardless of the laws that
might otherwise govern under the applicable provisions of conflict of laws.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
BEFORE EXECUTING THIS AGREEMENT, THE EXCHANGING HOLDER SHOULD CONSULT WITH ITS
TAX ADVISORS REGARDING THE CONSEQUENCES OF THE EXCHANGE AND OWNERSHIP OF THE
SERIES D SHARES.
7
IN WITNESS WHEREOF, the parties hereto have caused this
Exchange Agreement to be executed as of the date first above written.
RITE AID CORPORATION
By:
-------------------------------
Name:
Title:
GREEN EQUITY INVESTORS III, L.P.
By: Xxxxxxx Xxxxx & Partners, L.P.
By: LGP Management, Inc.
By:
--------------------------
Name:
Title:
8
