RITE AID CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 12 day of June, 2001, by and between Rite Aid Corporation (the "Company"), a
corporation organized under the laws of the State of Delaware, and each
purchaser, whose name and address is set forth on the signature page hereof,
together with their permitted transferees (the "Purchasers").
WHEREAS, the Company desires to issue and sell to the
Purchasers, and the Purchasers desire to purchase from the Company, shares
("Shares") of the Company's Common Stock, par value $1.00 per share (the "Common
Stock"); and
WHEREAS, the Company proposes to enter into this same form of
purchase agreement with certain other investors (collectively, the "Other
Purchasers") and to consummate sales of Shares to the Other Purchasers on
substantially the same terms and conditions. The term "Placement Agent" shall
collectively mean Xxxxxxx Xxxxx Xxxxxx Inc. and Credit Suisse First Boston
Corporation.
NOW THEREFORE, IN CONSIDERATION of the mutual covenants
contained in this Agreement, the Company and the Purchasers do hereby agree as
follows:
1. Agreement to Sell and Purchase the Shares. At the Closing (as
defined in Section 2 herein), the Company will, subject to the terms and
conditions of this Agreement, sell to the Purchasers, and the Purchasers will,
subject to the terms and conditions of this Agreement, buy from the Company, the
number of Shares set forth on the signature page hereto at a purchase price of
$7.50 per Share (the "Purchase Price") The obligations of the Purchasers are
several and not joint.
2. Delivery of the Shares at the Closing. The closing of the sale to,
and the purchase by, the Purchasers of the Shares (the "Closing") shall occur at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four Times Square, New
York, New York 10036-6522, simultaneously with Closing of the Refinancing (as
defined herein) (the "Closing Date"). Prior to the time of Closing, the Company
shall deliver to one or more custodians for the Purchasers, one or more
certificates registered in the name of the nominee of the custodian, evidencing
the Shares (the "Share Certificates") against delivery to the Company of the
aggregate Purchase Price. The custodians will execute such documents reasonably
necessary to evidence receipt of such Share Certificates. If for any reason, the
Closing does not occur within twenty-four hours of the Company's delivery to the
custodians of the Share Certificates, the custodians shall immediately return
such Share Certificates to the Company or an authorized representative thereof.
At the Closing, the Company will deliver to the Purchaser (i) the Legal Opinions
set forth in Section 3.22 herein, (ii) an executed copy of the Registration
Rights Agreement (as defined herein), and (iii) the Officer's Certificate set
forth in Section 6.1(e) herein. At the Closing, the Purchasers will deliver to
the Company (i) the aggregate Purchase Price in immediately available funds to
an account designated by the Company in writing, and (ii) an executed copy of
the Registration Rights Agreement (as defined herein).
1
As used herein, the term "Refinancing" shall mean the Company's
refinancing of its Senior Credit Agreement dated as of June 12, 2000 on terms
and conditions not materially less favorable to the Company than the terms of
that certain bank commitment letter attached as Exhibit A hereto and without the
waiver by the Agents (as such term is defined in the Commitment Letter) of any
material condition contained therein (the "Commitment Letter").
3. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Purchasers as
follows:
3.1 Organization. The Company is duly organized and validly
existing and in good standing under the laws of Delaware, and has all requisite
corporate power and authority to enter into this Agreement and the Registration
Rights Agreement (as defined herein) and to consummate the transactions
contemplated hereby and thereby. Each subsidiary of the Company listed on
Exhibit 21 to the 2001 10-K (as defined herein) (collectively, the
"Subsidiaries") is duly organized and except for those Subsidiaries included on
Schedule 3.1 herein, is validly existing and in good standing under their
respective jurisdiction of organization.
3.2 Validity. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action, corporate or otherwise, on the part of the Company. This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company and constitute legal, valid and binding obligations of
the Company enforceable against it in accordance with their terms.
3.3 Issuance, Sale and Delivery of the Shares. The Shares have
been duly authorized for issuance and sale to the Purchasers pursuant to this
Agreement, and, when issued, sold and delivered in accordance with this
Agreement against payment therefore of the consideration expressed herein, will
be duly and validly issued, fully paid and non-assessable and will be free of
restrictions on transfer other than restrictions on transfer set forth under
this Agreement. The issuance of the Shares is not subject to preemptive rights.
3.4 Capital Stock. As of June 1, 2001 and without giving
effect to the transactions contemplated by this Agreement and the proposed
agreements with Other Purchasers, the authorized capital stock of the Company
consisted of (i) 600,000,000 shares of Common Stock, of which approximately
403,761,696 shares were issued and outstanding and (ii) 20,000,000 shares of
preferred stock, of which 3,360,237 shares of Series B Preferred Stock were
outstanding. The outstanding shares of Common Stock and Preferred Stock are
validly issued, fully paid and non-assessable and have been issued in compliance
with applicable law. None of the outstanding shares of Common Stock or Preferred
Stock are entitled to cumulative voting rights or preemptive rights. Except as
set forth on Schedule 3.4 hereto, the Company has outstanding no option, warrant
or other commitment to issue or to acquire any shares of its capital stock or
any security or obligations convertible into or exchangeable for its capital
stock, nor has it given any person or entity any right to acquire from the
Company or sell to the Company any shares of its capital stock. Schedule 3.4
hereto sets forth as of the date hereof the outstanding shares of Common Stock,
assuming the exercise of all outstanding options and warrants, the conversion of
all securities or obligations convertible into or exchangeable for shares of its
Common Stock and the issuance of the maximum number of shares of Common Stock
subject to outstanding commitments of the Company.
2
3.5 Compliance with Other Instruments. Neither the execution
and delivery by the Company of this Agreement or the Registration Rights
Agreement, nor the consummation of the transactions contemplated hereby or
thereby, nor the issuance and sale of the Shares will (a) conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound or to
which any of the property or assets of the Company or any Subsidiary is subject,
(b) result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any Subsidiary or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any Subsidiary or any of its respective
properties, (c) result in the creation under any agreement or instrument of any
lien, security interest, encumbrance or other claim upon any of the respective
assets of the Company or any Subsidiary, or (d) create in any person or entity
any right to terminate any agreement with the Company or otherwise exercise any
rights against the Company or cause any payment or performance obligation of the
Company to be accelerated, except in each case (a-d) as would not, individually
or in the aggregate have a material adverse effect on the business, results of
operations, prospects or financial condition of the Company (as such business is
presently conducted and as it is presently proposed to be conducted) ("Material
Adverse Effect").
3.6 Governmental Consents. No consent, approval or
authorization of, or declaration or filing with, any governmental authority or
agency or any securities exchange on the part of the Company is required for the
valid execution and delivery of this Agreement and the Registration Rights
Agreement, the consummation of the transactions contemplated hereby and thereby,
or the valid offer, issue, sale and delivery of the Shares pursuant to this
Agreement other than the filings with the Securities and Exchange Commission
required to comply with its obligations under the Registration Rights Agreement.
The Company is not in violation of any of the listing requirements of the New
York Stock Exchange, except where such violation would not, individually or in
the aggregate, have a material adverse effect on (i) the Shares, (ii) the
ability of the Company to perform its obligations under this Agreement and the
Registration Rights Agreement, or (iii) the assets, business, properties or
financial condition of the Company (as such business is presently conducted and
as it is presently proposed to be conducted).
3.7 Offering Materials. The Company has not distributed and
will not distribute prior to the Closing Date, any offering material in
connection with the offering and sale of the Shares other than (i) the Company's
Annual Report on Form 10-K for the fiscal year ended March 3, 2001 (the "2001
10-K"); (ii) the Company's Preliminary Proxy filed with the Securities and
Exchange Commission (the "SEC") on May 21, 2001 (the "Preliminary Proxy"); (iii)
the Company's Definitive Proxy filed with the SEC on May 31, 2001 (the
"Definitive Proxy"); and (iv) and any other document filed by the Company with
the SEC since October 11, 2000 through the Closing Date (together with the 2001
10-K, the Preliminary Proxy and the Definitive Proxy, the "SEC Documents")
pursuant to its reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
3
3.8 Environmental and Safety Laws. Neither the Company nor any
Subsidiary is in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, except where any such
violations would not, individually or in the aggregate, have a Material Adverse
Effect, and to the best of the Company's knowledge, no material expenditures are
or are reasonably expected to be required in order to comply with any such
existing statute, law, or regulation.
3.9 Litigation. Except as disclosed in the SEC Documents or on
Schedule 3.9 hereto, there is no action, suit, proceeding, or investigation
pending, or to the Company's knowledge, currently threatened against the Company
or any Subsidiary that questions the validity of this Agreement or the
Registration Rights Agreement, or the Company's ability to consummate the
transactions contemplated hereby or thereby, or that might have, either
individually or in the aggregate, a Material Adverse Effect.
3.10 Compliance With Laws. Except as disclosed in the SEC
Documents or on Schedule 3.9 hereto, neither the Company nor any Subsidiary has
received any notification from any governmental entity (i) asserting a violation
of any law, statute, ordinance or regulation or the terms of any judgments,
orders, decrees, injunctions or writs applicable to the conduct of their
respective business; (ii) threatening to revoke any license, franchise permit or
government authorization; or (iii) restricting or in any way limiting its
operations as currently conducted or proposed to be conducted, except where any
such violations would not, individually or in the aggregate, have a Material
Adverse Effect.
3.11 Changes. Except for transactions contemplated by this
Agreement and the Registration Rights Agreement, or as disclosed in the SEC
Documents or on Schedule 3.11 hereto, and other than transactions conducted in
the ordinary course of business, since March 3, 2001, there has not been:
(a) any change in the assets, liabilities, financial condition,
or operating results of the Company, that have not been and
are not expected to be, individually or in the aggregate,
materially adverse to the assets, business, properties,
prospects or financial condition of the Company (as such
business is presently conducted and as it is presently
proposed to be conducted);
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business,
properties, prospects or financial condition of the Company
(as such business is presently conducted and as it is
presently proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company;
4
(e) any material change to a material contract or arrangement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any key employee, officer, director or
stockholder;
(g) any sale, assignment, or transfer of any patents,
trademarks, copyrights, trade secrets, or other intangible
assets;
(h) any resignation or termination of employment of any key
officer of the Company; and the Company, to the best of its
knowledge, does not know of the impending resignation or
termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its
material properties or assets, except liens for taxes not
yet due or payable or contested by the Company in good
faith;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, stockholders, officers, or
directors, or any members of their immediate families, other
than travel advances and other advances made in the ordinary
course of its business, except for certain short term loans
made by the Company to its officers described on Schedule
3.11 hereto;
(l) any declaration, setting aside, or payment of any dividend
or other distribution of the Company's assets in respect of
any of the Company's capital stock, except for dividends
paid-in-kind on outstanding Series B Preferred Stock or any
dividends payable on the proposed Series C Preferred Stock,
or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by the Company;
(m) any other event or condition of any character that would
reasonably be expected to have a Material Adverse Effect; or
(n) any agreement or commitment by the Company to do any of the
things described in this Section 3.11.
3.12 Integration. Neither the Company nor any affiliate (as
such term is defined in Rule 501(b) under the Securities Act) nor any person,
firm or corporation acting on its behalf, has directly or indirectly, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be integrated
5
with the sale of the Shares in a manner that would require the registration of
the Shares under the Securities Act. For purposes of Sections 3.12, 3.14 and
3.20 of this Agreement, we have assumed that the Placement Agents (i) will not
solicit offers for or offer Common Stock by any form of general solicitation or
general advertising (as those terms are defined in Regulation D of the
Securities Act), and (ii) will solicit offers for Common Stock only from, and
will offer Common Stock only to, institutional investors that it reasonably
believes to be "Accredited Investors" as defined in Rule 501(a)(1), (2), (3), or
(7) under the Securities Act.
3.13 Permits. Each of the Company and the Subsidiaries has all
franchises, permits, licenses, and any similar authority necessary for the
conduct of their business as now being conducted by it, except for those
franchises, permits, licenses the lack of which would not have a Material
Adverse Effect, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as presently
conducted or proposed to be conducted. Neither the Company nor any Subsidiary is
in default under any such franchisees, permits, license or other similar
authority except where such default would not have a Material Adverse Effect.
3.14 Offering. Assuming the truth and accuracy of the
Purchasers' representations and warranties set forth in this Agreement, the
offer and sale and issuance of the Shares as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereof that would cause the loss of such exemption.
3.15 Intellectual Property. Each of the Company and the
Subsidiaries own or possess sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for their respective business as now
conducted and as proposed to be conducted without conflict with, or infringement
of, the rights of others, except where the failure to have such rights,
individually or in the aggregate, would not have a Material Adverse Effect.
3.16 Employee Relations. To the best of the Company's
knowledge, there is no strike, labor dispute or union organization activities
pending or threatened between the Company and its employees. To the best of its
knowledge and except as disclosed in the SEC Documents, the Company has complied
in all material respects with all applicable state and federal equal opportunity
and other laws related to employment. The Company is not aware that any officer
or key employee, or that any group of key employees, intends to terminate
employment with the Company, nor does the Company have any present intention to
terminate the employment of any of the foregoing.
3.17 Additional Information. Since October 11, 2000, the
Company has timely filed, and at the Closing Date, the Company will have timely
filed, all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission pursuant to the
reporting requirements of the Exchange Act. The Company represents and warrants
that as of their respective filing dates, the information contained in the 2001
10-K (without exhibits) and the Definitive Proxy, complied with the requirements
of the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the 2001 10-K and
the Definitive Proxy, except for the failure to include certain financial
information as described therein, and neither the 2001 10-K nor the Definitive
Proxy (including all exhibits included in the 2001 10-K and the Definitive Proxy
and all financial statements and schedules thereto and documents incorporated by
reference therein), at the time they were respectively filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6
3.18 Terms of Other Purchasers' Agreements. Except as set
forth on Schedule 3.18 herein and other than certain closing mechanics and
covenants related to publicity and the use of such Other Purchaser's name, the
terms, conditions, rights and benefits contained in this Agreement and the
Registration Rights Agreement are the same terms, conditions, rights and
benefits as those contained in the Other Purchasers' Stock Purchase Agreement
and Registration Rights Agreement, or any other similar agreement. Except as set
forth on Schedule 3.18 herein, neither the Company nor any underwriter acting on
behalf of the Company has entered into any separate agreement with any Other
Purchaser to provide different or more favorable terms, including, but not
limited to terms that provide any Other Purchaser liquidity for the Shares, or
any form of compensation or value in the event the filing or effectiveness of
any the registration statements required by the Registration Rights Agreement is
delayed, or withdrawn, or suspended; provided, however, that this representation
shall not include that certain Stock Purchase Agreement dated May 17, 2001, by
and between the Company and Transamerica Investment Management, LLC and the
Other Purchasers named therein.
3.19 Brokers. There is no broker, investment banker, financial
advisor, finder or other person which has been retained by or is authorized to
act on behalf of the Company who might be entitled to any fee or commission for
which the Purchasers will be liable in connection with the execution of this
Agreement or the transactions contemplated hereby.
3.20 Offering of Securities. Neither the Company nor any
person, firm or corporation acting on its behalf has sold or offered the Shares
or any similar securities of the Company to, or solicited any offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto with,
any person or persons in such manner as would subject the offering, issuance or
sale of any of the Shares to the provisions of Section 5 of the Securities Act.
Neither the Company nor any person, firm or corporation acting on behalf of the
Company has taken or will take any action which would subject the offering,
issuance or sale of any of the Shares to the provisions of Section 5 of the
Securities Act.
3.21 Investment Company Status. Neither the Company nor any
Subsidiary is, or upon consummation of the sale of the Shares will be, an
"investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
3.22 Legal Opinions. At the Closing, Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, counsel to the Company, will deliver its legal opinion to
the Purchasers with respect to (i) the Company's due incorporation and valid
existence under the laws of the state of Delaware; (ii) the due execution,
authorization and delivery of this Agreement and the Registration Rights
Agreement; (iii) corporate power and corporate authority to execute and deliver
7
this Agreement and the Registration Rights Agreement; (iv) no violation of the
Company's Certificate of Incorporation or Bylaws or certain specified laws; (v)
enforceability of this Agreement and the Registration Rights Agreement; (vi) no
registration of the Shares; and (vii) the Shares are duly authorized, fully paid
and non-assessable, each of such opinions in (i) through (vii) subject to
customary qualifications, assumptions and carve-outs for a transaction of this
nature. At the Closing, the Senior Executive Vice President and General Counsel
of the Company will deliver its legal opinion to the Purchasers with respect to
no violation of material contracts of the Company, such opinion subject to
customary qualifications, carve-outs and assumptions for a transaction of this
nature.
4. Representations, Warranties and Covenants of the Purchasers. Each
Purchaser, severally and not jointly, represents and warrants to, and covenants
with, the Company as follows:
4.1 Organization. The Purchaser is validly existing under the
laws of its jurisdiction of organization and has all requisite power and
authority to enter into this Agreement and the Registration Rights Agreement and
to consummate the transactions contemplated hereby and thereby.
4.2 Validity. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action, corporate, trust or otherwise, on the part of the Purchaser.
This Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Purchaser and constitute valid and binding obligations of the
Purchaser enforceable against it in accordance with their terms.
4.3 Governmental Consents. No consent, approval,
authorization, waiting period or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement and the Registration
Rights Agreement or the consummation of the transactions contemplated hereby or
thereby.
4.4 Ability to Protect Its Own Interests and Bear Economic
Risks. The Purchaser represents that by reason of the business and financial
experience of its management, the Purchaser has the capacity to evaluate the
risks and merits of, and make an informed decision with regard to, an investment
in the Company and the transactions contemplated by this Agreement. The
Purchaser further represents that the Purchaser is able to bear the economic
risk of an investment in the Shares, and has an adequate income independent of
any income produced from an investment in the Shares and has sufficient net
worth to sustain a loss of all of its investment in the Shares without economic
hardship if such a loss should occur.
4.5 Accredited Investor. The Purchaser represents that it is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
8
4.6 Access to Information. The Company has made available to
the Purchaser all reports, schedules, forms, statements and other documents
filed by the Company with the SEC from October 11, 2000 through the Closing Date
pursuant to the reporting requirements of the Exchange Act, and the Purchaser
has received physical delivery of all such documents, records and information
which the Purchaser has requested, and has had adequate opportunity to ask
questions of, and receive answers from, the Company's officers, employees,
agents, accountants, and representatives concerning the Company's business,
operations, financial condition, assets, liabilities, and all other matters
relevant to its investment in the Shares.
4.7 Advice of own Counsel. The Purchaser has, with respect to
all legal matters relating to this Agreement and the offer and sale of the
Shares, relied solely upon the advice of the Purchaser's own counsel and has not
relied upon or consulted the counsel to the Placement Agent or counsel to the
Company.
4.8 Restrictions on Dispositions. The Purchaser understands
and agrees that the Shares have not been, and will not upon issuance be
registered under the Securities Act, and each certificate or other document
evidencing any of the Shares shall be endorsed with the legend in substantially
the form set forth below, as well as any other legends required by applicable
law. The Purchaser covenants that the Purchaser shall not transfer the Shares
represented by any such certificate without complying with the restrictions on
transfer described in the legends endorsed on such certificate and understands
that the Company shall refuse to register any transfer of Shares not complying
with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), OR
REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
ASSIGNED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER APPLICABLE
STATE SECURITIES LAWS, OR (B) EXEMPTIONS FROM SUCH REGISTRATION OR
QUALIFICATION REQUIREMENTS ARE AVAILABLE. AS A CONDITION TO PERMITTING
ANY TRANSFER OF THESE SECURITIES, THE COMPANY MAY REQUIRE THAT IT BE
FURNISHED WITH AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION OR
QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER
4.9 Acquisition for Own Account. The Purchaser is acquiring
the number of Shares set forth on the signature page hereto, for its own account
and for investment and not with a view toward distribution in a manner which
would violate the Securities Act. The Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in compliance with the Securities Act, the rules and regulations
thereunder and any applicable state securities laws. The Purchaser has, in
connection with its decision to purchase the number of Shares set forth on the
signature page hereto, not relied upon any representations or other information
(whether oral or written) other than the representations and warranties of the
Company contained herein.
9
4.10 Permitted Transfer. The Purchasers may transfer Shares to
any fund or account advised by the Purchaser or any affiliate thereof if the
transferee is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act of 1933, as amended) and agrees in writing to be bound by the
terms hereof.
5. Negative Covenants of the Company. From the date hereof through the
Closing Date, the Company shall, except as contemplated by this Agreement or the
Commitment Letter, or as consented to by the Purchaser or reasonably necessary
to consummate the Refinancing, operate its business in the ordinary course and
substantially in accordance with past practice. From the date hereof through the
Closing Date, the Company shall promptly advise the Purchaser of any change that
is reasonably likely to cause a representation or warranty to be untrue, cause a
covenant to be unsatisfied, or would have a Material Adverse Effect. Nothing
contained in this Section 5 will prevent the Company from consummating any
additional debt-for-equity exchanges, or any sale of the Company's equity or
debt securities or the other transactions, in each case, as contemplated by or
required by the Commitment Letter.
6. Conditions of Parties' Obligations.
6.1 Conditions of the Purchaser's Obligations. The obligations
of the Purchaser under Sections 1 and 2 hereof are subject to the fulfillment
prior to or on the Closing Date of all of the following conditions, any of which
may be waived in whole or in part by the Purchaser.
(a) Continued Accuracy of the Company's Covenants,
Representations and Warranties. The representations and
warranties of the Company contained in Section 3 shall
be true and correct on and as of the Closing Date with
the same effect as though such representations and
warranties had been made on and as of the Closing Date
(except to the extent expressly made as of an earlier
date, in which case as of such earlier date).
(b) Consents and Waivers. All authorizations, approvals, or
permits, if any, of any governmental authority or
regulatory body of the United States or of any state or
any stock exchange or of any third party that are
required in connection with the issuance and sale of
the Shares pursuant to this Agreement shall be duly
obtained and effective as of the Closing Date.
(c) No Material Adverse Change. There shall be no material
adverse change in the business, properties, prospects,
or assets of the Company from and after the date of
this Agreement.
(d) Consummation of the Refinancing. The Company shall
simultaneously with the Closing, consummate the
Refinancing.
10
(e) Officer's Certificate. The Company shall have delivered
to the Purchasers, a certificate dated the Closing
Date, executed by the Senior Executive Vice President
and General Counsel of the Company, certifying the
satisfaction of the conditions specified in (a), (b),
(c) and (d) of this Section 6.1.
(f) Registration Rights Agreement. The Purchaser and the
Company shall have executed and delivered the
Registration Rights Agreement (as defined herein).
(g) Legal Opinions. The Company shall have delivered to the
Purchasers, the Legal Opinions set forth in Section
3.22 herein.
6.2 Conditions of the Company's Obligations. The obligations
of the Company under Sections 1 and 2 hereof are subject to the fulfillment
prior to or on the Closing Date of all of the following conditions, any of which
may be waived in whole or in part by the Company.
(a) Continued Accuracy of Purchaser's Covenants,
Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 4
shall be true and correct on and as of the Closing Date
with the same effect as though such representations and
warranties had been made on and as of the Closing Date
(except to the extent expressly made as of an earlier
date, in which case as of such earlier date).
(b) Consents and Waivers. All authorizations, approvals,
permits, or the expiration of any waiting periods, if
any, of any governmental authority or regulatory body
of the United States or of any state or any stock
exchange or of any third party that are required in
connection with the purchase of the Shares pursuant to
this Agreement shall be duly obtained and effective as
of the Closing Date.
6.3 Conditions of Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereunder
are subject to the parties being reasonably satisfied as to the absence of (i)
litigation challenging or seeking damages in connection with the transactions
contemplated by this Agreement, and (ii) any provision of any applicable law or
regulation, or any judgment, injunction, order or decree prohibiting or
enjoining the transactions contemplated by this Agreement.
7. Survival of Representations, Warranties and Agreements. The
covenants and agreements of the Company contained herein shall survive the
Closing; provided, however, notwithstanding any investigation made by any party
to this Agreement or by the Placement Agent, all representations and warranties
made by the Company and the Purchasers herein shall survive until the later of
(i) twelve months from the Closing Date, and (ii) one hundred and eighty days
11
after the effective date of the Shelf Registration Statement (as such term is
defined in the Registration Rights Agreement). Any claim for indemnification
made pursuant to Section 11 herein arising out of the inaccuracy or breach of
any representation or warranty must be made prior to the termination of the
applicable survival period, in which case such representation or warranty which
is the subject of such claim shall survive with respect to such claim until the
final resolution hereof.
8. Registration Rights Agreement. Simultaneous with the execution and
delivery of this Agreement, the Company and the Purchasers will enter into a
registration rights agreement in substantially the form attached as Exhibit B
hereto (the "Registration Rights Agreement").
9. Broker's Fee. There is no broker, investment banker, financial
advisor, finder or other person which has been retained by or is authorized to
act on behalf of any Purchaser who might be entitled to any fee or commission
for which the Company will be liable in connection with the execution of this
Agreement or the transactions contemplated hereby. Each Purchaser acknowledges
that the Company will pay to the Placement Agent a fee in respect to the sale of
the Shares to the Purchaser.
10. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:
(a) if to the Company, to:
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Senior Executive Vice President and General
Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and (b) if to any Purchaser, at its address as set
forth at the end of this Agreement, or at such other address or addresses as may
have been furnished to the Company in writing.
12
11. Indemnification.
(a) The Company will indemnify each Purchaser, each of its
directors, officers, agents, employees, representatives
and controlling persons against all expenses, claims,
losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising
out of any inaccuracy or breach or any representation
or warranty made by the Company (for as long as such
representations and warranties survive pursuant to
Section 5 hereof), or the breach of any of the
agreements or covenants contained in this Agreement,
and will reimburse each such indemnified person for any
legal and any other expenses reasonably incurred in
connection with investigating and defending or settling
any such claim, loss, damage, liability or action. It
is agreed that the indemnity agreement contained in
this Section 11 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the
consent of the Company (which consent shall not be
unreasonably withheld or delayed).
(b) Each Purchaser, severally and not jointly, shall
indemnify the Company, each of its directors, officers,
agents, employees, representatives and controlling
persons against all expenses, claims, losses, damages
and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of any inaccuracy or
breach of any representation or warranty made by the
Purchaser (for as long as such representatives and
warranties survive pursuant to Section 5 herein), or
the breach of any of the agreements or covenants
contained in this Agreement, and will reimburse each
such indemnified person for any legal and any other
expenses reasonably incurred in connection with
investigating and defending or settling any such claim,
loss, damage, liability or action. It is agreed that
the indemnity agreement contained in this Section 11
shall not apply to amounts paid in settlement of any
such claims, losses, damages or liabilities (or actions
in respect thereof) if such settlement is effected
without the consent of such Purchaser (which consent
shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this
Section 11 (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which
indemnity may be sought and shall permit the
Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation
resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the
Indemnified Party may participate in such defense with
13
counsel reasonably acceptable to and paid for by the
Indemnifying Party but otherwise at the Indemnified
Party's expense, and provided, further, that the
failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 11 to the
extent such failure is not materially prejudicial. No
Indemnifying Party in the defense of any such claim or
litigation shall except with the consent of each
Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include an
unconditional release of such Indemnified Party from
all liability in respect of such claim or litigation.
Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with
the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 11
is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any
loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any
other relevant equitable considerations. No person
guilty of fraudulent misrepresentation (within the
meaning of section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
12. Termination. Either party to this Agreement may terminate this
Agreement by giving written notice to such other non-terminating party if the
Closing has not occurred by July 13, 2001; provided, however, that the right to
terminate this Agreement under this Section 12 shall not be available to any
party who is in breach of this Agreement and such breach has not been waived by
the other party hereto, or whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before July 13, 2001. If this Agreement is terminated pursuant to
this Section 12, then all rights and obligations of the parties hereunder shall
terminate without any liability of either party to the other party; provided,
however, that Sections 21, 24 and 26 shall survive any termination of this
Agreement.
13. Amendment. This Agreement may not be modified or amended except
pursuant to an instrument in writing, signed by the Company and the Purchaser.
The observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively) only with the written consent
of the Company and the Xxxxxxxxx.
00
00. Headings and Subheadings. The headings and subheadings of the
various sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement and are not
to be considered in interpreting or construing this Agreement.
15. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
conflicts of law provisions thereof.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
18. Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in any federal
or state court located in the State of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and 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 suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 8 shall be deemed effective service of process on such
party.
19. No Implied Waiver. No failure or delay by any party in exercising
any right, power or privilege hereunder 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 herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
20. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
21. Expenses. Each of the Company and the Purchasers shall pay and be
responsible for all of its respective fees and expenses incurred in connection
with the preparation and negotiation of this Agreement and the consummation of
the transactions contemplated hereby. Notwithstanding the foregoing, the Company
will pay at the Closing, reasonable legal fees and expenses of one counsel
15
representing all of the Purchasers, in an amount not to exceed $35,000;
provided, however, that if the Closing does not occur and the failure of the
Closing to occur is a result of the breach by the Purchasers of its obligations
under this Agreement, which breach has not been waived by the Company, or the
Purchaser's failure to fulfill any obligation under this Agreement, then the
Company shall not have any liability for any fees or expenses of the Purchasers.
22. Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and such
Agreement supersedes and replaces all other prior agreements, written or oral,
among the parties hereto with respect to the subject matter hereof.
23. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
24. Publicity. Except as required by law or by obligations pursuant to
any listing agreement with, or requirement of, any national securities exchange
or national quotation system on which the Common Stock is listed, admitted to
trading or quoted, the Company shall not, without the prior written consent of
the Purchaser make any public announcement or issue any press release which
includes the name of the Purchaser or any Affiliate of the Purchaser with
respect to the transactions contemplated by this Agreement. The Company agrees
that it will not use in advertising or publicity the names of the undersigned,
any of its partners or employees, any of the funds or accounts managed by it or
any of its affiliates, or any trade name, trademark, trade device, service xxxx,
symbol or any abbreviation, contraction or simulation thereof, in any case
without the prior written consent of the Purchaser.
25. Listing of Shares on the New York Stock Exchange. The Company shall
promptly take all action reasonably necessary in order to list the Shares on the
New York Stock Exchange.
16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
RITE AID CORPORATION
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Executive Vice President
and General Counsel
PURCHASER
Print or Type: Name of Purchaser
(Individual or Institution): American Century Mutual Funds, Inc.
(on behalf of its Vista series
of Shares)
Name and Title of Individual(s) representing Purchaser (if an Institution):
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President, Associate General Counsel
Number of Shares
to be Purchased Aggregate Price
------------------------------------- -----------------------------------
3,000,000 $22,500,000
Signature by: Individual Purchaser or Individual(s)
representing Purchaser:
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President, Associate
General Counsel
Address: American Century Investments
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
RITE AID CORPORATION
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Executive Vice President
and General Counsel
PURCHASER
Print or Type: Name of Purchaser
(Individual or Institution): American Century World Mutual Funds, Inc.,
(on behalf of its Global Growth series of shares)
Name and Title of Individual(s) representing Purchaser (if an Institution):
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President, Associate General Counsel
Number of Shares
to be Purchased Aggregate Price
---------------------------------- -----------------------------------
400,000 $3,000,000
Signature by: Individual Purchaser or Individual(s)
representing Purchaser:
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Vice President, Associate
General Counsel
Address: American Century Investments
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
EXHIBIT A
COMMITMENT LETTER
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
SCHEDULE 3.1
Thrifty Wilshire, Inc
Reads, Inc.
Leader Drugs, Inc.
Rite Aid of Massachusetts, Inc.
The Xxxx Company
PL Xpress Inc.
SCHEDULE 3.4
CAPITAL STOCK
Rite Aid Common Stock Outstanding as of June 1, 2001: 403,761,696
3,360,237 Series B, $100 Par, Preferred Stock Convertible to Common Stock
at $5.50 per Share: 61,095,218
In the Money Stock Options (a) 44,787,450
-----------
Common Stock on a Fully diluted Basis as of June 1, 2001: 509,644,364
Debt for Equity Exchanges Agreed to and Priced but Not Yet Settled:
Exchange of RCF Facility for stock 8,562,174 (b)
Exchange of RCF Facility for stock 12,654,598 (b)
-----------
21,216,772
-----------
Common Stock on a Pro Forma Fully diluted Basis as of June 1, 2001: 530,861,136
===========
(a) Includes 37.4 million shares which are not yet vested.
(b) May be issued initially as Series C Convertible Preferred Stock.
Not Included in the Above Total are the Following:
A. $152,016,000 of 5.25% Convertible Subordinated Noted due 2002 that are
convertible into 27.672 shares of common stock per $1,000 note.
B. Warrants held by X. X. Xxxxxx to purchase 2,500,000 shares of Rite Aid
common stock at $11.00 per Share.
C. Private debt for equity exchanges that were agreed to but not yet priced:
$31,500,000 Exchange of 10.5% Notes Due 9/15/02 for stock
$15,300,000 Exchange of 10.5% Notes Due 9/15/02 for stock
$2,200,000 Exchange of RCF Facility for stock
$14,477,000 Exchange of Bank Debt for stock
$6,504,000 Exchange of 10.5% Notes Due 9/15/02 for stock
$10,000,000 Exchange of 10.5% Notes Due 9/15/02 for stock
-----------
$79,981,000
D. Shareholder suit settlement for 20,000,000 shares of common stock.
E. 3,000,000 common stock purchase warrants proposed to be issued in
connection with the exchange of $152 million of the Company's 10.5% Senior
Secured Notes for a new series of 12.5% Senior Secured Notes due 2006.
F. 7,559,599 stock options that are not in the money including 1,583,750
shares not yet vested.
G. 26,573,426 shares of common stock to be issued for $150 million.
SCHEDULE 3.9
LITIGATION
Federal Investigations
There are currently pending federal governmental
investigations, both civil and criminal, by the SEC and the United States
Attorney, involving our financial reporting and other matters. We are
cooperating fully with the SEC and the United States Attorney. We have begun
settlement discussions with the United States Attorney for the Middle District
of Pennsylvania. The United States Attorney has proposed that the government
would not institute any criminal proceedings against the Company if we enter
into a consent judgment providing for civil penalty payable over a period of
years. The amount of the civil penalty has not been agreed to and there can be
no assurance that a settlement will be reached or that the amount of such
penalty will not have a material adverse effect on our financial condition and
results of operations.
The U.S. Department of Labor has commenced an investigation of
matters relating to our employee benefit plans, including our principal 401(k)
plan, which permitted employees to purchase our common stock. Purchases of our
common stock under the plan were suspended in October 1999. In January 2001, we
appointed an independent trustee to represent the interests of these plans in
relation to the company and to investigate possible claims the plans may have
against us. Both the independent trustee and the Department of Labor have
asserted that the plans may have claims against us. The investigations, with
which we are cooperating fully, are ongoing and we cannot predict their
outcomes. In addition, a purported class action lawsuit on behalf of the plans
and their participants has been filed by a participant in the plans in the
United States District Court for the Eastern District of Pennsylvania.
These investigations and settlement discussions are ongoing
and we cannot predict their outcomes. If we were convicted of any crime, certain
contracts and licenses that are material to our operations may be revoked, which
would have a material adverse effect on our results of operations and financial
condition. In addition, substantial penalties, damages or other monetary
remedies assessed against us, including a settlement, could also have a material
adverse effect on our results of operations, financial condition and cash flows.
Stockholder Litigation
We, certain of our directors, our former chief executive
officer Xxxxxx Xxxxx, our former president Xxxxxxx Xxxxxx, our former chief
financial officer Xxxxx Xxxxxxxx, and our former auditor KPMG LLP, have been
sued in a number of actions, most of which purport to be class actions, brought
on behalf of stockholders who purchased our securities on the open market
between May 2, 1997 and November 10, 1999. All of these cases have been
consolidated in the U.S. District Court for the Eastern District of
Pennsylvania. On November 9, 2000, we announced that we had reached an agreement
to settle the consolidated securities class action lawsuits pending against us
in the U.S. District Court for the Eastern District of Pennsylvania and the
derivative lawsuits pending there and in the Delaware Court of Chancery. Under
the agreement, which has been submitted to the U.S. District Court for the
Eastern District of Pennsylvania for approval, we will pay $45 million in cash,
which will be fully funded by our officers' and directors' liability insurance,
and issue shares of common stock in 2002. The shares will be valued over a 10
day trading period in January 2002. If the value determined is at least $7.75
per share, we will issue 20 million shares. If the value determined is less than
$7.75 per share, we have the option to deliver any combination of common stock,
cash and short-term notes, with a total value of $155 million. As additional
consideration for the settlement, we have assigned to the plaintiffs all of our
claims against the above named executives and KPMG LLP. Several members of the
class have elected to "opt-out" of the class and, as a result, if the settlement
is approved by the court, they will be free to individually pursue their claims.
Management believes that their claims, individually and in the aggregate, are
not material.
Drug Pricing and Reimbursement Matters
On October 5, 2000, we settled, for an immaterial amount, and
without admitting any violation of the law, the lawsuit filed by the Florida
Attorney General alleging that our non-uniform pricing policy for cash
prescription purchases was unlawful under Florida law.
The filing of the complaint by the Florida Attorney General,
and our press release issued in conjunction therewith, precipitated the filing
of a purported federal class action in California and several purported state
class actions, all of which (other than those pending in New York that were
filed on October 5, 1999 and those pending in California that were filed on
January 3, 2000) have been dismissed. A motion to dismiss the action in New
York is currently pending. On May 30, 2001, a complaint filed in New Jersey in
which the plaintiff made similar allegation and which the trial court dismissed
for failing to state a claim upon which relief could be based was reinstated by
the appellate court. We believe that the remaining lawsuits are without merit
under applicable state consumer protection laws. As a result, we intend to
continue to vigorously defend against them and we do not anticipate that if
fully adjudicated, they will result in an award of damages. However, such
outcomes cannot be assured and a ruling against us could have a material adverse
effect on the financial position and results of operations of the company as
well as necessitate substantial additional expenditures to cover legal costs as
we pursue all available defenses.
We are being investigated by multiple state attorneys general
for our reimbursement practices relating to partially-filled prescriptions and
fully-filled prescriptions that are not picked up by ordering customers. We are
supplying similar information with respect to these matters to the Department of
Justice. We believe that these investigations are similar to investigations
which were, and are being, undertaken with respect to the practices of others in
the retail drug industry. We also believe that our existing policies and
procedures fully comply with the requirements of applicable law and intend to
fully cooperate with these investigations. We cannot, however, predict their
outcomes at this time.
An individual acting on behalf of the United States of
America, has filed a lawsuit in the United States District Court for the Eastern
District of Pennsylvania under the Federal False Claims Act alleging that we
defrauded federal health care plans by failing to appropriately issue refunds
for partially filled prescriptions and prescriptions which were not picked up by
customers. The Department of Justice has not decided whether to join this
lawsuit, as is its right under the law, and its investigation is continuing. We
have filed a motion to dismiss the complaint for failure to state a claim.
If any of these cases result in a substantial monetary
judgment against us or is settled on unfavorable terms, our results of
operations, financial position and cash flows could be materially adversely
affected.
Store Management Overtime Litigation
We are a defendant in a class action pending in the California
Superior Court in San Diego with three subclasses, comprised of our California
store managers, assistant managers and managers-in-training. The plaintiffs seek
back pay for overtime not paid to them and injunctive relief to require us to
treat our store management as non-exempt. They allege that we decided to
minimize labor costs by causing managers, assistant managers and
managers-in-training to perform the duties and functions of associates for in
excess of forty hours per week without paying them overtime. We believe that
in-store management were and are properly classified as exempt from the overtime
provisions of California law. On May 21, 2001, we entered into a Memorandum of
Agreement with the plaintiffs under which, subject to approval of the court, we
will settle this lawsuit for a maximum of $25.0 million, a charge for which was
taken in fiscal 2000. The settlement amount is payable in four equal
installments of 25%, the first of which is payable upon final court approval of
the settlement and the balance is payable six, 12 and 18 months thereafter.
Other
We are subject from time to time to lawsuits arising in the
ordinary course of business. In the opinion of our management, these matters are
adequately covered by insurance or, if not so covered, are without merit or are
of such nature or involve amounts that would not have a material adverse effect
on our financial condition, results of operations or cash flows if decided
adversely.
SCHEDULE 3.11
CHANGES
RITE AID CORPORATION
RESTRICTED STOCK LOANS ISSUED 5/01-6/15/01
Vested
Name SS# Shares Gross Income Total W/H
--------------------------- ----------- ------- ------------- -------------
Xxxxxx ###-##-#### 10,000 $84,500.00 $28,096.25
------- ------------- -------------
Non ss.16B Officer 10,000 $84,500.00 $28,096.25
------- ------------- -------------
Gerson ###-##-#### 12,500 $106,750.00 $47,877.38
Hall ###-##-#### 36,591 $312,487.14 $140,150.49
Xxxxxxx ###-##-#### 124,622 $1,064,271.88 $477,325.94
Xxxxxxxx ###-##-#### 12,500 $106.750.00 $47,877.38
Xxxxxx ###-##-#### 382,387 $3,265,584.98 $1,464,614.87
Xxxxxxx ###-##-#### 247,841 $2,116,562.14 $949,278.13
Sari ###-##-#### 8,750 $74,725.00 $33,514.17
Sorkin ###-##-#### 8,750 $74,725.00 $33,514.17
Xxxxxxxx ###-##-#### 124,622 $1,064,271.88 $477,325.94
------- ------------- -------------
ss.16B Officers 958,563 $8,186,128.02 $3,671,478.47
------- ------------- -------------
Total Loan
Amounts 968,563 $8,270,628.02 $3,699,574.72
======= ============= =============
[RESTUBBED TABLE]
In Rate: 4.25%
Name Loan Amt. Interest Total
--------------------------- ------------- ----------- -------------
Xxxxxx $28,096.25 $107.96 $28,204.21
------------- ----------- -------------
Non ss.16B Officer $28,096.25 $107.96 $28,204.21
------------- ----------- -------------
Gerson $47,877.38 $2074.90 $49,952.28
Hall $140,150.49 $6073.80 $146,224.29
Xxxxxxx $477,325.94 $20,686.22 $498,012.16
Xxxxxxxx $47,877.38 $2,074.90 $49,952.28
Xxxxxx $1,464,614.87 $63,473.06 $1,528,087.93
Xxxxxxx $949,278.13 $41,139.55 $900,417.68
Sari $33,514.17 $1,452.43 $34,966.60
Sorkin $33,514.17 $1,452.43 $34,966.60
Xxxxxxxx $477,325.94 $20,686.22 $498,012.16
------------- ----------- -------------
ss.16B Officers $3,671,478.47 $159,133.49 $3,830,591.97
------------- ----------- -------------
Total Loan
Amounts $3,699,574.72 $159,221.45 $3,858,796.18
============= =========== =============
SCHEDULE 3.19
OTHER PURCHASERS' AGREEMENTS
The obligations of the Xxxxxx Purchasers and the Fidelity Purchasers are several
and not joint.
