-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VR0/bhCbcTs/SASHfuwc8t36Fq9nKXwnGBaxHc9Tc8/ezyMfyVbGX2kde1Zv+FC3 KLcdyp8gAeH9ucrp+hAz1g== 0000950130-98-005314.txt : 19981109 0000950130-98-005314.hdr.sgml : 19981109 ACCESSION NUMBER: 0000950130-98-005314 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19981106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RITE AID CORP CENTRAL INDEX KEY: 0000084129 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 231614034 STATE OF INCORPORATION: DE FISCAL YEAR END: 0302 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-66901 FILM NUMBER: 98739635 BUSINESS ADDRESS: STREET 1: 30 HUNTER LANE CITY: CAMP HILL OWN STATE: PA ZIP: 17011 BUSINESS PHONE: 7177612633 MAIL ADDRESS: STREET 1: PO BOX 3165 CITY: HARRISBURG STATE: PA ZIP: 17105 FORMER COMPANY: FORMER CONFORMED NAME: LEHRMAN LOUIS & CO DATE OF NAME CHANGE: 19680510 FORMER COMPANY: FORMER CONFORMED NAME: RACK RITE DISTRIBUTORS DATE OF NAME CHANGE: 19680510 S-4 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on November 6, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- RITE AID CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 5912 23-1614034 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER) RITE AID CORPORATION 30 HUNTER LANE CAMP HILL, PENNSYLVANIA 17011 (717) 761-2633
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------------------- ELLIOT S. GERSON SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY RITE AID CORPORATION 30 HUNTER LANE CAMP HILL, PENNSYLVANIA 17011 (717) 761-2633 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) WITH A COPY TO: MORGAN, LEWIS & BOCKIUS LLP 101 PARK AVENUE NEW YORK, NEW YORK 10178 (212) 309-6000 ATTN: HOWARD A. KENNY Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
Title of Each Class Of Amount to Proposed Maximum Proposed Amount of Securities To Be be Offering Price Maximum Registration Registered Registered Per Unit (1) Aggregate Fee Offering Price (2) - -------------------------------------------------------------------------------------------------------------- 6% Dealer remarketable securities(SM) $200,000,000 100% $200,000,000 $55,600 - --------------------------------------------------------------------------------------------------------------
(1) Determined solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act. (2) Calculated in accordance with Rule 457(f)(2) under the Securities Act. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ Subject to completion, dated November 6, 1998. PROSPECTUS RITE AID CORPORATION THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. RITE AID CORPORATION HEREBY OFFERS TO EXCHANGE UP TO $200,000,000 OF ITS 6% DEALER REMARKETABLE SECURITIES(SM) ("DRS.(SM)") DUE OCTOBER 1, 2013 (THE "EXCHANGE DRS.") FOR AN IDENTICAL PRINCIPAL AMOUNT OF ITS OUTSTANDING 6% DRS. DUE OCTOBER 1, 2013 (THE "RESTRICTED DRS."). The Exchange Drs. will: . be identical in all material respects to the Restricted Drs., except for certain transfer restrictions, registration rights and liquidated damages provisions relating to the Restricted Drs. . bear interest at 6% per annum until the Remarketing Date (defined below), accruing from September 22, 1998 (the date of issuance of the Restricted Drs.) and payable semi- annually on April 1 and October 1, commencing April 1, 1999. . not be listed on any securities exchange or approved for quotation through any automated quotation system. No active public market is anticipated. . be represented by a global security or securities registered in the name of a nominee of The Depository Trust Company ("DTC"). The Exchange Offer: . expires at 5:00 p.m., New York City time, on ___________, 1999, unless extended. . is not conditioned upon any minimum amount of Restricted Drs. being tendered. . is subject to customary terms and conditions, as specified in this Prospectus and the accompanying Letter of Transmittal. The Exchange Drs., like the Restricted Drs., are subject to mandatory tender, or redemption, on October 1, 2003 (the "Remarketing Date"). Each broker-dealer that receives Exchange Drs. for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Drs. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker- dealer in connection with resales of Exchange Drs. received in exchange for Restricted Drs. where such Restricted Drs. were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." You should rely only on the information contained in this Prospectus or that we have referred you to. We have not authorized anyone to provide you with information that is different. We are not offering to sell or asking you to buy anything other than the Exchange Drs. We are not offering to sell or asking you to buy anything in any jurisdiction where doing so would be against the law. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE EXCHANGE DRS. NOR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. - ---------------,1998 _______________ "Dealer remarketable securities(SM)" and "Drs.(SM)" are service marks of J.P. Morgan Securities Inc. AVAILABLE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and file reports, proxy and information statements and other information with the Securities and Exchange Commission (the "SEC" or the "Commission"). These reports, proxy and information statements and other information can be inspected and copied at the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549 at prescribed rates. The SEC maintains a Web site that contains reports, proxy and information statements and other materials that are filed through the SEC's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. This Web site can be accessed at http://www.sec.gov. Such reports, proxy and information statements and other information can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. We have filed with the SEC a Registration Statement on Form S-4 (including the exhibits and amendments thereto, the "Registration Statement") pursuant to the requirements of the Securities Act with respect to the Exchange Drs. offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain portions of which are omitted in accordance with the rules and regulations of the SEC. Copies of the Registration Statement together with exhibits may be inspected at the office of the SEC in Washington, D.C., without charge, and copies thereof may be obtained therefrom upon payment of a prescribed fee. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the SEC are incorporated by reference into this Prospectus: (i) the Company's Annual Report on Form 10-K for the year ended February 28, 1998; (ii) the Company's Quarterly Report on Form 10-Q for the quarterly period ended May 30, 1998; and (iii) the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 29, 1998. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus but prior to the termination of the Exchange Offer shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or therein, or in any other subsequently filed document that also is or is deemed to be incorporated herein or therein by reference, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this Prospectus except as so modified or superseded. We will provide without charge to each person to whom a copy of this Prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated into this Prospectus by reference. We will also provide copies of any exhibits to such documents that are specifically incorporated by reference in such documents. Requests for such copies should be directed to Investor Relations, Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011, telephone number (717) 761-2633, Ext. 5362. 2 THE COMPANY Rite Aid Corporation, incorporated in 1968, is one of the largest retail drugstore chains in the United States. As of August 29, 1998, we operated 3,898 drugstores, within a range of approximately 7,200 to 20,000 square feet per store in size, in 32 eastern, southern and western states and the District of Columbia and employed over 75,000 associates. Pharmacy service forms the core of our business, with prescriptions accounting for 53.5 percent of drugstore sales in the twenty-six week period ended August 29, 1998. Our drugstores cater to convenience, offering a full selection of health and personal care products, seasonal merchandise and a large private label product line. Express mail with complementary services and one-hour photo departments have been added in select locations. Our Eagle Managed Care Corp. subsidiary markets prescription plans and sells other managed health care services to employers, health maintenance organizations and government-sponsored employee benefit programs. On December 12, 1996, we acquired Thrifty PayLess Holdings, Inc. ("Thrifty PayLess"), which was one of the largest drugstore retailers in the western United States with over 1,000 stores in 10 states. We have renamed the Thrifty PayLess stores "Rite Aid" and are in the process of remodeling such stores. On August 27, 1997, we completed the acquisitions of K&B Incorporated ("K&B") and Harco, Inc. ("Harco"). K&B, based in New Orleans, Louisiana, operated 186 stores in Louisiana, Alabama, Mississippi, Texas, Tennessee and Florida. It was the 13th largest drugstore chain in the U.S. with sales of $580,000,000 for fiscal year 1996. Harco, headquartered in Tuscaloosa, Alabama, operated 146 stores in Alabama, Mississippi and Florida. It was the 17th largest drugstore chain in the U.S. with sales of $258,000,000 in fiscal year 1996. We have renamed all K&B and Harco stores "Rite Aid" and have completed the integration of such stores with our operations. Our strategy is to operate drugstores in large, fast-growing metropolitan areas. Of the 60 largest metropolitan statistical areas ("MSAs") in the United States, we operate in 33 and are either the largest or second largest for retail drugstore prescription sales in 23 of those 33 MSAs. The Company is a Delaware corporation. Our principal executive offices are located at 30 Hunter Lane, Camp Hill, Pennsylvania 17011 and our telephone number is (717) 761-2633. USE OF PROCEEDS There will be no proceeds to the Company from the exchange of Drs. pursuant to the Exchange Offer. The Exchange Drs. are being offered hereunder in order to satisfy certain obligations of the Company contained in the Exchange and Registration Rights Agreement dated as of September 22, 1998 (the "Registration Rights Agreement"), among the Company, J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated (the "Initial Purchasers"), with respect to the initial sale of the Restricted Drs. RATIO OF EARNINGS TO FIXED CHARGES
TWENTY-SIX WEEKS ENDED FISCAL YEAR ----------- ----------------------------- AUGUST 29, 1998 1998 1997 1996 1995 1994 ----------- ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges/(1)/ 0.96 2.91 2.56 3.08 3.78 1.66
/(1)/ The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings include pre-tax income from continuing operations plus fixed charges. Fixed charges include interest, whether expensed or capitalized, amortization of debt expense and that portion of rental expense which is representative of the interest factor in these rentals. 3 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING RESTRICTED DRS. Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange Restricted Drs. that are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on , 1999; provided, however, that if the Company has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $200,000,000 aggregate principal amount of the Restricted Drs. are outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about , 1998, to all holders of Restricted Drs. known to the Company. The Company's obligation to accept Restricted Drs. for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "--Certain Conditions to the Exchange Offer" below. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and the Company may accept Restricted Drs. for exchange or defer acceptance until the extended Expiration Date, by giving notice of such extension to the holders thereof. During any such extension, all Restricted Drs. previously tendered will remain subject to the Exchange Offer and the Company may accept such Restricted Drs. for exchange or defer acceptance until the extended Expiration Date. Any Restricted Drs. not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Restricted Drs. not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "--Certain Conditions to the Exchange Offer." The Company will give notice of any extension, amendment, non- acceptance or termination to the holders of the Restricted Drs. as promptly as practicable, such notice in the case of any extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. PROCEDURES FOR TENDERING RESTRICTED DRS. The tender to the Company of Restricted Drs. by a holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Restricted Drs. for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to Harris Trust and Savings Bank (the "Exchange Agent") at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Restricted Drs. into the Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF A LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Restricted Drs. surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Restricted Drs. 4 who has not completed the box entitled "Special Issuance Instruction" on the Letter of Transmittal or (ii) for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm that is a member or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program, or by an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Restricted Drs. tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Restricted Drs. not properly tendered or to not accept any particular Restricted Drs. which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Restricted Drs. either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Restricted Drs. in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Restricted Drs. either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Restricted Drs. for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Restricted Drs. for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. By tendering, each broker-dealer holder will represent to the Company that, among other things, the Exchange Drs. acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the holder and any beneficial holder, that neither the holder nor any such beneficial holder has an arrangement or understanding with any person to participate in the distribution of such Exchange Drs. and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. If the holder is not a broker-dealer, the holder must represent that it is not engaged in nor does it intend to engage in a distribution of the Exchange Drs. ACCEPTANCE OF RESTRICTED DRS. FOR EXCHANGE; DELIVERY OF EXCHANGE DRS. For each Restricted Drs. accepted for exchange, the holder of such Restricted Drs. will receive an Exchange Drs. having a principal amount equal to that of the surrendered Restricted Drs. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Restricted Drs. for exchange when, as and if the Company has given oral and written notice thereof to the Exchange Agent. In all cases, issuance of Exchange Drs. for Restricted Drs. that are accepted for exchange pursuant to the Exchange Offer will be made only after a timely Book-Entry Confirmation of such Restricted Drs. into the Exchange Agent's account at the Book-Entry Transfer Facility, receipt of a properly completed and duly executed Letter of Transmittal and receipt of all other required documents. If any tendered Restricted Drs. are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Restricted Drs. are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Restricted Drs. will be credited to an account maintained with the Book-Entry Transfer Facility as promptly as practicable after the expiration of the Exchange Offer. 5 BOOK-ENTRY TRANSFER Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Restricted Drs. by causing the Book-Entry Transfer Facility to transfer such Restricted Drs. into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. Although delivery of Restricted Drs. will be effected through book-entry transfer at the Book- Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Restricted Drs. desires to tender such Restricted Drs. and time will not permit such holder's Letter of Transmittal or other required documents to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly competed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Restricted Drs. and the amount of Restricted Drs. tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, a Book-Entry Confirmation and all other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) a Book-Entry Confirmation and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL RIGHTS Tenders of Restricted Drs. may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Restricted Drs. to be withdrawn and identify the Restricted Drs. to be withdrawn (including the principal amount of such Restricted Drs.). Any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Restricted Drs. and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Restricted Drs. so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Restricted Drs. that have been tendered will be credited to an account maintained with the Book-Entry Transfer Facility for the Restricted Drs. as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Restricted Drs. may be retendered by following one of the procedures described under "--Procedures for Tendering Restricted Drs. " above at any time on or prior to the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue Exchange Drs. in exchange for, any Restricted Drs. and may terminate or amend the Exchange Offer if at any time before the Expiration Date, the Company determines that the Exchange Offer violates applicable law, any applicable interpretation of the staff of the Commission or any order of any governmental agency or court of competent jurisdiction. 6 The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its reasonable discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, the Company will not accept for exchange any Restricted Drs. tendered, and no Exchange Drs. will be issued in exchange for any such Restricted Drs., if prior to the Expiration Date any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In any such event, the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. EXCHANGE AGENT Harris Trust and Savings Bank has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: Facsimile Transmission Number: By Hand/Overnight Delivery: By Registered or Certified Mail: - -------------------------------- ------------------------------- -------------------------------- (For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank (212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company of New York of New York 88 Pine Street P.O. Box 1010 For General Information and to 19th Floor Wall Street Station - ------------------------------ New York, NY 10005 New York, NY 10268-1010 Confirm Receipt of Facsimile by - ------------------------------- Telephone: --------- (212) 701-7624
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES The Company will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The principal solicitation is being made by mail; however, additional solicitations may be made in person or by telephone by officers and employees of the Company. The expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs among others. ACCOUNTING TREATMENT The Exchange Drs. will be recorded at the same carrying value as the Restricted Drs., which is the principal amount as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer will be capitalized for accounting purposes. TRANSFER TAXES Holders who tender their Restricted Drs. for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register Exchange Drs. in the name of, or request that Restricted Drs. not tendered or not accepted in the Exchange Offer be registered in the name of, a person other than the 7 registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE DRS. Holders of Restricted Drs. who do not exchange their Restricted Drs. for Exchange Drs. pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Restricted Drs. as set forth in the legend thereon as a consequence of the issuance of the Restricted Drs. pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities law. Restricted Drs. not exchanged pursuant to the Exchange Offer will continue to accrue interest at 6% per annum and will otherwise remain outstanding in accordance with their terms. Holders of Restricted Drs. do not have any appraisal or dissenters' rights under Delaware General Corporation Law in connection with the Exchange Offer. In general, the Restricted Drs. may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Restricted Drs. under the Securities Act. If (i) in the opinion of counsel for the Initial Purchasers, a registration statement must be filed and a prospectus must be delivered by the Initial Purchasers in connection with any offering or sale of Drs. because those Drs. represent an unsold allotment from the original offering thereof, (ii) any applicable law or interpretation does not permit any holder of Drs. to participate in the Exchange Offer, (iii) any holder that participates in the Exchange Offer does not receive freely transferable Exchange Drs. or (iv) the Company so elects, the Company will use its reasonable best efforts to cause to be filed as soon as practicable after that determination, date or notice of counsel is given to the Company, as the case may be, at the Company's sole expense, a registration statement (the "Shelf Registration Statement") providing for the sale of the Drs. and to have the Shelf Registration Statement declared effective by the SEC by April 20, 1999 (210 days after the date on which the Company delivered the Restricted Drs. to the Initial Purchasers). If the Company is required to file the Shelf Registration Statement solely as a result of the matters referred to in clause (i) of the preceding sentence, the Company will file and have declared effective by the Commission both a registration statement (the "Exchange Offer Registration Statement") relating to a registered offer to exchange Restricted Drs. for Exchange Drs. and the Shelf Registration Statement (which may be a combined registration statement with the Exchange Offer Registration Statement) with respect to offers and sales of Drs. held by the Initial Purchasers after completion of the Exchange Offer. The Company will use its best efforts to keep the Shelf Registration Statement continuously effective until two years from the effective date thereof or such shorter period which will terminate when all of the Drs. covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. The Company will, if the Shelf Registration Statement is filed, provide to each holder copies of the prospectus which is a part of the Shelf Registration Statement, notify each holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Drs. A holder that sells Drs. pursuant to the Shelf Registration Statement will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with those sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification rights and obligations). Based on existing interpretations of the Securities Act by the staff of the SEC (the "Staff") set forth in several no-action letters to third parties, and subject to the immediately following sentence, the Company believes that the Exchange Drs. to be issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by the holders thereof (other than holders who are broker-dealers) without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, any purchaser of Drs. who is an affiliate of the Company or who intends to participate in the Exchange Offer for the purpose of distributing the Exchange Drs., or any broker-dealer who purchased the Drs. from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (i) will not be able to rely on the interpretations of the Staff set forth in the above-mentioned no-action letters, (ii) will not be entitled to tender its Drs. in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Drs. unless the sale or transfer is made pursuant to an exemption from those requirements. The Company does not intend to seek its own no-action letter, and there can be no assurance that the Staff would make a similar determination with respect to the 8 Exchange Drs. as it has in those no-action letters to third parties. In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Drs. may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the Exchange Drs. for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Drs. reasonably requests in writing. 9 DESCRIPTION OF THE DRS. The form and terms of the Exchange Drs. are the same as the form and terms of the Restricted Drs. except that (i) the Exchange Drs. will have been registered under the Securities Act and thus will not bear restrictive legends restricting their transfer pursuant to the Securities Act and (ii) holders of Exchange Drs. will not be entitled to certain rights of holders of the Restricted Drs. under the Registration Rights Agreement. The Restricted Drs. have been, and the Exchange Drs. are to be, issued under an Indenture, dated as of September 22, 1998 (the "Indenture"), among the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"). The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the Trust Indenture Act. Nevertheless, all material provisions of the Indenture are summarized in the following discussion. A copy of the Indenture has been filed by the Company as an exhibit to the Registration Statement of which this Prospectus is a part and is available from the Company upon request. GENERAL The Drs. are limited to $200,000,000 in aggregate principal amount. The Restricted Drs. are, and the Exchange Drs. will be, unsecured obligations of the Company and will rank equally with all other unsecured and unsubordinated obligations of the Company. The Exchange Drs. will be issued only in fully registered form, without coupons, in denominations of $1,000 or any integral multiple thereof. The Restricted Drs. bear, and the Exchange Drs. will bear, interest at an annual rate of 6% to October 1, 2003 (the "Remarketing Date"). If J.P. Morgan Securities Inc., as Remarketing Dealer (the "Remarketing Dealer"), elects to remarket the Drs., then after the Remarketing Date, the interest rate on the Drs. will be reset at a fixed rate until October 1, 2013 (the "Stated Maturity Date"), as determined by the Remarketing Dealer based on bids requested from dealers in the Company's publicly-traded debt. See "--Mandatory Tender of Drs.; Remarketing." The Exchange Drs. will bear interest from the last payment date on which interest was paid on the Restricted Drs. surrendered in exchange therefor or, if no interest has been paid on the Restricted Drs., from September 22, 1998, payable semi-annually on April 1 and October 1 of each year or if any such date is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"), commencing April 1, 1999, to the persons in whose name the Exchange Drs. are registered on the fifteenth calendar day (whether or not a Business Day) immediately preceding the related Interest Payment Date (each, a "Record Date"). "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in The City of New York or in the city in which the Trustee is located (Chicago, Illinois on the date of the Indenture) are authorized or obligated by law, executive order or governmental decree to be closed. The Drs. will mature on the Stated Maturity Date. However, if the Remarketing Dealer elects to remarket the Drs., then the Drs. will be subject to mandatory tender to the Remarketing Dealer, for purchase at 100% of the principal amount thereof on the Remarketing Date on the terms and subject to the conditions described herein. See "--Mandatory Tender of Drs.; Remarketing." If the Remarketing Dealer does not elect to exercise its right to a mandatory tender of the Drs., or for any reason does not purchase all of the Drs. on the Remarketing Date, then holders are required to tender, and the Company is required to repurchase, any Drs. that have not been purchased by the Remarketing Date from the holders thereof at 100% of the principal amount thereof plus accrued interest, if any. See "--Repurchase." The Drs. will be redeemable on the Remarketing Date on the terms described under "--Redemption." The Exchange Drs. will be issued in the form of one or more registered global securities and will be deposited with, or on behalf of, DTC and registered in the name of DTC or its nominee. See "--Book-Entry System." Although the United States federal income tax treatment of the Drs. is not certain, the terms of the Drs. provide that the Company and all holders of the Drs. agree to treat the Drs. as fixed rate debt instruments that mature on the Remarketing Date for United States federal income tax purposes. See "Certain United States Federal Income Tax Considerations." 10 MANDATORY TENDER OF DRS.; REMARKETING The following description sets forth the terms and conditions of the remarketing of the Drs., if the Remarketing Dealer elects to purchase the Drs. on the Remarketing Date for remarketing. Mandatory Tender If the Remarketing Dealer gives notice to the Company and the Trustee on a Business Day not later than five Business Days prior to the Remarketing Date (the "Notification Date") of its intention to purchase all of the Drs. for remarketing, all outstanding Drs. will be automatically tendered to the Remarketing Dealer for purchase on the Remarketing Date, except in the circumstances described under "--Repurchase" or "--Redemption" below. The purchase price of the Drs. will be equal to 100% of the principal amount thereof. When the Drs. are tendered for remarketing, the Remarketing Dealer may remarket the Drs. for its own account at varying prices to be determined by the Remarketing Dealer at the time of each sale or may sell such Drs. to the Reference Corporate Dealer (defined below) submitting the lowest firm, committed bid on the Determination Date, as described below. If the Remarketing Dealer elects to remarket the Drs., then from and including the Remarketing Date to but excluding the Stated Maturity Date, the Drs. will bear interest at the Interest Rate to Maturity (defined below). The obligation of the Remarketing Dealer to purchase the Drs. on the Remarketing Date is subject to several conditions set forth in a Remarketing Agreement between the Company and the Remarketing Dealer (the "Remarketing Agreement"). In addition, the Remarketing Dealer may terminate the Remarketing Agreement upon the occurrence of certain events set forth therein. See "--The Remarketing Dealer." If for any reason the Remarketing Dealer does not purchase all outstanding Drs. on the Remarketing Date, then the Company will be required on the Remarketing Date to repurchase any Drs. that have not been purchased by the Remarketing Dealer from the holders thereof at a price equal to the principal amount thereof plus all accrued interest, if any. See "--Repurchase" below. The Remarketing Dealer shall determine the interest rate that the Drs. will bear from the Remarketing Date to the Stated Maturity Date (the "Interest Rate to Maturity") on the third Business Day immediately preceding the Remarketing Date (the "Determination Date") by soliciting by 3:30 p.m., New York City time, the Reference Corporate Dealers (defined below) for firm, committed bids to purchase all outstanding Drs. at the Dollar Price (defined below), and by selecting the lowest such firm, committed bid (regardless of whether each of the Reference Corporate Dealers actually submits a bid). Each bid shall be expressed in terms of the Interest Rate to Maturity that the Drs. would bear (quoted as a spread over 4.93% per annum (the "Base Rate")) based on the following assumptions: (i) the Drs. would be sold to the Reference Corporate Dealer on the Remarketing Date for settlement on the same day; (ii) the Drs. would mature on the Stated Maturity Date; and (iii) the Drs. would bear interest from the Remarketing Date at the Interest Rate to Maturity bid by such Reference Corporate Dealer, payable semiannually on the Interest Payment Dates for the Drs. The Interest Rate to Maturity announced by the Remarketing Dealer as a result of such process will be quoted to the nearest one hundred-thousandth (0.00001) of one percent per annum and, absent manifest error, will be binding and conclusive upon the holders of the Drs., the Company and the Trustee. The Remarketing Dealer shall have the discretion to select the time at which the Interest Rate to Maturity is determined on the Determination Date. "Comparable Treasury Issue" means the United States Treasury security selected by the Remarketing Dealer as having an actual maturity on the Determination Date (or the United States Treasury securities selected by the Remarketing Dealer to derive an interpolated maturity on such Determination Date) comparable to the remaining term of the Drs. The United States Treasury security selected by the Remarketing Dealer will be based on the standard market convention for the benchmark used in the swap market to settle an option on the 10-year then on- the-run Treasury 11 security. "Comparable Treasury Price" means (a) the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) on the Determination Date, as set forth on Telerate Page 500 (defined below), adjusted to reflect settlement on the Remarketing Date if prices quoted on Telerate Page 500 are for settlement on any date other than the Remarketing Date, or (b) if such page (or any successor page) is not displayed or does not contain such offer prices on such Business Day, then (i) the average of such Reference Treasury Dealer Quotations for such Remarketing Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations (unless there is more than one highest or lowest quotation, in which case only one such highest and/or lowest quotation shall be excluded), or (ii) if the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. The Remarketing Dealer shall have the discretion to select the time at which the Comparable Treasury Price is determined on the Determination Date and the number of Reference Treasury Dealer Quotations (which shall be at least three) to be obtained. "Dollar Price" means the discounted present value to the Remarketing Date of the cash flows on a bond (x) with a principal amount equal to the aggregate principal amount of the initially issued Drs., (y) maturing on the Stated Maturity Date and (z) bearing interest from the Remarketing Date, payable semi- annually (assuming a 360-day year consisting of twelve 30-day months) on the Interest Payment Dates of the Drs. at a rate equal to the Base Rate, using a discount rate equal to the Treasury Rate (defined below). "Reference Corporate Dealer" means J.P. Morgan Securities Inc. and four other leading dealers of publicly-traded debt securities of the Company acceptable to J.P. Morgan Securities Inc. and the Company. "Reference Treasury Dealer" means a primary U.S. Government securities dealer in The City of New York (which may include the Remarketing Dealer) selected by the Remarketing Dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer, the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) for settlement on the Remarketing Date, quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the Determination Date. "Telerate Page 500" means the display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such other page as may replace Telerate Page 500 on such service) or such other service displaying the offer price specified in clause (a) of the definition of Comparable Treasury Price as may replace Dow Jones Markets Limited. "Treasury Rate" means the annual rate equal to the semi-annual equivalent yield to maturity or interpolated (on a 30/360 day count basis) yield to maturity on the Determination Date of the Comparable Treasury Issue for value on the Remarketing Date, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price. Notification of Results; Settlement If the Remarketing Dealer has elected to remarket the Drs. as provided herein, then the Remarketing Dealer will notify the Company, the Trustee and DTC by telephone, confirmed in writing, by 5:00 p.m., New York City time, on the Determination Date, of the Interest Rate to Maturity. All of the Drs. will be automatically delivered to the account of the Trustee by book-entry through DTC, pending payment of the purchase price therefor, on the Remarketing Date. The Remarketing Dealer will make, or cause the Trustee to make, payment to DTC by the close of business on the Remarketing Date against delivery through DTC of the Drs., of the purchase price for all of the Drs. tendered. The purchase price of the Drs. will be equal to 100% of the principal amount thereof. If the Remarketing Dealer does not 12 purchase all of the Drs. on the Remarketing Date, then the Company is obliged to make or cause to be made such payment for all of the Drs. not purchased by the Remarketing Dealer, as described below under "--Repurchase." In any case, the Company will make, or cause the Trustee to make, payment of interest due on the Remarketing Date to holders of Drs. by book-entry through DTC by the close of business on the Remarketing Date. The tender and settlement procedures described above may be modified without the consent of the holders of the Drs. to the extent required by DTC or, if the book-entry system is no longer available for the Drs. at the time of the remarketing, to the extent required to facilitate the tendering and remarketing of Drs. in certificated form. In addition, the Remarketing Dealer may modify without the consent of the holders of the Drs. the settlement procedures set forth above in order to facilitate the settlement process. As long as DTC's nominee holds the certificates representing any Drs. in the book-entry system of DTC, no certificates for such Drs. will be delivered by any selling beneficial owner to reflect any transfer of such Drs. effected in the remarketing. In addition, under the terms of the Drs. and the Remarketing Agreement, the Company has agreed that (i) it will use its best efforts to maintain the Drs. in book-entry form with DTC or any successor thereto and to appoint a successor depository to the extent necessary to maintain the Drs. in book-entry form and (ii) it will waive any discretionary right that it otherwise has under the Indenture to cause the Drs. to be issued in certificated form. For further information with respect to transfers and settlement through DTC, see "--Book-Entry System" below. The Remarketing Dealer The Company and the Remarketing Dealer have entered into a Remarketing Agreement which provides for the Drs. to be remarketed substantially on the terms described below and in "--Mandatory Tender of Drs.; Remarketing." The Remarketing Dealer will not receive any fees or reimbursement of expenses from the Company in connection with the remarketing but will be entitled to reimbursement of out-of-pocket expenses under certain circumstances. The Company has agreed to indemnify the Remarketing Dealer against certain liabilities, including liabilities under the Securities Act, arising out of or in connection with its duties under the Remarketing Agreement. If the Remarketing Dealer elects to remarket the Drs. as described herein, the obligation of the Remarketing Dealer to purchase Drs. from holders thereof will be subject to several conditions set forth in the Remarketing Agreement. In addition, the Remarketing Agreement provides for its termination by the Remarketing Dealer on or before the Remarketing Date, upon the occurrence of certain events that would customarily give underwriters the right to terminate an underwriting agreement or would give rise to a failure to satisfy a closing condition to an underwriting agreement in the Company's public debt offerings. The Remarketing Agreement also provides that the Remarketing Dealer may resign at any time as Remarketing Dealer, such resignation to be effective ten Business Days after the delivery to the Company and the Trustee of notice of such resignation. In such case, the Company shall have the right, but not the obligation, to appoint a successor Remarketing Dealer. As a result of these conditions and termination rights and the Remarketing Dealer's right to resign, holders of Drs. cannot be assured that their Drs. will be purchased by the Remarketing Dealer in connection with a mandatory tender. No holder of any Drs. shall have any rights or claims under the Remarketing Agreement or against the Company or the Remarketing Dealer as a result of the Remarketing Dealer not purchasing such Drs. If the Remarketing Dealer does not purchase all of the Drs. on the Remarketing Date, the Company will be required to purchase on the Remarketing Date any Drs. that have not been purchased by the Remarketing Dealer at a price equal to 100% of the principal amount thereof plus accrued interest, if any. See "--Repurchase." The Remarketing Dealer, in its individual or any other capacity, may buy, sell, hold and deal in any of the Drs. The Remarketing Dealer may exercise any vote or join in any action which any holder of Drs. may be entitled to exercise or take with like effect as if it did not act in any capacity under the Remarketing Agreement. 13 The Remarketing Dealer, in its individual capacity, either as principal or agent, may also engage in or have an interest in any financial or other transaction with the Company as freely as if it did not act in any capacity under the Remarketing Agreement. REPURCHASE If the Remarketing Dealer for any reason does not purchase all of the Drs. on the Remarketing Date, all holders are required to tender, and the Company shall repurchase on the Remarketing Date, any Drs. that have not been purchased by the Remarketing Dealer, at a price equal to 100% of the principal amount of the Drs. plus all accrued and unpaid interest, if any, on such Drs. to (but excluding) the Remarketing Date. REDEMPTION If the Remarketing Dealer has elected to remarket the Drs. on the Remarketing Date, the Company shall have the right to redeem the Drs., in whole but not in part, from the Remarketing Dealer on the Remarketing Date at a redemption price equal to the greater of (i) 100% of the aggregate principal amount of the Drs. and (ii) the Dollar Price, by giving notice of such redemption to the Remarketing Dealer: (x) no later than the Business Day immediately prior to the Determination Date, or (y) if fewer than three Reference Corporate Dealers timely submit firm, committed bids for all outstanding Drs. to the Remarketing Dealer on the Determination Date, immediately after the deadline set by the Remarketing Dealer for receiving such bids has passed. In either such case, the Company shall pay such redemption price for the Drs. in same-day funds by wire transfer on the Remarketing Date to an account designated by the Remarketing Dealer. OPTIONAL REDEMPTION AFTER THE REMARKETING DATE After the Remarketing Date, if the Remarketing Dealer has elected to remarket the Drs. on the Remarketing Date, the Drs. will be redeemable (a "Post- Remarketing Redemption"), in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Drs. or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including the portion of any such payments of interest accrued as of the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined below) (determined on the third Business Day preceding such redemption date), plus, in each case, accrued and unpaid interest thereon to (but excluding) the redemption date. Notice of any Post-Remarketing Redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Drs. to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Drs. or portions thereof called in connection with a Post-Remarketing Redemption. "Adjusted Treasury Rate" means (i) the arithmetic mean of the yields under the heading "Week Ending" published in the Statistical Release most recently published prior to the date of determination under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to the maturity, as of the redemption date, of the principal being redeemed, plus (ii) 0.20%. If no maturity set forth under such heading exactly corresponds to the maturity of such principal, yields for the two published maturities most closely corresponding to the maturity of such principal shall be calculated pursuant to the immediately preceding sentence, and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of the relevant periods to the nearest month. 14 "Statistical Release" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively-traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under the terms of the Drs., then such other reasonably comparable index which shall be designated by the Company. CERTAIN RESTRICTIONS Absence of Certain Protections in the Indenture The Indenture does not contain any provisions that permit the holders of the Drs. to require prepayment in the event of a change in the management or control of the Company, or that afford holders of the Drs. protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders of the Drs. (except to the limited extent that the covenants described below might affect the Company's ability to consummate such transactions). General The various restrictive provisions of the Indenture applicable to the Company and its Restricted Subsidiaries do not apply to Unrestricted Subsidiaries. The assets and indebtedness of Unrestricted Subsidiaries are not consolidated with those of the Company and its Restricted Subsidiaries in calculating Consolidated Net Tangible Assets under the Indenture and investments by the Company or by its Restricted Subsidiaries in Unrestricted Subsidiaries are excluded in computing Consolidated Net Tangible Assets. "Unrestricted Subsidiaries" are those Subsidiaries which are designated as Unrestricted Subsidiaries by the Board of Directors from time to time pursuant to the Indenture (in each case, unless and until designated as Restricted Subsidiaries by the Board of Directors pursuant to the Indenture). "Restricted Subsidiaries" are all Subsidiaries other than Unrestricted Subsidiaries. A "Wholly-owned Restricted Subsidiary" is a Restricted Subsidiary at least 99% of the outstanding voting stock of which (except directors' qualifying shares) is owned by the Company and its other Wholly-owned Restricted Subsidiaries. A "Subsidiary" is a corporation more than 50% of the outstanding voting stock is owned, directly or indirectly, by the Company or an entity other than a corporation of which the Company has, directly or indirectly, the majority ownership and the power to direct the management. (Section 1.01) An Unrestricted Subsidiary may not be designated a Restricted Subsidiary if it has any Secured Debt, Funded Debt or Attributable Debt in respect of Sale and Leaseback Transactions, except such debt as the Company would be permitted to incur under the terms of the Indenture, immediately after such Unrestricted Subsidiary becomes a Restricted Subsidiary. (Section 10.11(a)) Restrictions Upon Secured Debt Neither the Company nor a Restricted Subsidiary is permitted to incur or guarantee certain indebtedness secured by any lien, mortgage, pledge or other encumbrance on its property without equally and ratably securing the Drs. This restriction does not apply to certain permitted encumbrances described in the Indenture, including purchase money mortgage encumbrances existing on property at the time it is acquired by the Company or a Restricted Subsidiary, conditional sales and similar agreements, and the extension, renewal or refunding of any of the foregoing and any Secured Debt of a Restricted Subsidiary owing to the Company or a Wholly-owned Restricted Subsidiary. Section 10.10(d) of the Indenture also permits other indebtedness secured by encumbrances not otherwise specifically permitted which, together with Attributable Debt respecting existing Sale and Leaseback Transactions (excluding Sale and Leaseback Transactions entered into in respect of property acquired by the Company or a Restricted Subsidiary not more than 24 months prior to the date such transaction is entered into), and unsecured Funded Debt of Restricted Subsidiaries (excluding unsecured Funded Debt incurred through extension, refund or renewal where Consolidated Funded Debt was not thereby increased and excluding any Funded Debt owed to the Company or a Wholly-owned Restricted Subsidiary), incurred or entered into, as the case may be, after the date of the Indenture, would not at the time exceed 20% of the 15 Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries. (Section 10.10) Under the Indenture, (i) "Consolidated Net Tangible Assets" means the total amount of assets on a consolidated balance sheet of the Company and its Restricted Subsidiaries (less applicable reserves and other properly deductible items and after excluding any investments made in Unrestricted Subsidiaries or in corporations while they were Unrestricted Subsidiaries but which are not Subsidiaries at the time of computation) after deducting (a) all liabilities and liability items, including amounts in respect of obligations under leases (or guarantees thereof) 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) goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles; (ii) "Funded Debt" means any indebtedness for money borrowed, created, issued, incurred, assumed or guaranteed, whether secured or unsecured, maturing more than one year after the date of determination thereof and any indebtedness, 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 the indebtedness, which would, in accordance with generally accepted accounting practice, be classified as funded debt, excluding (a) indebtedness for which money in satisfaction thereof has been deposited in trust, (b) certain guarantees arising in the ordinary course of business and (c) liabilities resulting from capitalization of lease rentals; (iii) "Secured Debt" means indebtedness for money borrowed which is secured by a lien or other encumbrance on property of the Company or any Restricted Subsidiary, excluding certain guarantees arising in the ordinary course of business; and (iv) "Attributable Debt" means as to any Sale and Leaseback Transaction (as defined below), in the case of a capital lease, the amount of the capital lease obligation thereunder and in all other cases, the present value of the minimum remaining rental obligation discounted at the interest factor included in the rental payment. (Section 1.01) Restrictions Upon Sales with Leases Back The Company is not permitted, and may not permit a Restricted Subsidiary, to sell or transfer (except to the Company or one or more Wholly-owned Restricted Subsidiaries) any manufacturing plant, warehouse, retail store or equipment owned and operated by the Company or a Restricted Subsidiary on or after the date of the Indenture with the intention that the Company or any Restricted Subsidiaries take back a lease thereof, except a lease for a period, including renewals, of not more than 24 months by the end of which period it is intended that the use of such property by the lessee will be discontinued (any such transaction, a "Sale and Leaseback Transaction"), except (i) where the Company would be entitled under Section 10.10(d) of the Indenture to incur additional secured indebtedness not otherwise specifically permitted by the Indenture in an amount equal to the Attributable Debt respecting such Sale and Leaseback Transaction, (ii) where the Sale and Leaseback Transaction is entered into in respect of property acquired by the Company or a Restricted Subsidiary within 24 months of such acquisitions or (iii) where the Company within 120 days of entering into the Sale and Leaseback Transaction applies to the retirement of its Secured Debt an amount equal to the greater of (a) the net proceeds of the sale of the property leased pursuant to such Transaction or (b) the fair market value of the property so leased. (Section 10.09) Restrictions Upon Funded Debt of Restricted Subsidiaries Restricted Subsidiaries are prohibited from becoming liable for any unsecured Funded Debt except where the Company would be entitled under Section 10.10(d) of the Indenture to incur additional secured indebtedness not otherwise specifically permitted by the Indenture in an amount equal to such Funded Debt and except for certain extensions, refundings and renewals of Funded Debt and Funded Debt owing to the Company or a Wholly-owned Restricted Subsidiary. (Section 10.08) Restrictions Upon Merger and Sale of Assets The Indenture provides that no merger of the Company with or sale of the Company's property substantially as an entirety to any other corporation shall be made if, as a result, properties or assets of the Company would become subject to a mortgage, lien or other encumbrance which would not be permitted by the Indenture, unless the Drs. shall be equally and ratably secured with such obligations. Any successor entity must be a corporation organized in the United 16 States, assume the payment of the principal and interest on the Drs. and the performance of every covenant under the Indenture and, immediately after giving effect to a merger or a consolidation, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing. (Section 8.01) Although the amount of the Company's property that will constitute a sale of such property "substantially as an entirety" is not readily quantifiable, a determination as to whether such a sale has occurred will depend on the percentage of operating and total assets transferred, among other measurements, and other facts and circumstances of the transaction. In any particular transaction, the determination of whether such a sale has occurred will be made by the Company, and the Company will give notice of such occurrence to the holders of the Drs. Because of the uncertainty regarding whether a particular sale will constitute a sale of property "substantially as an entirety," holders will not be able to determine for themselves whether such a transaction has occurred and will have to rely on the Company's determination. If such a transaction occurs, the person to which such amount of the Company's property is transferred shall enter into a supplemental indenture satisfactory in form to the Trustee. MODIFICATION OF THE INDENTURE The Indenture and the rights of the holders may be modified by the Company only with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Drs.; but no modification altering the terms of payment of principal or interest, changing the place or medium of payment of principal or interest, impairing the rights of holders to institute suit for payment or reducing the percentage required for modification will be effective against any holder without his, her or its consent. (Section 9.02) EVENTS OF DEFAULT The Indenture defines an Event of Default with respect to the Drs. as being any one of the following events: (i) default in any payment of principal of (or premium, if any) upon any Drs. when due, (ii) default for 30 days in any payment of interest upon any Drs. when due, (iii) default in the performance of the covenant restricting merger and sale of assets, (iv) default for 60 days after appropriate notice in the performance of any other covenant in the Indenture, (v) certain events of default resulting in the acceleration of the maturity of indebtedness aggregating in excess of $10,000,000 under any mortgages, indentures or instruments under which the Company may have issued, or by which there may have been secured or evidenced, any other indebtedness of the Company or (vi) certain events in bankruptcy, insolvency or reorganization. In case an Event of Default shall occur and be continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Drs. then outstanding may declare the principal of the Drs. and the accrued interest thereon, if any, to be due and payable. Any Event of Default with respect to the Drs. which has been cured may be waived by the holders of a majority in aggregate principal amount of the Drs. then outstanding. (Sections 5.01, 5.02 and 5.13) The Indenture requires the Company to file annually with the Trustee a written statement signed by an officer of the Company as to the absence of certain defaults under the terms of the Indenture. The Indenture provides that the Trustee may withhold notice to the holders of any default (except in payment of principal or premium, if any, or interest) if it considers it in the interest of the holders to do so. (Sections 6.02 and 10.13) Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Indenture provides that the Trustee shall be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of holders unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for indemnification and certain other rights of the Trustee, the Indenture provides that the holders of a majority in principal amount of the Drs. then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. (Sections 5.12 and 6.03) 17 DEFEASANCE AND DISCHARGE The terms of the Indenture provide the Company with the option to be discharged from any and all obligations (except for certain obligations to register the transfer or exchange of Drs., to replace stolen, lost or mutilated Drs., to maintain paying agencies and hold moneys for payment in trust) upon the deposit with the Trustee, in trust, of money or U.S. Government Obligations (as defined), or both, which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay any installment of principal (and premium, if any) and interest on such Drs. in accordance with the terms of the Indenture and such Drs. Such option may only be exercised (i) if the Company has received from, or there has been published by, the United States Internal Revenue Service (the "IRS") a ruling to the effect that such a discharge will not be deemed, or result in, a taxable event with respect to holders of Drs., (ii) there is no Event of Default or event which may become an Event of Default then occurring and (iii) such action would not cause any outstanding Drs. to become delisted as a result thereof. (Article 12) DEFEASANCE OF CERTAIN COVENANTS The terms of the Indenture provide the Company with the option to have the occurrence of events described in (iii) or (v) under the heading "--Events of Default" above no longer be Events of Default and to omit to comply with certain of the covenants described under the heading "--Certain Restrictions" above. The Company, in order to exercise such option, will be required to deposit with the Trustee money or U.S. Government Obligations, or both, which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay principal (and premium, if any) and interest on such Drs. in accordance with the terms of the Indenture and such Drs. Additionally, no Event of Default or event which may become an Event of Default may have occurred and be continuing on the date of deposit with the Trustee. The Company will also be required to deliver to the Trustee an opinion of counsel to the effect that the deposit and related covenant defeasance will not cause the holders of such Drs. to recognize income, gain or loss for federal income tax purposes. (Article 12) The Company may exercise its defeasance option with respect to such Drs. notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its defeasance option, payment of such Drs. may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of such Drs. may not be accelerated by reference to the provisions described in the preceding paragraph. In the event the Company omits to comply with its remaining obligations with respect to such Drs. under the Indenture after exercising its covenant defeasance option and such Drs. are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations on deposit with the Trustee may be insufficient to pay amounts due on the Drs. at the time of the acceleration resulting from such Event of Default. However, the Company will remain liable in respect of such payments. (Article 12) BOOK-ENTRY SYSTEM The Exchange Drs. will be issued in the form of one or more fully registered global securities that will be deposited with, or on behalf of, DTC and registered in the name of DTC's nominee. See "--General." DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes to Participants' accounts, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC System is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, 18 either directly or indirectly ("Indirect Participants"), including Euroclear and Cedel Bank. The rules applicable to DTC and its Participants are on file with the Commission. Payments of principal of, premium, if any, and interest on the Drs. will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct Participants' accounts on the related payment date in accordance with their respective holdings shown on DTC's records. Payments of interest on and principal of the Drs. held through Euroclear and Cedel Bank will be credited to the cash accounts of their respective participants in accordance with the relevant system's rules and procedures. Payments by Participants to beneficial owners of the Drs. will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or any Paying Agent under the Indenture, or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. is the responsibility of the Company or the Trustee or any Paying Agent, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the beneficial owners of the Drs. is the responsibility of Direct and Indirect Participants. DTC may decide to discontinue providing its services as securities depository with respect to the Drs. at any time by giving notice to the Company or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Drs. certificates are required to be printed and delivered. None of the Company, the Trustee, any Paying Agent or any Registrar for the Drs. will have any responsibility or liability for any aspect of the records maintained by DTC relating to, or payments made on account of beneficial ownership interests in, Drs. represented in global form, or for maintaining, supervising or receiving any records relating to such beneficial ownership interests maintained by DTC. CONCERNING THE TRUSTEE Harris Trust and Savings Bank is the Trustee under the Indenture and has been appointed by the Company as the initial registrar and paying agent with respect to the Drs. 19 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS INTRODUCTION The following is a summary of the principal U.S. federal income tax consequences of the purchase, ownership and disposition of the Drs. to initial holders purchasing Drs. at their "issue price." The "issue price" of the Drs. is the first price to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the Drs. is sold for money. This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change, which change may be retroactive. Moreover, it deals only with purchasers who hold Drs. as "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, persons holding Drs. as a hedge against currency risk or as a position in a "straddle," "conversion transaction" or another integrated transaction for tax purposes, or U.S. Holders (as defined below) whose functional currency is not the U.S. dollar. In addition, this discussion only addresses the U.S. federal income tax consequences of the Drs. for the period ending on the Remarketing Date. Although the following summary does not purport to describe all of the tax considerations that may be relevant to a prospective purchaser of Drs., in the opinion of Morgan, Lewis & Bockius LLP, tax counsel to the Company, subject to the qualifications and limitations set out herein, the discussion below fairly summarizes the material U.S. federal income tax considerations of an investment in the Drs. to a U.S. Holder (as defined below) or, as the case may be, to a non-U.S. Holder (as defined below). As used herein, the term "U.S. Holder" means a beneficial owner of Drs. that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate or trust the income of which is subject to U.S. federal income tax regardless of its source. As used herein, the term "non-U.S. Holder" means a beneficial owner of Drs. that is, for U.S. federal income tax purposes, (i) a nonresident alien individual, (ii) a foreign corporation or (iii) a nonresident alien fiduciary of a foreign estate or trust. Because the Drs. are subject to mandatory tender to the Remarketing Dealer or repurchase by the Company on the Remarketing Date, the Company intends to treat the Drs. as maturing on the Remarketing Date for U.S. federal income tax purposes and as being reissued on the Remarketing Date should the Remarketing Dealer remarket the Drs. By purchasing the Drs., a holder agrees to follow such treatment for U.S. federal income tax purposes. Because no debt instrument closely comparable to the Drs. has been the subject of any Treasury regulation, revenue ruling or judicial decision, the U.S. federal income tax treatment of the Drs. is not certain. No ruling on any of the issues discussed below will be sought from the IRS. Accordingly, significant aspects of the U.S. federal income tax consequences of an investment in the Drs. are uncertain, and no assurance can be given that the IRS or the courts will agree that the Drs. should be treated as maturing on the Remarketing Date. PROSPECTIVE PURCHASERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE Drs. (INCLUDING ALTERNATIVE CHARACTERIZATIONS OF THE Drs.). EXCEPT WHERE INDICATED TO THE CONTRARY, THE FOLLOWING DISCUSSION ASSUMES THAT THE COMPANY'S TREATMENT OF THE Drs. WILL BE RESPECTED FOR U.S. FEDERAL INCOME TAX PURPOSES. PROSPECTIVE PURCHASERS SHOULD ALSO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION. 20 TAX TREATMENT OF THE DRS. Assuming the characterization of the Drs. set forth above, the following tax consequences will result to U.S. Holders. Exchange Offer The exchange of Restricted Drs. for Exchange Drs. in the Exchange Offer will not constitute a taxable event to U.S. Holders. Consequently, (i) no gain or loss will be realized by a U.S. Holder upon receipt of an Exchange Drs.; (ii) the holding period of the Exchange Drs. will include the holding period of the Restricted Drs. exchanged therefor; and (iii) the adjusted tax basis of the Exchange Drs. will be the same as the adjusted tax basis of the Restricted Drs. exchanged therefor immediately before the exchange. Interest Income Interest on the Drs. will be taxable as ordinary income for U.S. federal income tax purposes when received or accrued by a U.S. Holder in accordance with its method of accounting for tax purposes. Gain or Loss on Sale or Retirement When a Drs. is sold or retired, the U.S. Holder will recognize gain or loss equal to the difference between the amount realized on the sale or retirement (excluding any amount attributable to accrued interest, which will be taxable as such) and the adjusted tax basis of the Drs. in the hands of the U.S. Holder. The adjusted tax basis of the Drs. generally will equal the U.S. Holder's cost, reduced by the principal payments previously received with respect to the Drs. Gain or loss on sale or retirement of a Drs. will be capital gain or loss. ALTERNATIVE U.S. FEDERAL INCOME TAX TREATMENT There can be no assurance that the IRS will agree with, or that a court will uphold, the Company's treatment of the Drs. as maturing on the Remarketing Date and as thereafter being reissued should the Drs. be remarketed, and it is possible that the IRS could assert another characterization. In particular, the IRS could seek to treat the Drs. as maturing on the Stated Maturity Date. Because of the possible remarketing and reset, if the Drs. were treated as maturing on the Stated Maturity Date, then Treasury regulations relating to contingent payment debt obligations (the "Contingent Payment Debt Regulations") would apply. In such case, the timing and character of income on the Drs. would be significantly affected. Among other things, U.S. Holders, regardless of their usual method of tax accounting, would be required to accrue income annually as original issue discount, subject to the adjustments described below, at a "comparable yield" on the adjusted issue price, which could be higher than the actual cash payments received on the Drs. in a taxable year. In addition, the Contingent Payment Debt Regulations require that a projected payment schedule be determined, and that adjustments to income accruals be made to account for differences between actual payments and projected payments. Furthermore, any gain realized with respect to the Drs. generally would be treated as ordinary interest income, and any loss realized generally would be treated as ordinary loss to the extent of the U.S. Holder's ordinary income inclusions with respect to the Drs. Any remaining loss generally would be treated as capital loss. In addition, the IRS could, in connection with the treatment of the Drs. as a contingent payment debt instrument maturing on the Stated Maturity Date, treat the holder of the Drs. as receiving consideration from the Remarketing Dealer (in effect, an option premium) in exchange for the Remarketing Dealer's right to require mandatory tender of the Drs., in which case the issue price of the Drs. would be increased by an equal amount. Under that characterization, upon the sale of a Drs. (other than through the mandatory tender), the IRS could take the position that the gain or loss with respect to the mandatory tender right and the gain or loss with respect to the debt instrument must be separately determined, in which case any deemed loss with respect to the mandatory tender right would be treated as capital loss, and a corresponding amount of additional ordinary income would be recognized by the U.S. Holder on the sale of the debt instrument. The ability to use capital losses to offset ordinary income in determining taxable income is generally limited. 21 Prospective purchasers are strongly urged to consult their tax advisors regarding the U.S. federal income tax consequences of an investment in the Drs. TREATMENT OF NON-U.S. HOLDERS Subject to the discussion of backup withholding tax below, a non-U.S. Holder will not be subject to withholding of U.S. federal income tax on payments of principal of, premium (if any) or interest (including (i) original issue discount and (ii) accruals, and gain treated as interest income, under the Contingent Payment Debt Regulations, if any) on a Drs., unless such non-U.S. Holder owns actually or constructively 10% or more of the total combined voting power of the stock of the Company, is a controlled foreign corporation related to the Company through stock ownership or is a bank receiving interest described in Section 881(c)(3)(A) of the Code. Sections 871(h) and 881(c) of the Code require that, in order to obtain the exemption from withholding tax described above, either the beneficial owner of the Drs., or a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and that is holding the Drs. on behalf of such beneficial owner, file a statement with the withholding agent to the effect that the beneficial owner of the Drs. is not a U.S. person. In general, for payments made on or prior to December 31, 1999, such requirement will be fulfilled if the beneficial owner of a Drs. certifies on IRS Form W-8, under penalties of perjury, that it is not a U.S. person and provides its name and address, and any Financial Institution holding the Drs. on behalf of the beneficial owner files a statement with the withholding agent to the effect that it has received such statement from the beneficial owner (and furnishes the withholding agent with a copy thereof). Generally, a non-U.S. Holder will not be subject to U.S. federal income tax on any amount which constitutes gain upon retirement or disposition of a Drs., provided the gain is not effectively connected with the conduct of a trade or business in the United States by the non-U.S. Holder. Certain other exceptions may be applicable, and a non-U.S. Holder should consult its tax advisor in this regard. The Drs. will not be includable in the estate of a non-U.S. Holder unless the individual is a direct or indirect 10% or greater shareholder of the Company or, at the time of such individual's death, payments in respect of the Drs. would have been effectively connected with the conduct by such individual of a trade or business in the United States. INFORMATION REPORTING AND BACKUP WITHHOLDING A holder may be subject to backup withholding tax at the rate of 31% of the interest and other "reportable payments" (including, under certain circumstances, principal payments and sales proceeds) paid with respect to the Drs. if, in general, the holder fails to comply with certain certification procedures and is not an exempt recipient under applicable provisions of the Code. On October 6, 1997, the Treasury Department issued new regulations (the "New Regulations") which make modifications to the withholding tax, backup withholding tax and information reporting rules described above. The New Regulations generally will be effective for payments made after December 31, 1999, subject to certain transition rules. Prospective investors are urged to consult their own tax advisors regarding the New Regulations. SUMMARY This discussion is intended to be a general summary. Due to the complexity of the rules described above, the current uncertainty as to the manner of their application to the holders and possible changes in law, it is particularly important that each holder consult with its own tax advisor regarding the tax treatment of its acquisition, ownership and disposition of its Drs. under the laws of the United States and those of any state, local or foreign taxing jurisdiction. 22 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Drs. for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Drs. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Drs. received in exchange for Restricted Drs. where such Restricted Drs. were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Drs. by broker-dealers. Exchange Drs. received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Drs. or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker- dealer or the purchasers of any such Exchange Drs. Any broker-dealer that resells Exchange Drs. that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Drs. may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Drs. and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Drs.) other than commissions or concessions of any broker-dealers and will indemnify the holders of the Drs. (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the Exchange Drs. will be passed upon for the Company by Morgan, Lewis & Bockius LLP. EXPERTS The consolidated financial statements and schedule of the Company and its subsidiaries as of February 28, 1998 and March 1, 1997 and for each of the years in the three-year period ended February 28, 1998, have been incorporated by reference herein and in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon authority of said firm as experts in accounting and auditing. With respect to the unaudited interim financial information of the Company and subsidiaries for the periods ended May 30, 1998 and August 29, 1998, incorporated by reference herein, the independent certified public accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports included in the Company's quarterly reports on Form 10-Q for the quarters ended May 30, 1998 and August 29, 1998, and incorporated by reference herein, state that they did not audit and they do not express an opinion on the interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of Section 11 of the Securities Act for their report on the unaudited interim financial information because that report is not a "report" or a "part" of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act. 23 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. _____________________ TABLE OF CONTENTS PAGE ---- Available Information.....................................2 Incorporation of Certain Documents by Reference...........2 The Company...............................................3 Use of Proceeds...........................................3 Ratio of Earnings to Fixed Charges........................3 The Exchange Offer........................................4 Description of the Drs...................................10 Certain United States Federal Income Tax Considerations..20 Plan of Distribution.....................................23 Legal Matters............................................23 Experts..................................................23 ================================================================================ RITE AID Corporation _______________________ PROSPECTUS _______________________ OFFER TO EXCHANGE 6% DEALER REMARKETABLE SECURITIES ("DRS.(SM)") DUE 2013 FOR 6% DRS. DUE 2013 ___________, 1998 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. A Delaware corporation may indemnify any person under such section in connection with a proceeding by or in the right of the corporation to procure judgment in its favor, as provided in the preceding sentence, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action, except that no indemnification shall be made in respect thereof unless, and then only to the extent that, a court of competent jurisdiction shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. A Delaware corporation must indemnify any person who was successful on the merits or otherwise in defense of any action, suit or proceeding or in defense of any claim, issue or matter in any proceeding, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. A Delaware corporation may pay for the expenses (including attorneys' fees) incurred by an officer or director in defending a proceeding in advance of the final disposition upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Registrant's Restated Certificate of Incorporation and By-Laws provide Registrant will indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or a person of whom such person is the legal representative is or was a director or officer of Registrant or is or was serving at the request of Registrant as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other II-1 capacity while serving as a director or officer shall be indemnified and held harmless by Registrant to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may be amended (but, in the case of any such amendment, only to the extent that such amendment permits Registrant to provide broader indemnification rights than said law permitted Registrant to provide prior to such amendment). The indemnity may include all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid to be paid in settlement) reasonably incurred or suffered by such person in connection with such proceeding and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent of Registrant and shall inure to the benefit of such person's heirs, executors and administrators. Section 102(b)(7) of the Delaware General Corporation Law provides that a Delaware corporation may in its articles of incorporation eliminate or limit the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability: for any breach of the director's duty of loyalty to the corporation or its stockholders; for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; under Section 174 (pertaining to certain prohibited acts including unlawful payment of dividends or unlawful purchase or redemption of the corporation's capital stock); or for any transaction from which the director derived an improper personal benefit. Registrant's Restated Certificate of Incorporation eliminates the liability of directors for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to Registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit, and provide that if the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of Registrant shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. The Delaware General Corporation Law permits the purchase of insurance on behalf of directors and officers against any liability asserted against directors and officers and incurred by such persons in such capacity, or arising out of their status as such, whether or not the corporation would have the power to indemnify offices and directors against such liability. Registrant's Restated Certificate of Incorporation allows Registrant to maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of Registrant or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not Registrant would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. Registrant has obtained liability coverage, which includes coverage to reimburse Registrant for amounts required or permitted by law to be paid to indemnify directors and officers. The foregoing summary of the Delaware General Corporation Law, Registrant's Restated Certificate of Incorporation and Registrant's By-Laws is qualified in its entirety by reference to the relevant provisions of the Delaware General Corporation Law and by reference to the relevant II-2 provisions of Registrant's Restated Certificate of Incorporation and the relevant provisions of Registrant's By-Laws. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits, as required by Item 601 of Regulation S-K, are filed as part of this Registration Statement: 4.1 Indenture, dated as of September 22, 1998, by and among Rite Aid Corporation and Harris Trust and Savings Bank, as Trustee. 4.2 Remarketing Agreement, dated as of September 22, 1998, between Rite Aid Corporation and J.P. Morgan Securities Inc., as Remarketing Dealer. 4.3 Exchange and Registration Rights Agreement, dated as of September 22, 1998, by and among Rite Aid Corporation, J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated. 5 Opinion of Morgan, Lewis & Bockius LLP as to the legality of the securities being registered. 8 Opinion of Morgan, Lewis & Bockius LLP with respect to tax matters. 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 15 Letter re Unaudited Interim Financial Information. 23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5). 23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8). 23.3 Consent of KPMG Peat Marwick LLP. 24 Powers of Attorney (contained in signature pages hereto). 25 Statement of Eligibility of Harris Trust and Savings Bank, as Trustee, on Form T-1. 99.1 Form of Letter of Transmittal respecting the offer to exchange 6% Dealer remarketable securities due 2013 which have been registered under the Securities Act for 6% Dealer remarketable securities due 2013. 99.2 Form of Notice of Guaranteed Delivery. II-3 (b) Financial Statement Schedules: Financial Statement Schedules filed herewith: None applicable. ITEM 22. UNDERTAKINGS. (a) (1) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (2) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the co-registrants pursuant to the provisions described under Item 20 or otherwise, the co-registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a co-registrant of expenses incurred or paid by a director, officer or controlling person of such co-registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, such co-registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Camp Hill, Commonwealth of Pennsylvania on November 6, 1998. RITE AID CORPORATION By: /s/Martin L. Grass ------------------------------------ Martin L. Grass Chairman of the Board and Chief Executive Officer II-5 POWER OF ATTORNEY We, the undersigned officers and directors of Rite Aid Corporation, hereby severally and individually constitute and appoint Frank M. Bergonzi, Elliot S. Gerson and Richard J. Varmecky, and each of them, the true and lawful attorneys and agents (with full power of substitution and resubstitution in each case) of each of us to execute in the name, place and stead of each of us (individually and in any capacity stated below) any and all amendments to this Registration Statement on Form S-4 and all instruments necessary or advisable in connection therewith and to file the same with the Securities and Exchange Commission, each of said attorneys and agents to have full power and authority to do and perform in the name and on behalf of each of the undersigned every act whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as any of the undersigned might or could do in person, and we hereby ratify and confirm our signatures as they may be signed by our said attorneys and agents or each of them to any and all amendments and instruments. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- Chairman of the Board and November 6, 1998 /s/Martin L. Grass Chief Executive Officer - ----------------------------- (Principal Executive Martin L. Grass Officer) President, Chief Operating November 6, 1998 /s/Timothy J. Noonan Officer and Director - ----------------------------- Timothy J. Noonan Executive Vice President November 6, 1998 and Chief Financial and /s/Frank M. Bergonzi Accounting Officer - ----------------------------- (Principal Financial and Frank M. Bergonzi Accounting Officer) /s/Franklin C. Brown Vice Chairman of the November 6, 1998 - ----------------------------- Board and Director Franklin C. Brown Director November 6, 1998 /s/William J. Bratton - ----------------------------- William J. Bratton
II-6 Director November 6, 1998 /s/Alex Grass - ------------------------------ Alex Grass Director November 6, 1998 /s/Leonard I. Green - ------------------------------ Leonard I. Green Director November 6, 1998 /s/Nancy A. Lieberman - ------------------------------ Nancy A. Lieberman Director - ------------------------------ Philip Neivert Director November 6, 1998 /s/Leonard N. Stern - ------------------------------ Leonard N. Stern Director November 6, 1998 /s/Preston Robert Tisch - ------------------------------ Preston Robert Tisch Director November 6, 1998 /s/Gerald Tsai, Jr. - ------------------------------ Gerald Tsai, Jr.
II-7 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.1 Indenture, dated as of September 22, 1998, by and among Rite Aid Corporation and Harris Trust and Savings Bank, as Trustee. 4.2 Remarketing Agreement, dated as of September 22, 1998, between Rite Aid Corporation and J.P. Morgan Securities Inc., as Remarketing Dealer. 4.3 Exchange and Registration Rights Agreement, dated as of September 22, 1998, by and among Rite Aid Corporation, J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated. 5 Opinion of Morgan, Lewis & Bockius LLP as to the legality of the securities being registered. 8 Opinion of Morgan, Lewis & Bockius LLP with respect to tax matters. 12 Statement re Computation of Ratio of Earnings to Fixed Charges. 15 Letter re Unaudited Interim Financial Information. 23.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5). 23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8). 23.3 Consent of KPMG Peat Marwick LLP. 24 Powers of Attorney (contained in signature pages hereto). 25 Statement of Eligibility of Harris Trust and Savings Bank, as Trustee, on Form T-1. 99.1 Form of Letter of Transmittal respecting the offer to exchange 6% Dealer remarketable securities due 2013 which have been registered under the Securities Act for 6% Dealer remarketable securities due 2013. 99.2 Form of Notice of Guaranteed Delivery. EX-4.1 2 INDENTURE EXHIBIT 4.1 RITE AID CORPORATION as Issuer TO HARRIS TRUST AND SAVINGS BANK As Trustee __________________________ INDENTURE Dated as of September 22, 1998 __________________________ $200,000,000 6% Dealer remarketable securities(SM) ("Drs(SM)") due 2013 - -------------------------------------------------------------------------------- _____________ "Dealer remarketable securities(SM)" and "Drs(SM)" are service marks of J.P. Morgan Securities Inc. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of September 22, 1998 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 310 (a)(1).................................. 6.09 (a)(2).................................. 6.09 (a)(3).................................. Not Applicable (a)(4).................................. Not Applicable (b)..................................... 6.08 6.10 (S) 311 (a)..................................... 6.13 (b)..................................... 6.13 (b)(2).................................. 7.03 (S) 312 (a)..................................... 7.01 7.02(a) (b)..................................... 7.02(b) (c)..................................... 7.02(c) (S) 313 (a)..................................... 7.03(a) (b)..................................... 7.03(a) (c)..................................... 7.03(a) (d)..................................... 7.03(b) (S) 314 (a)..................................... 7.04 (b)..................................... Not Applicable (c)(1).................................. 1.02 (c)(2).................................. 1.02 (c)(3).................................. Not Applicable (d)..................................... Not Applicable (e)..................................... 1.02 (S) 315 (a)..................................... 6.01 (b)..................................... 6.02 7.03(a) (c)..................................... 6.01 (d)..................................... 6.01 (d)(1).................................. 6.01(a)(1) (d)(2).................................. 6.03(h) (d)(3).................................. 6.01(c)(3) (e)..................................... 5.14 Trust Indenture Indenture Act Section Section - --------------- --------- (S) 316 (a)(1)(A)............................... 5.12 (a)(1)(B)............................... 5.13 (a)(2).................................. Not Applicable (b)..................................... 5.08 (S) 317 (a)(1).................................. 5.03 (a)(2).................................. 5.04 (b)..................................... 10.03 (S) 318 (a)..................................... 1.07 ____________ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. iii Reconciliation and tie between Trust Indenture Act
TABLE OF CONTENTS ------------- Page ---- ARTICLE 1 --------- DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION ------------------------------------------------------- Section 1.01. Definitions.....................................................................1 -- Section 1.02. Compliance Certification and Opinions..........................................14 -- Section 1.03. Form of Documents Delivered to Trustee.........................................14 -- Section 1.04. Acts of Holders; Record Date...................................................15 -- Section 1.05. Notices, Etc., to Trustee and the Company......................................16 -- Section 1.06. Notice to Holders; Waiver......................................................16 -- Section 1.07. Conflict with Trust Indenture Act..............................................17 -- Section 1.08. Effect of Headings and Table of Contents.......................................17 -- Section 1.09. Successors and Assigns.........................................................17 -- Section 1.10. Separability Clause............................................................17 -- Section 1.11. Benefits of Indenture..........................................................17 -- Section 1.12. Governing Law..................................................................18 -- Section 1.13. Legal Holidays.................................................................18 -- ARTICLE 2 --------- SECURITY FORMS -------------- Section 2.01. Forms Generally; Initial Forms of Rule 144A and Regulation S Securities........18 -- Section 2.02. Form of Face of Security.......................................................19 -- ARTICLE 3 --------- THE SECURITIES -------------- Section 3.01. Title and Terms................................................................34 -- Section 3.02. Denominations..................................................................34 -- Section 3.03. Execution, Authentication, Delivery and Dating.................................34 -- Section 3.04. Temporary Securities...........................................................36 -- Section 3.05. Global Securities..............................................................36 -- Section 3.06. Registration, Registration of Transfer and Exchange; Securities Act Legends....38 -- Section 3.07. Mutilated, Destroyed, Lost and Stolen Securities...............................41 -- Section 3.08. Payment of Interest; Interest Rights Preserved.................................42 -- Section 3.09. Persons Deemed Owners..........................................................43 -- Section 3.10. Cancellation...................................................................44 -- Section 3.11. Computation of Interest........................................................44 -- Section 3.12. Cusip Numbers..................................................................44 --
Page ---- ARTICLE 4 --------- SATISFACTION AND DISCHARGE -------------------------- Section 4.01. Satisfaction and Discharge of Indenture........................................45 -- Section 4.02. Application of Trust Money.....................................................46 -- ARTICLE 5 --------- REMEDIES -------- Section 5.01. Events of Default..............................................................47 -- Section 5.02. Acceleration of Maturity; Rescission and Annulment.............................49 -- Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee................50 -- Section 5.04. Trustee May File Proofs of Claim...............................................51 -- Section 5.05. Trustee May Enforce Claims Without Possession of Securities....................51 -- Section 5.06. Application of Money Collected.................................................52 -- Section 5.07. Limitation on Suits............................................................52 -- Section 5.08. Unconditional Right of Holders to Receive Principal, Premium and Interest......53 -- Section 5.09. Restoration of Rights and Remedies.............................................53 -- Section 5.10. Rights and Remedies Cumulative.................................................53 -- Section 5.11. Delay or Omission Not Waiver...................................................53 -- Section 5.12. Control by Holders.............................................................54 -- Section 5.13. Waiver of Past Defaults........................................................54 -- Section 5.14. Undertaking for Costs..........................................................54 -- Section 5.15. Waiver of Stay or Extension Laws...............................................55 -- ARTICLE 6 --------- THE TRUSTEE ----------- Section 6.01. Certain Duties and Responsibilities............................................55 -- Section 6.02. Notice of Defaults.............................................................55 -- Section 6.03. Certain Rights of Trustee......................................................55 -- Section 6.04. Not Responsible for Recitals or Issuance of Securities.........................57 -- Section 6.05. May Hold Securities............................................................57 -- Section 6.07. Compensation and Reimbursement.................................................57 -- Section 6.08. Disqualification; Conflicting Interest.........................................58 -- Section 6.09. Corporate Trustee Required; Eligibility........................................58 -- Section 6.10. Resignation and Removal; Appointment of Successor..............................59 -- Section 6.11. Acceptance of Appointment by Successor.........................................60 --
ii
Page ---- Section 6.12. Merger, Conversion, Consolidation or Succession to Business....................61 -- Section 6.13. Preferential Collection of Claims Against Company..............................61 -- ARTICLE 7 --------- HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY ------------------------------------------------- Section 7.01. Company to Furnish Trustee Names and Addresses of Holders......................61 -- Section 7.02. Preservation of Information; Communications to Holders.........................62 -- Section 7.03. Reports by Trustee.............................................................62 -- Section 7.04. Reports by Company.............................................................62 -- Section 7.05. Officers' Certificate with Respect to Change in Interest Rates.................63 -- ARTICLE 8 --------- CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE ---------------------------------------------------- Section 8.01. Company May Consolidate, Etc., Only on Certain Terms............................63 -- Section 8.02. Successor Substituted..........................................................64 -- ARTICLE 9 --------- SUPPLEMENTAL INDENTURES ----------------------- Section 9.01. Supplemental Indentures Without Consent of Holders.............................65 -- Section 9.02. Supplemental Indentures with Consent of Holders................................66 -- Section 9.03. Execution of Supplemental Indentures...........................................66 -- Section 9.04. Effect of Supplemental Indentures..............................................67 -- Section 9.05. Conformity with Trust Indenture Act............................................67 -- Section 9.06. Reference in Securities to Supplemental Indentures.............................67 -- ARTICLE 10 ---------- COVENANTS --------- Section 10.01. Payment of Principal, Premium and Interest....................................67 -- Section 10.02. Maintenance of Office or Agency...............................................67 -- Section 10.03. Money for Security Payments to Be Held in Trust...............................68 -- Section 10.04. Corporate Existence...........................................................69 -- Section 10.05. Maintenance of Properties.....................................................70 -- Section 10.06. Payment of Taxes and Other Claims.............................................70 -- Section 10.07. Insurance.....................................................................70 -- Section 10.08. Restrictions on Funded Debt of Restricted Subsidiaries........................70 --
iii
Page ---- Section 10.09. Restriction on Sales with Leases Back.........................................71 -- Section 10.10. Restrictions on Secured Debt..................................................71 -- Section 10.11. Restrictions on Permitting Unrestricted Subsidiaries to become Restricted Subsidiaries..................................................................73 -- Section 10.12. Statement by Officers as to Default...........................................73 -- Section 10.13. Waiver of Certain Covenants...................................................73 -- ARTICLE 11 ---------- REDEMPTION OF SECURITIES ------------------------ Section 11.01. Right of Redemption...........................................................74 -- Section 11.02. Applicability of Article......................................................74 -- Section 11.03. Election to Redeem; Notice to Trustee.........................................74 -- Section 11.04. Selection by Trustee of Securities to Be Redeemed.............................74 -- Section 11.05. Notice of Redemption..........................................................75 -- Section 11.06. Deposit of Redemption Price...................................................75 -- Section 11.07. Securities Payable on Redemption Date.........................................76 -- Section 11.08. Securities Redeemed in Part...................................................76 -- ARTICLE 12 ---------- DEFEASANCE AND COVENANT DEFEASANCE ---------------------------------- Section 12.01. Company's Option to Effect Defeasance or Covenant Defeasance..................76 -- Section 12.02. Defeasance and Discharge......................................................77 -- Section 12.03. Covenant Defeasance...........................................................77 -- Section 12.04. Conditions to Defeasance or Covenant Defeasance...............................77 -- Section 12.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions......................................................79 -- Section 12.06. Reinstatement.................................................................80 --
iv Page ---- ANNEX A Form of Regulation S Certificate..........................A-1 ANNEX B Form of Restricted Securities Certificate.................B-1 ANNEX C Form of Unrestricted Securities Certificate...............C-1
INDENTURE, dated as of September 22, 1998, between Rite Aid Corporation, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "COMPANY"), having its principal office at 30 Hunter Lane, Camp Hill, Pennsylvania, 17011, Harris Trust and Savings Bank, an Illinois banking corporation, as Trustee (herein called the "TRUSTEE"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of its 6 % Dealer remarketable securities due 2013 (the "SECURITIES") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary (i) to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company and (ii) to make this Indenture a valid agreement of the Company, all in accordance with their respective terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE 1. Definitions and Other Provisions of General Application Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles (whether or not such is indicated herein), and, except as otherwise herein expressly provided, the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted as consistently applied by the Company at the date of such computation; and (d) the words "HEREIN", "HEREOF" and "HEREUNDER" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article 6, are defined in that Article. - "ACT", when used with respect to any Holder, has the meaning specified in Section 1.04. ---- "AFFILIATE" of any Person means any other Person directly or indirectly controlling or con trolled by or under direct or indirect common control with such Person. For the purposes of this definition, "CONTROL" when used with respect to any Person means the power to direct the manage ment and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AGENT MEMBER" means any member of, or participant in, the Depositary. "APPLICABLE PROCEDURES" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, Euroclear and Cedel, in each case to the extent applicable to such transaction and as in effect at the time of such transfer or transaction. "ATTRIBUTABLE DEBT" means, as to any particular Sale and Leaseback Transaction under which the Company or any Restricted 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 such Sale and Leaseback Transaction, the then present value of the minimum rental obligation under such 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 payment, or, if such interest factor included in such payment, or, if such interest factor cannot be readily determined, at the rate per annum equal to the rate of interest on the Securities. 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, 2 insurance, taxes, assessments, utilities, operating and labor costs and similar charges. "BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee of that board. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York or in the city in which the Corporate Trust Office is located are authorized or obligated by law, executive order or governmental decree to close. "CAPITAL LEASE" means any lease of property which, in accordance with generally accepted accounting principles, should be capitalized on the lessee's balance sheet or for which the amount of asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet; and "Capital Lease Obligation" means the amount of the liability so capitalized or disclosed (or which should be so disclosed) in a note in respect of a Capital Lease. "CEDEL" means Cedel Bank, S.A. (or any successor securities clearing agency). "CLOSING DATE" means September 22, 1998. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "COMPANY" means the Person named as the "COMPANY" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture and thereafter "COMPANY" shall mean such successor Person. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee. 3 "CONSOLIDATED FUNDED DEBT" means the total of all outstanding Funded Debt of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles. "CONSOLIDATED NET TANGIBLE ASSETS" means (a) 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 Company and its Restricted 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, less (b) the amount which would be so included on such consolidated balance sheet for Investments (less applicable reserves) (i) made in Unrestricted Subsidiaries or (ii) made in corporations while they were Unrestricted Subsidiaries but which at the time of computation are not Subsidiaries of the Company. "CORPORATE TRUST OFFICE" means the principal office of the Trustee in the City of Chicago, State of Illinois, at which at any particular time its corporate trust business shall be administered. "CORPORATION" means a corporation, association, company, joint-stock company, partnership or business trust. "DEPOSITARY" means, with respect to any Securities, a clearing agency that is registered as such under the Exchange Act and is designated by the Company to act as Depositary for such Securities (or any successor securities clearing agency so registered). "DTC" means The Depository Trust Company, a New York corporation. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System (or any successor securities clearing agency). "EVENT OF DEFAULT" has the meaning specified in Section 5.01. ---- "EXCHANGE AND REGISTRATION RIGHTS AGREEMENT" means the Exchange and Registration Rights Agreement, dated as of September 22, 1998, among the Company, J.P. Morgan Securities Inc., Goldman Sachs & Co. and Morgan 4 Stanley & Co. Incorporated, as representatives of the Initial Purchasers, and the Holders from time to time as provided therein, as such agreement may be amended from time to time. "EXCHANGE OFFER" means an offer made by the Company pursuant to the Exchange and Registration Rights Agreement under an effective registration statement under the Securities Act to exchange securities substantially identical to Outstanding Securities (except for the differences provided for herein) for Outstanding Securities. "EXCHANGE REGISTRATION STATEMENT" means a registration statement of the Company under the Securities Act registering Exchange Securities for distribution pursuant to the Exchange Offer. "EXCHANGE ACT" refers to the Securities Exchange Act of 1934 as it may be amended and any successor act thereto. "EXCHANGE SECURITIES" means the Securities issued pursuant to the Exchange Offer and their Successor Securities. "FUNDED DEBT" means any indebtedness for money borrowed, created, issued, incurred, assumed or guaranteed, whether secured or unsecured, maturing more than one year after the date of determination thereof and any indebtedness, 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 the indebtedness, which would, in accordance with generally accepted accounting practice, be classified as funded debt but shall not include: (a) any indebtedness 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 the 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 Securities, 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; or (c) any liability resulting from the capitalization of lease rentals. 5 "GLOBAL SECURITY" means a Security that is registered in the Security Register in the name of a Depositary or a nominee thereof. "HOLDER" means a Person in whose name a Security is registered in the Security Register. "INDEBTEDNESS" means (i) all items of indebtedness or liability (except capital and surplus) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which indebtedness is to be determined, (ii) indebtedness secured by any Mortgage existing on property owned subject to such Mortgage, whether or not the indebtedness secured thereby shall have been assumed, and (iii) guarantees, endorsements (other than for purposes of collection) and other contingent obligations in respect of, or to purchase or otherwise acquire, indebtedness of others, unless the amount thereof is included in indebtedness under the preceding clauses (i) or (ii); provided, however, that any obligations or guarantees of such obligations or guarantees of obligations in respect of lease rentals, whether or not such obligations or guarantees of obligations would be included as liabilities on a consolidated balance sheet of the Company and its Restricted Subsidiaries, shall not be included in indebtedness. "INDENTURE" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "INITIAL PURCHASERS" means J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, as purchasers of the Securities from the Company pursuant to the Purchase Agreement. "INTEREST PAYMENT DATE" means the Stated Maturity of an installment of interest on the Securities. "INVESTMENTS" mean and include all investments, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution or otherwise, made by the Company or by any Restricted Subsidiary, and shall include all guarantees, direct or indirect, by the Company or any Restricted Subsidiary of any indebtedness of an Unrestricted Subsidiary which by its term matures 12 months or less from the time of computation of the amount thereof to the extent not included as a liability or liability item on the consolidated balance sheet of the Company and its Restricted Subsidiaries, but shall not include 6 accounts receivable of the Company or of any Restricted Subsidiary arising from the sale of merchandise in the ordinary course of business. "MATURITY", when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "MORTGAGE" means and includes any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. "OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "ORIGINAL SECURITIES" means all Securities other than Exchange Securities. "OUTSTANDING", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities which have been transferred pursuant to Section 3.06 or ---- in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide 7 purchaser in whose hands such Securities are valid obligations of the Company; and (iv) Securities paid pursuant to Section 3.07; ---- provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "PAYING AGENT" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PREDECESSOR SECURITY" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.07 in exchange for or in lieu of a ---- mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "PURCHASE AGREEMENT" means the Purchase Agreement, dated as of September 17, 1998, between the Company and the Initial Purchasers. "REDEMPTION DATE", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. 8 "REDEMPTION PRICE", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "REGISTRATION DEFAULT" means the occurrence of any of the following events: (i) the Company has not filed the Exchange Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to the Exchange and Registration Rights Agreement, (ii) the Exchange Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective under the requirements of the Exchange and Registration Rights Agreement, (iii) the Exchange Offer has not been completed on or before the date required by the Exchange and Registration Rights Agreement or (iv) any Exchange Registration Statement or Shelf Registration Statement required to be filed pursuant the Exchange and Registration Rights Agreement is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective. "REGISTRATION DEFAULT PERIOD" means any period during which a Registration Default has occurred and is continuing. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S CERTIFICATE" means a certificate substantially in the form set forth in Annex A. "REGULATION S GLOBAL SECURITY" has the meaning specified in Section 2.01. "REGULATION S LEGEND" means a legend substantially in the form of the legend required in the form of Security set forth in Section 2.02 to be placed upon Regulation S Securities. "REGULATION S SECURITIES" means all Securities required pursuant to Section 3.06(c) to bear a Regulation S Legend. - ------- "RESPONSIBLE OFFICER", when used with respect to the Trustee, means any vice president, any assistant vice president, any assistant secretary, any assistant treasurer, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the 9 above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED PERIOD" means the period of 40 consecutive days beginning on the later of (i) the day on which Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the Closing Date. "RESTRICTED SECURITIES" means all Securities required pursuant to Section 3.06(c) to bear a Restricted Securities Legend. Such term includes the - ------- Restricted Global Securities. "RESTRICTED SECURITIES CERTIFICATE" means a certificate substantially in for form set forth in Annex B. "RESTRICTED SECURITIES LEGEND" means a legend substantially in the form of the legend required in the form of Security set forth in Section 202 to be placed upon a Restricted Security. "RESTRICTED SUBSIDIARY" means any Subsidiary, whether existing on or after the date of this Indenture, unless such Subsidiary is an Unrestricted Subsidiary. "RULE 144" means Rule 144 under the Securities Act. "RULE 144A" means Rule 144A under the Securities Act. "RULE 144A SECURITIES" means the Securities purchased by the Initial Purchasers from the Company pursuant to the Purchase Agreement, other than the Regulation S Securities. "SECURED DEBT" means indebtedness for money borrowed which is secured by a mortgage, pledge, lien, security interest or encumbrance on property of the Company or any Restricted 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 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. "SECURITIES" means Securities designated in the first paragraph of the RECITALS OF THE COMPANY and includes the Original Securities and the Exchange Securities. 10 "SECURITIES ACT" means the Securities Act of 1933, as it may be amended and any successor act thereto. "SECURITIES ACT LEGENDS" means the Registered Securities Legend and the Regulation S Legend. "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 3.06(a). ------- "SHELF REGISTRATION STATEMENT" means a shelf registration statement under the Securities Act filed by the Company, if required by, and meeting the requirements of, the Exchange and Registration Rights Agreement, registering Original Securities for resale. "SPECIAL INTEREST PAYMENTS" has the meaning specified in the form of Securities set forth in Section 2.02. "SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by Trustee pursuant to Section 3.08. ---- "STATED MATURITY" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "SUBSIDIARY" of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "SUCCESSOR SECURITY" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purpose of this definition, any Security authenticated and delivered under Section 3.07 in exchange for or in lieu of a ---- mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. 11 "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 9.05; provided, however, that in the event the Trust Indenture Act of 1939 is - ---- amended after such date, "TRUST INDENTURE ACT" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "TRUSTEE" means the Person named as the "TRUSTEE" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "TRUSTEE" shall mean such successor Trustee. "UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary which, in accordance with the provisions of this Indenture, has been designated by a Board Resolution as an Unrestricted Subsidiary, in each case unless and until such Subsidiary shall, in accordance with the provisions of this Indenture, be designated by Board Resolution as a Restricted Subsidiary; and (b) any Subsidiary a majority of the Voting Stock of which shall at the time be owned directly or indirectly by one or more Unrestricted Subsidiaries. "U.S. GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such obligation evidenced by such depository receipt or a specific payment of interest on or principal of any such obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the obligation set forth in (i) or (ii) above or the specific payment of interest on or principal of such obligation evidenced by such depository receipt. "U.S. PERSON" means (i) any individual resident in the United States, (ii) any partnership or corporation organized or incorporated under the laws of the United States, (iii) any estate of which an executor or administrator is a U.S. Person (other than an estate governed by foreign law and of which at least one executor or administrator is a non-U.S. Person who has sole or shared investment discretion with respect to its assets), (iv) any trust of which any trustee is a U.S. Person (other than a trust of which at least one trustee is a non-U.S. Person who has sole or shared investment discretion with respect to its assets and no 12 beneficiary of the trust (and no settlor if the Trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign entity located in the United States, (vi) any non-discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person, (vii) any discretionary or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States (other than such an account held for the benefit or account of a non-U.S. Person), (viii) any partnership or corporation organized or incorporated under the laws of a foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act (unless it is organized or incorporated, and owned, by accredited investors within the meaning of Rule 501(a) under the Securities Act who are not natural persons, estates or trusts); provided, however, that the term "U.S. PERSON" does not include (A) a branch or agency of a U.S. Person that is located and operating outside the United States for valid business purposes as a locally regulated branch or agency engaged in the banking or insurance business, (B) any employee benefit plan established and administered in accordance with the law, customary practices and documentation of a foreign country and (C) the international organizations set forth in Section 9.02(o)(7) of Regulation S under the Securities Act and any other similar international organizations, and their agencies, affiliates and pension plans. "VICE PRESIDENT", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "VICE PRESIDENT". "VOTING STOCK" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of which at least 99% of the outstanding Voting Stock (other than directors' qualifying shares) is at the time, directly or indirectly, owned by the Company, or by one or more Wholly-owned Restricted Subsidiaries, or by the Company and one or more Wholly-owned Restricted Subsidiaries. Section 1.02. Compliance Certification and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required by the Trustee under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of 13 Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. 14 Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.04. Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) ---- conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.01) ---- prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. 15 (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 1.05. Notices, Etc., to Trustee and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Trustee Administration, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. Section 1.06. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. 16 Section 1.07. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act, that is required under such Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Until such time as this Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust Indenture Act to the same extent as would be the case if this Indenture were so qualified on the date hereof. Section 1.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.09. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.10. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section l.12. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. Section 1.13. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, or Redemption Date, or at the Stated Maturity, as the case may be, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. 17 ARTICLE 2. Security Forms Section 2.01. Forms Generally; Initial Forms of Rule 144A and Regulation S Securities. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Upon their original issuance, Rule 144A Securities shall be issued in the form of one or more Global Securities without interest coupons registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, in New York, New York, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Securities, together with their Successor Securities which are Global Securities other than the Regulation S Global Security are collectively herein called the "RESTRICTED GLOBAL SECURITY". Upon their original issuance, Regulation S Securities (herein called the "REGULATION S GLOBAL SECURITY") shall be issued in the form of a single Global Security without coupons registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee at its Corporate Trust Office, as custodian for DTC, for credit to Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System, and Cedel to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct) in accordance with the rules thereof. Section 2.02. Form of Face of Security. [IF THE SECURITY IS A RESTRICTED SECURITY, THEN INSERT -- THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER (I) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY THE COMPANY, THE TRUSTEE OR ANY AFFILIATE OF ANY OF THE COMPANY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE UNDER RULE 144A, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A 18 QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT (IF AVAILABLE); AND (II) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE (UNLESS THIS CERTIFICATE IS HELD IN GLOBAL FORM) WITHIN TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(k) (OR ANY SUCCESSOR PROVISION) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO THE TRUSTEE. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS; AND THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN THE ABOVE PARAGRAPH. THIS SECURITY WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER UNLESS THE REGISTRAR OR TRANSFER AGENT IS SATISFIED THAT THE RESTRICTIONS ON TRANSFER SET FORTH ABOVE HAVE BEEN COMPLIED WITH, ALL AS PROVIDED IN THE INDENTURE.] [IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH 19 DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] [IF THE SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY TRUST COMPANY IS TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] [IF THE SECURITY IS A REGULATION S SECURITY, THEN INSERT -- THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 , AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.] RITE AID CORPORATION 6% DEALER REMARKETABLE SECURITY(SM) ("DRS.(SM)") DUE 2013 No. CUSIP:_________ Rite Aid Corporation, a Delaware corporation (hereinafter called the "COMPANY"), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the principal sum set forth on Schedule A hereof on October 1, 2013, at the office or agency of the Company in the City of Chicago, State of Illinois, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to 20 pay interest, semi-annually on April 1 and October 1 of each year (each, an "INTEREST PAYMENT DATE"), on said principal sum at the rate per annum specified below, at such office or agency, in like coin or currency, from the April 1 or October 1, as the case may be, to which interest on the Securities has been paid preceding the date hereof (unless the date hereof is an April 1 or an October 1 to which interest has been paid, in which case from the date hereof, or unless the date hereof is prior to any interest having been paid, in which case from September 22, 1998) until payment of said principal sum has been made or duly provided for. If the Company shall default in the payment of interest when due on such April 1 or October 1, then this Security shall bear interest from the next preceding date to which interest has been paid, or, if no interest has been paid, from September 22, 1998. The interest so payable on any April 1 or October 1 shall be paid to the person in whose name this Security shall be registered at the close of business on the fifteenth calendar day (whether or not a Business Day) immediately preceding the related Interest Payment Date (each, a "REGULAR RECORD DATE"). For purposes of this Security, "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which banking institutions in The City of New York or in the city in which the Corporate Trust Office is located are authorized or obligated by law, regulation, executive order or governmental decree to be closed. - ---------------------------- (SM) "Dealer remarketable security" and "Drs." are service marks of J.P. Morgan Securities Inc. If and to the extent the Company shall default in the payment of the interest due on any interest payment date, such defaulted interest shall be paid to the person in whose name this Security is registered at the close of business on a record date established for such payment by notice by or on behalf of the Company to the holders of the Securities mailed by first-class mail not less than fifteen days prior to such record date to their last address as they shall appear upon the Security register, such record date to be not less than five days preceding the date of payment of such defaulted interest. The Company may pay interest by check mailed to the holder's address as it appears on the Security register. The rate of interest on this Security shall be 6% per annum to October 1, 2003 (the "REMARKETING DATE"); provided that, if any Registration Default occurs under the Exchange and Registration Rights Agreement, then the per annum interest rate on the Securities will increase for the period from the occurrence of the Registration Default until such time as no Registration Default is in effect (at which time the interest rate will be reduced to its initial rate) at a per annum rate of 0.50%. If the Remarketing Dealer elects to remarket the Securities pursuant to the Remarketing Agreement dated as of September 22, 1998 (the "REMARKETING AGREEMENT") between J.P. Morgan Securities Inc., as Remarketing Dealer (the 21 "REMARKETING DEALER"), and the Company, then, except as otherwise set forth on the reverse hereof, (i) this Security shall be subject to mandatory tender to the Remarketing Dealer for remarketing on the Remarketing Date, on the terms and subject to the conditions set forth on the reverse hereof, and (ii) on and after the Remarketing Date, this Security shall bear interest at the rate determined by the Remarketing Dealer in accordance with the procedures set forth in Section 4 on the reverse hereof (the "INTEREST RATE TO MATURITY"). If the Remarketing Dealer does not remarket the Securities pursuant to the Remarketing Agreement, this Security shall be subject to mandatory tender to the Company for repurchase on the Remarketing Date, on the terms and subject to the conditions set forth on the reverse hereof. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been executed by the Trustee under the Indenture referred to on the reverse hereof. 22 IN WITNESS WHEREOF, the Company has caused this Security to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereunto. RITE AID CORPORATION By: _________________________ Title: Attest: ___________________________ Secretary 23 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. HARRIS TRUST AND SAVINGS BANK, as Trustee ___________________________________ Authorized Officer 24 Form of Reverse of Security RITE AID CORPORATION 6% DEALER REMARKETABLE SECURITY(SM) ("DRS.(SM)") DUE 2013 1. Indenture. (a) This Security is one of the duly authorized issue of debt securities of the Company (herein referred to as the "DEBT SECURITIES") of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of September 22, 1998 (the "INDENTURE") between the Company and Harris Trust and Savings Bank, as Trustee (herein referred to as the "TRUSTEE"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders (the words "HOLDERS", "HOLDER", "SECURITYHOLDERS" or "SECURITYHOLDER" mean the registered holder(s)) of the Debt Securities. (b) This Security is one of the series designated as the 6% Dealer remarketable securities(SM) ("DRS.(SM)") due 2013 of the Company and such series is limited in aggregate principal amount to $200,000,000. References herein to "SECURITIES" or "DRS." shall mean the Debt Securities of said series. (c) All capitalized terms used in this Security which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. 2. Mandatory Tender on Remarketing Date; Purchase and Settlement. On a Business Day not later than five Business Days prior to the Remarketing Date (the "NOTIFICATION DATE"), the Remarketing Dealer will notify the Company and the Trustee as to whether it elects to purchase all (but not less than all) of the outstanding Drs. on the Remarketing Date. If, and only if, the Remarketing Dealer so elects, the Drs. shall be subject to mandatory tender to the Remarketing Dealer for purchase and remarketing on the Remarketing Date, upon the terms and subject to the conditions described herein and in the Remarketing Agreement. The purchase price of the Drs. shall be equal to 100% of the principal amount thereof. No holder or beneficial owner of any Securities shall have any rights or claims under the Remarketing Agreement or against the Company or the Remarketing Dealer as a result of the Remarketing Dealer not purchasing such Securities. 3. Maintenance of Book-Entry System. (a) The tender and settlement procedures with respect to the Securities set forth in the Remarketing Agreement 25 shall be subject to modification, without the consent of the holders of the Securities, to the extent required by DTC or, if the book-entry system is no longer available for the Securities at the time of the remarketing, to the extent required to facilitate the tendering and remarketing of Securities in certificated form. In addition, the Remarketing Dealer may modify the settlement procedures without the consent of the holders of the Securities in order to facilitate the settlement process. (b) The Company hereby agrees with the Trustee and the holders of Securities that (i) at all times, it will use its best efforts to maintain the Securities in book-entry form with DTC or any successor thereto and to appoint a successor depository to the extent necessary to maintain the Securities in book- entry form and (ii) it waives any discretionary right that it otherwise may have under the Indenture to cause the Securities to be issued in certificated form. 4. Determination of Interest Rate to Maturity; Notification Thereof. The Remarketing Dealer shall determine the interest rate the Drs. will bear from the Remarketing Date to the Stated Maturity Date (the "INTEREST RATE TO MATURITY") on the third Business Day immediately preceding the Remarketing Date (the "DETERMINATION DATE") by soliciting by 3:30 p.m., New York City time, the Reference Corporate Dealers (defined below) for firm, committed bids to purchase all outstanding Drs. at the Dollar Price (defined below), and by selecting the lowest such firm, committed bid (regardless of whether each of the Reference Corporate Dealers actually submit bids). Each bid shall be expressed in terms of the Interest Rate to Maturity that the Drs. would bear (quoted as a spread over 4.93% per annum (the "BASE RATE")) based on the following assumptions: (i) the Drs. would be sold to the Reference Corporate Dealer on the Remarketing Date for settlement on the same day; (ii) the Drs. would mature on the Stated Maturity Date; and (iii) the Drs. would bear interest from the Remarketing Date at a stated rate equal to the Interest Rate to Maturity bid by such Reference Corporate Dealer, payable semi-annually on the interest payment dates for the Drs. The Interest Rate to Maturity announced by the Remarketing Dealer as a result of such process will be quoted to the nearest one hundred-thousandth (0.00001) of one percent per annum and, absent manifest error, will be binding and conclusive upon holders of the Drs., the Company and the Trustee. The Remarketing Dealer shall have the discretion to select the time at which the Interest Rate to Maturity is determined on the Determination Date. 26 The Remarketing Dealer shall have the right in its sole discretion to either (i) remarket the Drs. for its own account (at a price equal to the lowest firm, committed bid, as described above) or (ii) sell the Drs. to the Reference Corporate Dealer submitting the lowest firm, committed, bid. If two or more Reference Corporate Dealers submit equivalent bids which constitute the lowest firm, committed bid, the Remarketing Dealer may in its sole discretion elect to sell the Drs. to any such Reference Corporate Dealer. If the Remarketing Dealer has elected to remarket the Drs. as provided herein, then it shall notify the Company, the Trustee and DTC by telephone, confirmed in writing (which may include facsimile or other electronic transmission), by 5:00 p.m., New York City time, on the Determination Date of the Interest Rate to Maturity applicable to the Drs. effective from and including the Remarketing Date. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by the Remarketing Dealer as having an actual maturity on the Determination Date (or the United States Treasury securities selected by the Remarketing Dealer to derive an interpolated yield to maturity on such Determination Date) comparable to the remaining term of the Drs. The United States Treasury security selected by the Remarketing Dealer will be based on the standard market convention for the benchmark used in the swap market to settle an option on the 10-year then on-the-run Treasury security. "COMPARABLE TREASURY PRICE" means (a) the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) on the Determination Date, as set forth on Telerate Page 500 (as defined below), adjusted to reflect settlement on the Remarketing Date if prices quoted on Telerate Page 500 are for settlement on any date other than the Remarketing Date, or (b) if such page (or any successor page) is not displayed or does not contain such offer prices on such Business Day, then (i) the average of such Reference Treasury Dealer Quotations for such Remarketing Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations (unless there is more than one highest or lowest quotation, in which case only one such highest and/or lowest quotation shall be excluded), or (ii) if the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. The Remarketing Dealer shall have the discretion to select the time at which the Comparable Treasury Price is determined on the Determination Date and the number of Reference Treasury Dealer Quotations (which shall be at least three) to be obtained. "DOLLAR PRICE" means the discounted present value to the Remarketing Date of the cash flows on a bond (x) with a principal amount equal to the aggregate principal amount of the initially issued Drs., (y) maturing on the Stated 27 Maturity Date and (z) bearing interest from the Remarketing Date, payable semi- annually (assuming a 360-day year consisting of twelve 30-day months) on the interest payment dates of the Drs. at a rate equal to the Base Rate, using a discount rate equal to the Treasury Rate (defined below). "REFERENCE CORPORATE DEALER" means J.P. Morgan Securities Inc. and four other leading dealers of publicly-traded debt securities of the Company acceptable to J.P. Morgan Securities Inc. and the Company. "REFERENCE TREASURY DEALER" means a primary U.S. Government securities dealer in The City of New York (which may include the Remarketing Dealer) selected by the Remarketing Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer, the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) for settlement on the Remarketing Date, quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the Determination Date. "TELERATE PAGE 500" means the display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such other page as may replace Telerate Page 500 on such service) or such other service displaying the offer price specified in clause (a) of the definition of Comparable Treasury Price as may replace Dow Jones Markets Limited. "TREASURY RATE" means the annual rate equal to the semi-annual equivalent yield to maturity or interpolated (on a 30/360 day count basis) yield to maturity on the Determination Date of the Comparable Treasury Issue for value on the Remarketing Date, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price. 5. Repurchase. If the Remarketing Dealer does not purchase all of the Drs. on the Remarketing Date, then holders will be required to tender, and the Company shall repurchase, on the Remarketing Date, at a price equal to 100% of the principal amount of the Drs. plus all accrued interest, if any, on the Drs. to (but excluding) the Remarketing Date, all Drs. that have not been purchased by the Remarketing Dealer on the Remarketing Date. 6. Redemption. If the Remarketing Dealer has elected to remarket the Drs. on the Remarketing Date, the Company shall have the right to redeem the Drs., in whole but not in part, from the Remarketing Dealer on the Remarketing Date at a redemption price equal to the greater of (i) 100% of the aggregate 28 principal amount of the Drs. and (ii) the Dollar Price, by giving written notice of such redemption to the Remarketing Dealer no later than (x) the Business Day immediately prior to the Determination Date or (y) if fewer than three Reference Corporate Dealers submit firm, committed bids for all outstanding Drs. to the Remarketing Dealer on the Determination Date in accordance with Section 4 of this Security, immediately after the deadline set by the Remarketing Dealer for receiving such bids has passed. In either such case, the Company shall pay such redemption price for the Drs. in same-day funds by wire transfer on the Remarketing Date to an account designated by the Remarketing Dealer. 7. Optional Redemption After the Remarketing Date. After the Remarketing Date, if the Remarketing Dealer has elected to remarket the Drs. on the Remarketing Date, the Drs. will be redeemable (a "POST-REMARKETING REDEMPTION"), in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Drs. or (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including the portion of any such payments of interest accrued as of the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day month) at the Adjusted Treasury Rate (as defined below) (determined on the third Business Day preceding such redemption date), plus, in each case, accrued and unpaid interest thereon to (but excluding) the redemption date. Notice of any Post-Remarketing Redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Drs. to be redeemed. Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Drs. or portions thereof called in connection with a Post-Remarketing Redemption. "ADJUSTED TREASURY RATE" means (i) the arithmetic mean of the yields under the heading "Week Ending" published in the Statistical Release most recently published prior to the date of determination under the captions "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to the maturity, as of the redemption date, of the principal being redeemed, plus (ii) 0.20%. If no maturity set forth under the heading exactly corresponds to the maturity of such principal, yields for the two published maturities most closely corresponding to the maturity of such principal shall be calculated pursuant to the immediately preceding sentence, and the 29 Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of the relevant periods to the nearest month. "STATISTICAL RELEASE" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively-traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under the terms of the Drs., then such other reasonably comparable index which shall be designated by the Company. 8. Certain Covenants. The Indenture restricts the Company's ability to merge, consolidate or sell substantially all of its assets. In addition, the Company is obliged to abide by certain covenants, including covenants limiting the amount of debt it may incur, as well as its ability to enter into sale and leaseback transactions, a covenant requiring it to maintain its material properties, and a covenant requiring it to pay or discharge all taxes, all as more fully described in the Indenture. All of such covenants are subject to the covenant defeasance procedures outlined in the Indenture. 9. Effect of Event of Default. If an Event of Default shall have occurred and be continuing under the Indenture, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. 10 Tax Treatment; Agreement to Tender. The Company and the holders of this Security (and each holder of a beneficial interest herein) by accepting this Security, agree to treat the Drs. as fixed rate debt instruments that mature on the Remarketing Date for United States Federal income tax purposes and that are reissued on the Remarketing Date should the Remarketing Dealer remarket the Securities. Furthermore, each holder of this Security (and each holder of a beneficial interest herein) irrevocably agrees that this Security shall automatically be tendered on the Remarketing Date (a) to the Remarketing Dealer if the Remarketing Dealer elects to remarket the Securities on the terms and conditions set forth herein or (b) to the Company if the Remarketing Dealer does not remarket the Securities on the terms and conditions set forth herein. 11. Amendments and Waivers. Modifications and amendments of the Indenture will be permitted to be made only with the consent of the holders of not less than a majority in principal amount of all outstanding Debt Securities issued under the Indenture that are affected by such modification or amendment; provided that no such modification or amendment may, without the consent of the holder of each such Debt Security affected thereby, (a) change the stated maturity of the principal of, or any installment of interest or principal on, any such Debt Security; (b) reduce the principal of, or the rate or amount of interest on, or any 30 amount payable upon redemption of, any such Debt Security, or adversely affect any right of repayment of the holder of any such Debt Security; (c) change the place of payment, or the coin or currency, for payment of principal of or interest on any such Debt Security; (d) impair the right to institute suit for the enforcement of any payment on or with respect to any such Debt Security; (e) reduce the above-stated percentage of outstanding Debt Securities necessary to modify or amend the Indenture, or to waive compliance with certain provisions thereof or certain defaults and consequences thereunder; or (f) modify any of the foregoing provisions or any of the provisions relating to the waiver of certain past defaults or certain covenants, except to increase the required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the consent of the holder of such Debt Security. Modifications and amendments of the Indenture will be permitted to be made by the Company and the Trustee without the consent of any holder of Debt Securities for any of the following purposes: (a) to evidence the succession of another person to the Company as obligor under the Indenture; (b) to add to the covenants, agreements and obligations of the Company for the benefit of the holders of all Debt Securities or to surrender any right or power conferred upon the Company in the Indenture; (c) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; (d) to cure any ambiguity, defect or inconsistency in the Indenture; (e) to secure the Debt Securities; or (f) to make any other change that does not adversely affect the rights of any Holder of Debt Securities. 12. Denominations; Transfer. (a) The Securities are issuable in registered form without coupons in denominations of $1,000 and any integral multiple thereof. (b) A certificate in global form representing all or a portion of the Securities may not be transferred except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such Securities or a nominee of such successor Depositary. 13. No Liability of Certain Persons. No past, present or future stockholder, employee, officer or director of the Company or any successor thereof shall have any liability for any obligation, covenant or agreement of the Company contained under this Security or the Indenture. Each holder by accepting this Security waives and releases all such liability. This waiver and release are part of the consideration for the issue of this Security. 31 14. Governing Law. The laws of the State of New York govern the Indenture and this Security. 32 SCHEDULE A SCHEDULE OF CHANGES IN OUTSTANDING PRINCIPAL AMOUNT The following notations in respect of changes in the outstanding principal amount of this Security have been made: CHANGE IN INITIAL OUTSTANDING OUTSTANDING PRINCIPAL PRINCIPAL PRINCIPAL DATE AMOUNT AMOUNT AMOUNT NOTATION ------------ ------------ ------------ ------------ ------------ ARTICLE 3. The Securities Section 3.01. Title and Terms. The Securities shall be known and designated as the "6% DEALER REMARKETABLE SECURITIES DUE 2013" of the Company. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $200,000,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05 or 9.06. Unless the context otherwise requires, the Original Securities and the Exchange Securities shall constitute one series for all purposes under the Indenture, including with respect to any amendment, waiver, acceleration or other Act of Holders or redemption. Section 3.02. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof. Section 3.03. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman, its President or one of its Vice Presidents, thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. 33 Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and make available for delivery such Securities as in this Indenture provided and not otherwise. At any time and from time to time after the execution and delivery of this Indenture and after the effectiveness of a registration statement under the Securities Act with respect thereto, the Company may deliver Exchange Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Exchange Securities and a like principal amount of Original Securities for cancellation in accordance with this Indenture, and the Trustee in accordance with the Company Order shall authenticate and make available for delivery such Securities. Prior to authenticating such Exchange Securities, and accepting any additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, if requested, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating in - ---- substance. (a) that all conditions hereunder precedent to the authentication and delivery of such Exchange Securities have been complied with and that such Exchange Securities, when such Securities have been duly authenticated and delivered by the Trustee (and subject to any other conditions specified in such Opinion of Counsel), have been duly issued and delivered and will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (b) that the issuance of the Exchange Securities in exchange for Original Securities has been effected in compliance with the Securities Act. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the 34 Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 3.04. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities, which Securities are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution thereof. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 10.02, without charge to the Holder. Upon ----- surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.05. Global Securities. (a) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary (A) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (B) has ceased to be a clearing agency registered as such under the Exchange Act, and in either case the Company fails to appoint a successor Depositary, (ii) the Company executes and delivers to the Trustee a Company Order stating that it elects to cause the issuance of the Securities in certificated form and that all Global Securities shall be exchanged in whole for Securities that are not Global Securities (in which case such exchange shall be effected by the Trustee) or (iii) there shall have occurred and be continuing an Event of Default with respect to the Security. 35 (c) If any Global Security is to be exchanged for other Securities or canceled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation as provided in this Article 3. If any Global Security is to be exchanged for - other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article 3 or (ii) the principal amount thereof - shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 3.06(c) ------- and as otherwise provided in this Article 3, authenticate and deliver any - Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article 3 if such order, direction or request is given or - made in accordance with the Applicable Procedures. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article 3 or otherwise, shall be authenticated - and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under the Indenture and the Securities and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. 36 Section 3.06. Registration, Registration of Transfer and Exchange; Securities Act Legends. (a) Registration, Registration of Transfer and Exchange Generally. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company designated pursuant to Section 10.02 being ----- herein sometimes collectively referred to as the "SECURITY REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee is hereby appointed "SECURITY REGISTRAR" for the purpose of registering Securities and transfers and exchanges of Securities as herein provided. Such Security Register shall distinguish between Original Securities and Exchange Securities. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 10.02 for such purpose, the ----- Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. At the option of the Holder, and subject to the other provisions of this Section 3.06, Securities may be exchanged for other Securities of any authorized ---- denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture upon surrender of the Securities to be exchanged at any such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and (except for the differences between Original Securities and Exchange Securities provided for herein) entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection 37 with any registration of transfer or exchange of Securities, other than exchanges pursuant to Sections 3.03, 3.04, 3.05, 3.06, or 9.06 not involving any ---- ---- ---- ---- ---- transfer. (b) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 306(b) shall be made only in accordance with this Section 3.06(b). ------- (i) Restricted Global Security to Regulation S Global Security. If the owner of a beneficial interest in the Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Regulation S Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Restricted Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) a Regulation S Certificate, duly executed by the owner of such beneficial interest in the Restricted Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(iv) below, shall reduce the principal amount of the Restricted Global Security and increase the principal amount of the Regulation S Global Security by such specified principal amount as provided in Section 3.05(c). ------- (ii) Regulation S Global Security to Restricted Global Security. If the owner of a beneficial interest in the Regulation S Global Security wishes at any time prior to the expiration of the Restricted Period to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Restricted Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Regulation S Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) a Restricted Securities Certificate, duly executed by the owner of such beneficial interest in the Regulation S Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar, shall reduce the principal amount 38 of the Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount as provided in Section 3.05(c). ------- (iii) Exchanges between Global Security and Non-Global Security. A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security as provided in Section 3.05, provided that, ---- if such interest is a beneficial interest in the Restricted Global Security, or if such interest is a beneficial interest in the Regulation S Global Security prior to the expiration of the Restricted Period, then such interest shall be exchanged for a Restricted Security (subject in each case to Section 3.06(c)). -------- (iv) Regulation S Global Security to be Held Through Euroclear or Cedel during Restricted Period. The Company shall use its best efforts to cause the Depositary to ensure that beneficial interests in the Regulation S Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof) during the Restricted Period, and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account; provided that this Clause (b)(iv) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) above. (c) Securities Act Legends. Rule 144A Securities and their respective Successor Securities shall bear a Restricted Securities Legend, and Regulation S Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following: (i) subject to the following Clauses of this Section 3.06(c), a ------- Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Securities Act Legend borne by such Global Security while represented thereby; (ii) subject to the following Clauses of this Section 3.06(c), a new ------- Security which is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Securities Act Legend borne by such other Security, provided that, if such new Security is required pursuant to Section 3.06(b)(iii) to be issued in the form of a Restricted Security, it ------- --- shall bear a Restricted Securities Legend and, if such new Security is so required to be issued in the form of a Regulation S Security, it shall bear a Regulation S Legend; 39 (iii) Exchange Securities shall not bear a Securities Act Legend; (iv) at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if the Trustee has received an unlegended Security, duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall authenticate and deliver such a new Security in exchange for or in lieu of such other Security as provided in this Article 3; - (v) a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if, in the Company's judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Company, shall authenticate and deliver such a new Security as provided in this Article 3; - and (vi) notwithstanding the foregoing provisions of this Section 3.06(c), a Successor Security of a Security that does not bear a particular ------- form of Securities Act Legend shall not bear such form of legend unless the Company has reasonable cause to believe that such Successor Security is a "RESTRICTED SECURITY" within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article 3. - Section 3.07. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by either of them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide 40 purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.08. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each 41 Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.09. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 3.08) interest on ---- such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. 42 None of the Company, the Trustee or any agent of the Company or the Trustee shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any Security in global form, nothing herein shall prevent the Company or the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any Depositary (or its nominee), as a Holder, with respect to such Security in global form or impair, as between such Depositary and owners of beneficial interests in such Security in global form, the operation of customary practices governing the exercise of the rights of such Depositary (or its nominee) as Holder of such Security in global form. Section 3.10. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures. Section 3.11. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360 day year of twelve 30-day months. Section 3.12. Cusip Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. 43 ARTICLE 4. Satisfaction and Discharge Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer and exchange and the Company's right of optional redemption, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of Holders to receive payment of principal and interest on the Securities, (iv) rights, obligations and immunities of the Trustee under the Indenture and (v) rights of the Holders of the Securities as beneficiaries of the Indenture with respect to any property deposited with the Trustee payable to all or any of them), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07 and (ii) Securities for ---- whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.03) have been ----- delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and inter- 44 est to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture pursuant to this Article 4.01, the obligations of the Company to the Trustee under Section ---- 6.07 and, if money shall have been deposited with the Trustee pursuant to - ---- subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall survive. ---- ----- Section 4.02. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant ----- to Section 4.01 shall be held in trust and applied by it, in accordance with the ---- provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee but such money need not be separated from other funds except to the extent required by law. ARTICLE 5. Remedies Section 5.01. Events of Default. "EVENT OF DEFAULT", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure to pay the principal of (or premium, if any, on) any Security at its Maturity; or 45 (2) failure to pay any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; or (3) failure to perform or comply with the provisions of Section 8.01; ---- or (4) failure to perform any other covenant or agreement of the Company in this Indenture or Securities (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder; or (5) a default under any bond, debenture, note or other evidence of indebtedness of the Company (including a default with respect to Securities of any series other than that series) or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of the Company (including this Indenture), whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay an aggregate principal amount exceeding $10,000,000 of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto and shall have resulted in such indebtedness in an aggregate principal amount exceeding $10,000,000 becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 10 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 10% in principal amount of the Outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; provided, -------- however, that if such default under such bond, debenture, note, mortgage, ------- indenture or other instrument or evidence of indebtedness shall be remedied or cured by the Company or waived pursuant to such agreement or instrument, then, unless the maturity of the Securities shall have been accelerated as provided herein, the Event of Default hereunder by reason thereof shall be 46 deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or the Holders. Subject to the provisions of Section 6.01 and 6.02, the Trustee shall not be deemed to have knowledge of such default unless either (A) a Responsible Officer of the Trustee shall have actual knowledge of such default or (B) the Trustee shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such mortgage, indenture or other instrument; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to have a case commenced against it or to seek an order for relief under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law or the taking of corporate action by the Company in furtherance of any such action. 47 Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 5.01(6) or ---- (7)) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities may declare all of the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal and any accrued interest, if any, shall become immediately due and payable. If an Event of Default specified in Section 5.01(6) or (7) occurs, the principal and any accrued interest on the Securities then Outstanding shall ipso facto become immediately due and payable without any declaration or other Act on the part of the Trustee or any Holder. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and, to the extent that payment of such interest is lawful, interest thereon at the rate provided by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate provided by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. ---- 48 No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate provided by the Securities, if any, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.04. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company or any other obligor upon the Securities, or upon the property of the Company or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the 49 Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07. ---- No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.06. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 6.07; and ---- SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. 50 Section 5.07. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. Section 5.08. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 3.08) interest on such Security on the respective Stated Maturities ---- expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 5.09. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then 51 and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.07, no right or remedy ---- herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.13. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security, or 52 (2) in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, including attorney's fees and expenses in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Trustee or the Company. Section 5.15. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 The Trustee Section 6.01. Certain Duties and Responsibilities. Except during the continuance of an Event of Default, the duties and responsibilities of the Trustee shall be as provided by the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any 53 financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.02. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 5.01(4), no such notice to Holders shall be given ---- until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "DEFAULT" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.03. Certain Rights of Trustee. Subject to the provisions of Section 6.01: ---- (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate or opinion; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the 54 Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; and (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. Section 6.04. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 6.05. May Hold Securities. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company, may become the owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may otherwise deal ---- ---- 55 with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. Section 6.06. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. Section 6.07. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture, including, but not limited to the costs incurred in connection with collection (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any and all loss, liability damage, claim or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against or investigating any claim (including any claim by the Company) or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall have a lien prior to the Securities as to all property and funds held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 6.07, except with respect to funds held in ---- trust for the benefit of the Holders of particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.01(5) or Section 5.01(6), the expenses ---- ---- (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of 56 administration under any applicable Federal or State bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. Section 6.08. Disqualification; Conflicting Interest. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 6.09. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and its Corporate Trust Office in The City of Chicago, State of Illinois. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. ---- (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. (d) If at any time: 57 (i) the Trustee shall fail to comply with Section 6.08 after written ---- request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 6.09 and ---- shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide ---- Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 1.06. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, 58 and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee and the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 59 ARTICLE 7 Holders' Lists and Reports by Trustee and Company Section 7.01. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 7.02. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and ---- addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. ---- (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities and the corresponding rights and duties of the Trustee, shall be provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.03. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within sixty days after each October 1, following 60 the date of this Indenture deliver to Holders a brief report, dated as of such October 1, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when the Securities are listed on any stock exchange or of any delisting thereof. Section 7.04. Reports by Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 30 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 7.05. Officers' Certificate with Respect to Change in Interest Rates. Within five days after the day on which any Special Interest begins accruing, and within five days after any Special Interest ceases to accrue, the Company shall deliver an Officers' Certificate to the Trustee stating the interest rate thereupon in effect for the Original Securities (if any are Outstanding) and the date on which such rate became effective. ARTICLE 8 Consolidation, Merger, Conveyance, Transfer or Lease Section 8.01. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: 61 (1) in case the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee by the Person (if other than the Company) formed by such consolidation or into which the Company shall have been merged or by the corporation which shall have acquired the Company's assets; (2) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or a Subsidiary as a result of such transaction as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor corporation or Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 8.02. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any transfer, 62 conveyance, sale, lease or other disposition of all or substantially all of the properties and assets of the Company as an entirety in accordance with Section 8.01, the successor Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to such provisions and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee on its behalf for that purpose pursuant to such provisions. All Securities so issued in all respects have the same legal rank and benefit under this Indenture as Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all such Securities had been issued prior to the date of such succession. In case of any such consolidation, merger, sale or conveyance, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE 9 Supplemental Indentures Section 9.01. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution of the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or 63 (3) to secure the Securities; or (4) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act; or (5) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this Clause (4) shall not adversely affect the interests of the Holders in any material respect. Section 9.02. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution of the Company and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any instalment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable thereon, or change the place of payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof, or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section 9.02 or Section 10.13, ---- ----- except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. 64 It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating - ---- that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.06. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE 10 Covenants Section 10.01. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. 65 Section 10.02. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan, The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.03. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: 66 (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 10.04. Corporate Existence. Subject to Article 8, the Company will - do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or 67 franchise if the Board of Directors in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 10.05. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary of the Company to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Board of Directors in good faith, desirable in the conduct of its business or the business of any Subsidiary of the Company and not disadvantageous in any material respect to the Holders. Section 10.06. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any of its Subsidiaries, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 10.07. Insurance. The Company covenants and agrees that it will, and will cause each Subsidiary to, insure and keep insured, with reputable insurance companies, their principal properties, and such insurance shall be in such amounts (and with such deductibles) as companies engaged in a similar business in accordance with good business practice customarily insure properties of a similar character against loss by fire and from other causes or, in lieu thereof, in the case of itself or of any one or more of its Subsidiaries, it will maintain or cause to be maintained a program of self-insurance in accordance with good business practices. Section 10.08. Restrictions on Funded Debt of Restricted Subsidiaries. The Company covenants and agrees that it will not permit any Restricted Subsidiary to create, issue, incur, assume, or in any other way become liable for any unsecured Funded Debt unless the Company would be entitled under 68 subparagraph (d) of Section 10.10 of this Indenture to create, issue, incur, ----- assume or guarantee any Secured Debt not specifically permitted under Section 10.10 of this Indenture but for subparagraph (d) thereof in an amount equal to - ----- such Funded Debt; provided, however, that the foregoing restriction shall not prevent (i) any Restricted Subsidiary from becoming liable to the Company or to a Wholly-owned Restricted Subsidiary for Funded Debt or (ii) the extension, renewal or refunding of any Funded Debt of any Restricted Subsidiary so long as Consolidated Funded Debt is not thereby increased. Section 10.09. Restriction on Sales with Leases Back. Except for a sale or transfer by a Restricted Subsidiary to the Company or a Wholly-owned Restricted Subsidiary, the Company covenants and agrees that it will not, and will not permit any Restricted Subsidiary to, sell or transfer any manufacturing plant, warehouse, retail store or equipment owned and operated or hereafter owned and operated by the Company or a Restricted Subsidiary, with the intention that the Company or any Restricted 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 Company or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if the Company or a Restricted Subsidiary would be entitled under subparagraph (d) of Section 10.10 to create, issue, incur, assume or guarantee ----- any Secured Debt not specifically permitted under Section 10.10 of this ----- Indenture but for subparagraph (d) thereof in an amount equal to the Attributable Debt respecting such Sale and Leaseback Transaction; provided further that, notwithstanding the foregoing, the Company or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if entered into in respect of property acquired by the Company or a Restricted 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 Company or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if the Company, within 120 days before or after the sale or transfer shall have been made by the Company or by any Restricted Subsidiary, applied or applies an amount equal to the greater of (i) the net proceeds of the sale of the property sold and leased back pursuant to such arrangement or (ii) the fair market value of the property so sold and leased back at the time of entering into such arrangement (as determined by any two of the following; the Chairman of the Board of the Company, its Chief Executive Officer, its President, any Vice President of the Company, its Treasurer and its Controller) to the retirement of Secured Debt of the Company other than at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision. 69 Section 10.10. Restrictions on Secured Debt. The Company covenants and agrees that it will not, and will not permit any Restricted Subsidiary to, create, issue, incur, assume or guarantee any Secured Debt without making effective provision (and the Company covenants that in such case it will make or cause to be made effective provision) whereby the Securities then Outstanding and any other indebtedness of or guaranteed by the Company or such Restricted Subsidiary then entitled thereto, shall be secured by such mortgage, pledge, lien or encumbrance equally and ratably with (or prior to) any and all other obligations and indebtedness thereby secured for so long as any such other obligations and indebtedness shall be so secured; provided, however, that the foregoing covenants shall not be applicable to the following: (a) (i) Any mortgage, pledge, lien or other encumbrance on any property acquired or constructed by the Company or a Restricted 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 Company or a Restricted Subsidiary of property subject to any mortgage, pledge, lien or other encumbrance upon such property existing at the time of acquisition thereof, whether or not assumed by the Company or such Restricted Subsidiary, or (iii) any conditional sales agreement or other title retention agreement with respect to any property hereafter acquired, provided that the lien of any such mortgage, pledge, lien or other encumbrance or agreement 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 mortgage, pledge, lien, or other encumbrance created for the sole purposes of extending, renewing or refunding, in whole or part, any mortgage, pledge, lien or other encumbrance permitted by this Section 10.10 or any ----- mortgage, pledge, lien or other encumbrance securing the indebtedness of the Company or of any Restricted Subsidiary on the date of this Indenture or of a corporation at the time such corporation becomes a Subsidiary, or any extensions, renewals or refundings of any such mortgage, pledge, lien or other encumbrance; provided, however, that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or refunding and that such extension, renewal or refunding mortgage, pledge, lien or other encumbrance shall be limited to all or that part of the same properties which secured the mortgage, pledge, lien or other encumbrance extended, renewed or refunded. (c) Any Secured Debt of a Restricted Subsidiary owing to the Company or a Wholly-owned Restricted Subsidiary. 70 (d) Secured Debt of the Company and its Restricted Subsidiaries which would otherwise be prohibited by the foregoing restrictions (not including Secured Debt permitted to be secured under subparagraphs (a) through (c) above, so long as the sum of any such Secured Debt hereafter incurred plus Attributable Debt of the Company and any Restricted Subsidiaries in respect of existing Sale and Leaseback Transactions hereafter entered into (excluding Attributable Debt incurred in respect of any Sale and Leaseback Transaction entered into in respect of property acquired by the Company or a Restricted Subsidiary not more than 24 months prior to the date such Transaction is entered into) plus unsecured Funded Debt of any Restricted Subsidiary hereafter incurred (excluding unsecured Funded Debt incurred through the extension, renewal or refunding of Funded Debt where Consolidated Funded Debt was not thereby increased and excluding any Funded Debt owed to the Company or a Wholly-owned Restricted Subsidiary) does not at the time exceed 20% of Consolidated Net Tangible Assets. Section 10.11. Restrictions on Permitting Unrestricted Subsidiaries to become Restricted Subsidiaries. (a) The Company will not permit any Unrestricted Subsidiary to be designated as a Restricted Subsidiary unless such Subsidiary has outstanding no Secured Debt, Funded Debt and/or Attributable Debt in respect of Sale and Leaseback Transactions except such Secured Debt, Funded Debt and Attributable Debt as the Company could permit it to become liable for immediately after becoming a Restricted Subsidiary under the provisions of Sections 10.08, 10.09 ----- ----- and 10.10 of this Indenture. ----- (b) Promptly after the adoption of any Board Resolution designating a Restricted Subsidiary as an Unrestricted Subsidiary or an Unrestricted Subsidiary as a Restricted Subsidiary, a copy thereof shall be filed with the Trustee, together, in the case of the designation of an Unrestricted Subsidiary as a Restricted Subsidiary, with an Officers' Certificate stating that the provisions of this Section have been complied with in connection with such designation. Section 10.12. Statement by Officers as to Default. Reference is made to Section 314(a)(4) of the Trust Indenture Act. Section 10.13. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 10.07 to 10.11, if before the time for such compliance the Holders of ----- ----- at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, 71 until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE 11 Redemption of Securities Section 11.01. Right of Redemption. The Securities may be redeemed at the option of the Company, in whole or in part, at any time on or after October 1, 2003, and prior to maturity, at the Redemption Price specified in the Security together with accrued interest to, but excluding, the Redemption Date. If less than all the Securities are to be redeemed, the Trustee shall select, in such manner as it shall deem fair and appropriate, the particular Securities to be redeemed or any portion thereof that is an integral multiple of $1,000. The Securities will not have the benefit of any sinking fund. Section 11.02. Applicability of Article. Redemption of the Securities at the election of the Company, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 11.03. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 11.01 shall be evidenced by ----- a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 11.04. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Securities of a denomination larger than $1,000. The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for redemption and, in the case of 72 any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 11.05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) CUSIP numbers of the Securities to be redeemed (if any). Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 11.06. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Redemption ----- Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. 73 Section 11.07. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price plus accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Securities for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that instalments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.07. ---- If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate provided by the Security. Section 11.08. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 10.02 (with, if the Company or ----- the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE 12 Defeasance and Covenant Defeasance Section 12.01. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may at its option by Board Resolution, at any time, in accordance with the Exchange and Registration Rights Agreement, elect to have either Section 12.02 or Section 12.03 applied to the Outstanding Securities upon ----- ----- compliance with the conditions set forth below in this Article 12. -- 74 Section 12.02. Defeasance and Discharge. Upon the Company's exercise of the option provided in Section 12.01 applicable to this Section, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "DEFEASANCE"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same) except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 12.04 and as more fully set forth in such Section, payments in respect ----- of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 3.04, 3.05, 3.06, 10.02 and 10.03, (C) the rights, ---- ---- ---- ----- ----- powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article 12. Subject to compliance with this Article 12, the Company may exercise -- -- its option under this Section 12.02 notwithstanding the prior exercise of its ----- option under Section 12.03. ----- Section 12.03. Covenant Defeasance. Upon the Company's exercise of the option provided in Section 12.01 applicable to this Section, (i) the Company ----- shall be released from its obligations under Sections 10.05 through 10.11, ----- ----- inclusive, and Clauses (3), (4) and (5) of Section 8.01, (ii) the occurrence of ---- an event specified in Sections 5.01(3) (with respect to Clauses (1), (3), (4) or ---- (5) of Section 8.01), 5.01(4) (with respect to any of Sections 10.05 through ---- ----- 10.11, inclusive) and 5.01(5) shall not be deemed to be an Event of Default - ----- shall cease to be effective on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"). For this purpose, such covenant defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, Clause or Article, whether directly or indirectly by reason of any reference elsewhere herein to any such Section, Clause or Article or by reason of any reference in any such Section, Clause or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. Section 12.04. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 12.02 or Section 12.03 to the then Outstanding Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the 75 requirements of Section 6.09 who shall agree to comply with the provisions ---- of this Article 12 applicable to it) as trust funds in trust for the -- purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and each instalment of interest on the Securities on the Stated Maturity of such principal or instalment of interest in accordance with the terms of this Indenture and of such Securities. (2) In the case of an election under Section 12.02, the Company shall ----- have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (3) In the case of an election under Section 12.03, the Company shall ----- have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred. (4) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (5) Such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 6.08 and for purposes ---- of the Trust Indenture Act with respect to any securities of the Company. 76 (6) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing. (7) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 12.02 or the covenant defeasance under Section 12.03 (as the case may be) ----- have been complied with. (9) Such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder. Section 12.05. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 10.03, all money and U.S. Government Obligations (including ----- the proceeds thereof) deposited with the Trustee (or other qualifying trustee-- collectively, for purposes of this Section 12.05, the "TRUSTEE") pursuant to ----- Section 12.04 in respect of the Securities shall be held in trust and applied by ----- the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 12.04 or the principal and interest received in ----- respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article 12 to the contrary notwithstanding, the Trustee -- shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 12.04 ----- which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, 77 are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 12.06. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 12.02 or 12.03 by reason of any ----- ----- order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 12 until such time as the Trustee -- or Paying Agent is permitted to apply all such money in accordance with Section 12.02 or 12.03; provided, however, that if the Company makes any payment of - ----- ----- principal of (and premium, if any) or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Security to receive such payment from the money held by the Trustee or the Paying Agent. _____________________________ 78 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. RITE AID CORPORATION By: /s/ Frank M. Bergonzi ---------------------------------- Name: Frank Bergonzi Title: Exec. V.P. & CFO Attest: /s/ Elliot S. Gerson - ---------------------------------------------------- Senior Vice President, General Counsel and Secretary HARRIS TRUST AND SAVINGS BANK By: /s/ DG Donovan ---------------------------------- Name: D.G. Donovan Title: Assistant Vice President Attest: /s/ C. Potter ___________________________ Assistant Secretary 79 ANNEX A -- Form of Regulation S Certificate REGULATION S CERTIFICATE (For transfers pursuant to (S) 3.06(b)(i) of the Indenture) Harris Trust and Savings Bank 311 West Monroe Street, 12th Floor Chicago, Illinois 60603 Attn: Indenture Trust Administration Re: 6% Dealer remarketable securities(SM) due 2013 of Rite Aid Corporation (the "SECURITIES") Reference is made to the Indenture, dated as of September 22, 1998 (the "INDENTURE"), from Rite Aid Corporation (the "COMPANY") to Harris Trust and Savings Bank, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the "SECURITIES ACT") are used herein as so defined. This certificate relates to U.S. $____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "SPECIFIED SECURITIES"): CUSIP No(s). ___________________________ CERTIFICATE No(s). _____________________ The person in whose name this certificate is executed below (the "UNDERSIGNED") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "OWNER". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. A-1 The Owner has requested that the Specified Securities be transferred to a person (the "TRANSFEREE") who will take delivery in the form of a Regulation S Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: 1. Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904: (a) the Owner is not a distributor of the Securities, an affiliate of the Company or any such distributor or a person acting on behalf of any of the foregoing; (b) the offer of the Specified Securities was not made to a person in the United States; (c) either: (i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or (ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (d) no directed selling efforts have been made in the United States by or on behalf of the Owner or any affiliate thereof; (e) if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Restricted Period, then the requirements of Rule 904(b)(1) or (b)(3) have been satisfied; and (f) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. A-2 2. Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (a) the transfer is occurring after a holding period of at least two years (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (b) the transfer is occurring after a holding period of at least three years has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Initial Purchasers. Dated: ----------------------------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) A-3 ANNEX B -- Form of Restricted Securities Certificate RESTRICTED SECURITIES CERTIFICATE (For transfers pursuant to (S) 3.06(b)(ii) of the Indenture) Harris Trust and Savings Bank 311 West Monroe Street, 12th Floor Chicago, Illinois 60603 Attn: Indenture Trust Administration Re: 6% Dealer remarketable securities(SM) due 2013 of Rite Aid Corporation (the "SECURITIES") Reference is made to the Indenture, dated as of September 22, 1998 (the "INDENTURE"), from Rite Aid Corporation (the "COMPANY"), to Harris Trust and Savings Bank, as Trustee. Terms used herein and defined in the Indenture or in Rule 144A or Rule 144 under the U.S. Securities Act of 1933 (the "SECURITIES ACT") are used herein as so defined. This certificate relates to U.S. $_____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "SPECIFIED SECURITIES"): CUSIP No(s). ___________________________ ISIN No(s), If any. ____________________ CERTIFICATE No(s). _____________________ The person in whose name this certificate is executed below (the "UNDERSIGNED") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "OWNER". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. B-1 The Owner has requested that the Specified Securities be transferred to a person (the "TRANSFEREE") who will take delivery in the form of a Restricted Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, (i) the Owner is not a U.S. Person (as defined in the Indenture) and (ii) such transfer is being effected in accordance with Rule 144A or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as: 1. Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A: (a) the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a "QUALIFIED INSTITUTIONAL BUYER" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified insti tutional buyer; and (b) the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and 2. Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (a) the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (b) the transfer is occurring after a holding period of at least two years has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Initial Purchasers. Dated: --------------------------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: ------------------------------------------------ Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) B-3 ANNEX C -- Form of Unrestricted Securities Certificate UNRESTRICTED SECURITIES CERTIFICATE (For removal of Securities Act Legends pursuant to (S) 3.06(c)) Harris Trust and Savings Bank 311 West Monroe Street, 12th Floor Chicago, Illinois 60603 Attn: Indenture Trust Administration Re: 6% Dealer remarketable securities(SM) due 2013 of Rite Aid Corporation (the "SECURITIES") Reference is made to the Indenture, dated as of September 22, 1998 (the "INDENTURE"), from Rite Aid Corporation (the "COMPANY"), to Harris Trust and Savings Bank, as Trustee. Terms used herein and defined in the Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the "SECURITIES ACT") are used herein as so defined. This certificate relates to U.S. $_____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "SPECIFIED SECURITIES"): CUSIP No(s). ___________________________ CERTIFICATE No(s). _____________________ The person in whose name this certificate is executed below (the "UNDERSIGNED") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "OWNER". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for Securities bearing no Securities Act Legend pursuant to Section 3.06(c) of the Indenture. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after a holding period of at least three years (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. The Owner also acknowledges that any future transfers of the Specified Securities must comply with all applicable securities laws of the states of the United States and other jurisdictions. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Initial Purchasers. Dated: ---------------------------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: ------------------------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) C-2 EX-4.2 3 REMARKETING AGREEMENT EXHIBIT 4.2 REMARKETING AGREEMENT between RITE AID CORPORATION and J.P. MORGAN SECURITIES INC. as Remarketing Dealer TABLE OF CONTENTS Page ---- Section 1. Definitions 2 -- Section 2. Representations and Warranties 6 -- Section 3. Covenants of the Company 7 -- Section 4. Appointment and Obligations of the Remarketing Dealer 10 -- Section 5. Fees and Expenses 14 -- Section 6. Resignation of the Remarketing Dealer 14 -- Section 7. Dealing in the Drs.; Purchase of Drs. by the Company 14 -- Section 8. Conditions to Remarketing Dealer's Obligations 15 -- Section 9. Indemnification 18 -- Section 10. Termination of Remarketing Agreement 22 -- Section 11. Remarketing Dealer's Performance; Duty of Care 23 -- Section 12. Governing Law 24 -- Section 13. Term of Agreement 24 -- Section 14. Successors and Assigns 24 -- Section 15. Headings 24 -- Section 16. Severability 25 -- Section 17. Counterparts 25 -- Section 18. Amendments; Waivers 25 -- Section 19. Notices 25 REMARKETING AGREEMENT dated as of September 22, 1998 (the "AGREEMENT") between Rite Aid Corporation, a Delaware corporation (the "COMPANY"), and J.P. Morgan Securities Inc. ("JPMSI" and, in its capacity as the remarketing dealer hereunder, the "REMARKETING DEALER"). WHEREAS, the Company has issued $200,000,000 aggregate principal amount of its 6% Dealer remarketable securities(SM) ("DRS."(SM)) pursuant to an Indenture dated as of September 22, 1998 (the "INDENTURE"), from the Company to Harris Trust and Savings Bank, as trustee (the "TRUSTEE"); and WHEREAS, the Drs. are being sold initially pursuant to a Purchase Agreement dated as of September 17, 1998 (the "PURCHASE AGREEMENT") between the Company and JPMSI, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, as Initial Purchasers; and WHEREAS, the Company has agreed in an Exchange and Registration Rights Agreement dated as of September 22, 1998 (the "REGISTRATION RIGHTS AGREEMENT") to prepare and file with the Securities and Exchange Commission (the "COMMISSION") a registration statement on an appropriate form under the Securities Act of 1933, as amended (the "SECURITIES ACT") with respect to a proposed offer to the holders of the Drs. to issue and deliver to such holders, in exchange for the Drs., a like principal of debt securities of the Company (the "EXCHANGE DRS." and the term "Drs." shall include any Exchange Drs. that are issued) that are identical in all material respects to the Drs., except for the transfer restrictions relating to the Drs., and to use its reasonable best efforts to have such registration statement declared effective within the time period specified in the Registration Rights Agreement; such registration statement, including any amendments and supplements thereto, and all documents incorporated therein by reference, as from time to time amended or supplemented pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Securities Act, or otherwise, are referred to herein as the "REGISTRATION STATEMENT"; all preliminary and final prospectuses relating to such Registration Statement used in connection with the offering of the Exchange Drs., including the documents incorporated by reference therein, are referred to herein collectively as the "PROSPECTUS"; provided that, if any new or revised prospectus shall be provided to the Remarketing Dealer by the Company for use in connection with the remarketing of the Drs. which differs from the Prospectus filed with the Commission at the time of the initial issuance of the Exchange Drs. (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) under the Securities Act), the term "PROSPECTUS" shall - --------------- (SM)"Dealer remarketable securities(SM)" and "Drs.(SM)" are service marks of J.P. Morgan Securities Inc. refer to such new or revised prospectus from and after the time it is first provided to the Remarketing Dealer for such use, and "REGISTRATION STATEMENT" shall refer to the Registration Statement as deemed amended by the prospectus so provided or any new registration statement of which such prospectus is a part; and WHEREAS, JPMSI is prepared to act as the Remarketing Dealer with respect to the remarketing of the Drs. on October 1, 2003 (the "REMARKETING DATE") pursuant to the terms of, but subject to the conditions set forth in, this Agreement; NOW, THEREFORE, for and in consideration of the covenants herein made, and subject to the conditions herein set forth, the parties hereto agree as follows: Section 1. Definitions. (a) The following terms have the following meanings: "BASE RATE" means 4.93% per annum. "BUSINESS DAY" means any day other than a Saturday or Sunday or other day on which banking institutions in the City of New York are authorized or obligated by law, executive order or governmental decree to be closed. "CALL PRICE" means, with respect to any Drs. Unavailable for Remarketing: (i) if the Remarketing Dealer's request for a Call Price payment is made prior to the Determination Date, the Commercially Reasonable Option Value for the Drs. Unavailable for Remarketing on the date of such request; or (ii) if the Remarketing Dealer's request for a Call Price payment is made on or after the Determination Date, an amount (if positive) equal to: Full Option Settlement Value x Drs. Unavailable for Remarketing ---------------------------------------------------------------- Original Amount of Drs. where "ORIGINAL AMOUNT OF DRS." means the aggregate principal amount of the Drs. issued by the Company on the date hereof; and "FULL OPTION SETTLEMENT VALUE" equals the Dollar Price less the Original Amount of Drs. 2 "COMMERCIALLY REASONABLE OPTION VALUE" means, with respect to any Drs. Unavailable for Remarketing, on any date, the amount determined by the Remarketing Dealer on such date under Section 6(e) of the ISDA Master Agreement on a "Market Quotation" basis in respect of the embedded interest rate option implicit in the Remarketing Dealer's option to purchase, at 100% of the aggregate principal amount thereof, the Drs. Unavailable for Remarketing as if a "Termination Event" had occurred on such date under such interest rate option with respect to the Company under the ISDA Master Agreement and the Company was the "Affected Party". The determination of the Commercially Reasonable Option Value shall be made using the provisions of the ISDA Master Agreement regardless of any subsequent modification to such form by the International Swaps and Derivatives Association. "COMPARABLE TREASURY ISSUE" means the United States Treasury security selected by the Remarketing Dealer as having an actual maturity on the Determination Date (or the United States Treasury securities selected by the Remarketing Dealer to derive an interpolated yield to maturity on such Determination Date) comparable to the remaining term of the Drs. The United States Treasury security selected by the Remarketing Dealer will be based on the standard market convention for the benchmark used in the swap market to settle an option on the 10-year then on-the-run Treasury security. "COMPARABLE TREASURY PRICE" means (a) the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) on the Determination Date, as set forth on Telerate Page 500, adjusted to reflect settlement on the Remarketing Date if prices quoted on Telerate Page 500 are for settlement on any date other than the Remarketing Date, or (b) if such page (or any successor page) is not displayed or does not contain such offer prices on such Business Day, then (i) the average of such Reference Treasury Dealer Quotations for such Remarketing Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations (unless there is more than one highest or lowest quotation, in which case only one such highest and/or lowest quotation shall be excluded), or (ii) if the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. The Remarketing Dealer shall have the discretion to select the time at which the Comparable Treasury Price is determined on the Determination Date and the number of Reference Treasury Dealer Quotations to be obtained; provided such number shall not be less than three. "DOLLAR PRICE" means the discounted present value to the Remarketing Date of the cash flows on a bond (x) with a principal amount equal to the aggregate principal amount of the initially issued Drs., (y) maturing on the Stated Maturity Date and (z) bearing interest from the Remarketing Date, payable semi- annually (assuming a 360-day year consisting of twelve 30-day months) on the 3 interest payment dates of the Drs. at a rate equal to the Base Rate, using a discount rate equal to the Treasury Rate. "DRS. UNAVAILABLE FOR REMARKETING" means any Drs. that are unavailable for any reason for remarketing by the Remarketing Dealer on the Remarketing Date (whether due to termination of this Agreement according to its terms, purchase or redemption of Drs. by the Company prior to the Remarketing Date, or otherwise). "ISDA MASTER AGREEMENT" means the standard form ISDA Master Agreement prepared by the International Swaps and Derivatives Association for use on the date hereof and attached hereto as Annex A. "REFERENCE CORPORATE DEALER" means J.P. Morgan Securities Inc. and four other leading dealers of publicly-traded debt securities of the Company acceptable to the Company and the Remarketing Dealer. "REFERENCE TREASURY DEALER" means a primary U.S. Government securities dealer in The City of New York (which may include the Remarketing Dealer) selected by the Remarketing Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to each Reference Treasury Dealer, the offer price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) for settlement on the Remarketing Date, quoted in writing to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the Determination Date. "STATED MATURITY DATE" means October 1, 2013. "TELERATE PAGE 500" means the display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such other page as may replace Telerate Page 500 on such service) or such other service displaying the offer prices specified in clause (a) of the definition of Comparable Treasury Price as may replace Dow Jones Markets Limited. "TREASURY RATE" means the annual rate equal to the semi-annual equivalent yield to maturity or interpolated (on a 30/360 day count basis) yield to maturity on the Determination Date of the Comparable Treasury Issue for value on the Remarketing Date, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price. 4 (b) The following additional terms are defined in the following Sections: Defined Term Section ------------ ------- Commission Preamble Company Preamble Determination Date 4(d) ---- Drs. Preamble DTC 4(e) ---- Exchange Act Preamble Exchange Act Documents 2(a) ---- Indemnified Person 9(c) ---- Indemnifying Person 9(c) ---- Indenture Preamble Interest Rate to Maturity 4(d) ---- Investment Grade 8(c) ---- JPMSI Preamble Moody's 8(c) ---- Notification Date 4(c) ---- Prospectus Preamble Purchase Agreement Preamble Rating Agency 8(c) ---- Registration Statement Preamble Remarketing Date Preamble Remarketing Dealer Preamble Remarketing Materials 3(b) ---- Representation Date 2(a) ---- S&P 8(c) ---- Securities Act Preamble Trustee Preamble Section 2. Representations and Warranties. (a) The Company represents and warrants to the Remarketing Dealer as of the date hereof (except in the case of (viii) below), the Notification Date, the Determination Date and the Remarketing Date (each of the foregoing dates being hereinafter referred to as a "REPRESENTATION DATE"), as follows: 5 (i) It has filed all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (collectively, the "EXCHANGE ACT DOCUMENTS"). (ii) The applicable Remarketing Materials will not, as of their date or the Remarketing Date, include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iii) The representations and warranties contained in the Purchase Agreement are true and correct with the same force and effect as though expressly made at and as of each Representation Date; except that for purposes of this Agreement, representations and warranties in the Purchase Agreement relating to the Offering Memorandum (as defined therein) shall be made with respect to such documents as deemed modified by the Exchange Act Documents, as well as any new or revised prospectus required by subsection 3(f) herein, and the date as of which such representations and warranties are made shall include each Representation Date. (iv) Since the respective dates as of which information is given in the Remarketing Materials or the Exchange Act Documents, there has not been any material change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any material adverse change in the financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Remarketing Materials or the Exchange Act Documents. Except as set forth or contemplated in the Remarketing Materials or the Exchange Act Documents, neither the Company nor any of its subsidiaries has entered into any transaction or agreement (whether or not in the ordinary course of business) material to the Company and its subsidiaries, taken as a whole. (v) This Agreement has been duly authorized, executed and delivered by the Company. (vi) The issue and sale of the Drs. and the compliance by the Company with all of the provisions of the Drs., the Indenture, this Agreement and the Registration Rights Agreement, and the consummation of the transactions herein and therein contemplated, will not (1) conflict with or result in a breach or violation by the Company of any terms or provisions of, or constitute a default by the Company under, any 6 indenture, mortgage, deed of trust, loan agreement or other similar agreement or instrument to which the Company is a party or by which the Company is bound or to which any property or assets of the Company is subject, except, in all such cases, for such conflicts, breaches, violations or defaults as would not have a material adverse effect on the financial condition of the Company and its subsidiaries taken as a whole, and (2) result in any violation of (A) the provisions of the Certificate of Incorporation or By-Laws of the Company or (B) any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties, which order, rule or regulation is applicable to the Company; provided, however, that in the case of this clause (B), this representation, warranty and agreement shall not extend to such violations as would not have a material adverse effect on the financial condition of the Company and its subsidiaries taken as a whole; no consent, approval, authorization, order, registration, filing or qualification of or with any court or governmental agency or body is required for the issue and sale of the Drs. or the consummation by the Company of the transactions contemplated by this Agreement, the Indenture or the Registration Rights Agreement (except, on the date of this Agreement, such consents, approvals, authorizations, filings or qualifications required by the Securities Act in connection with Registration Rights and this Agreement) except such consents, approvals, authorizations, orders, registration, filings or qualifications as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Initial Purchasers, and except for those which, if not obtained, will not have a material adverse effect on the financial condition of the Company and its subsidiaries taken as a whole;. (vii) The Drs. conform on the date hereof in all material respects to the description thereof contained in the Offering Memorandum and the Drs. will conform, on the Notification Date, the Determination Date and the Remarketing Date, in all material respects to the description thereof contained in the Prospectus. (viii) If a new or amended Registration Statement is required pursuant to Section 3(f), no stop order suspending the effectiveness of such Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Company, threatened by the Commission; and such Registration Statement and Prospectus comply in all material respects with the Securities Act and the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (collectively, the "TRUST INDENTURE ACT") and do not contain any untrue statement of a material fact or omit to state any 7 material fact required to be stated therein or necessary to make the statements therein not misleading; except that the foregoing representations and warranties shall not apply to that part of the Registration Statement which constitutes the Statement of Eligibility and Qualification (Form T-1) of the Trustee under the Trust Indenture Act; the Indenture has been duly qualified under the Trust Indenture Act. (b) Additional Certifications. Any certificate signed by any officer of the Company and delivered to the Remarketing Dealer or to counsel for the Remarketing Dealer in connection with the remarketing of the Drs. shall be deemed a representation and warranty by the Company to the Remarketing Dealer as to the matters covered thereby. Section 3. Covenants of the Company. The Company covenants with the Remarketing Dealer as follows: (a) The Company will provide prompt notice by telephone, confirmed in writing (which may include facsimile or other electronic transmission), to the Remarketing Dealer of the occurrence: (i) at any time, of any event set forth in clause (i), (ii) or (iii) of subsection 8(c) or of any amendment of any kind to the Indenture ---- (including the Drs.); and (ii) on or after the Notification Date, of any event set forth in clauses (i) or (ii) of subsection 8(d). ---- (b) The Company will furnish to the Remarketing Dealer upon request: (i) each Registration Statement and the Prospectus relating to the Drs. (including in each case any amendment or supplement thereto and each document incorporated therein by reference); (ii) each Exchange Act Document filed after the date hereof; and (iii) such other information relating to the Company and the Drs. as the Remarketing Dealer may reasonably request from time to time for use in connection with the remarketing of the Drs. The Company agrees to provide the Remarketing Dealer with as many copies of the foregoing written materials and information (collectively, the "REMARKETING MATERIALS", including in each case any document incorporated by reference 8 therein) as the Remarketing Dealer may reasonably request for use in connection with the remarketing of Drs. and consents to the use thereof for such purpose. (c) If, at any time within three months of the Remarketing Date, any event or condition known to the Company relating to or affecting the Company, any subsidiary thereof or the Drs. shall occur which could reasonably be expected to cause any of the Remarketing Materials to contain an untrue statement of a material fact or omit to state a material fact, the Company shall promptly notify the Remarketing Dealer in writing of the circumstances and details of such event or condition. (d) So long as the Drs. are outstanding, the Company will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the rules and regulations thereunder. (e) The Company will comply with the Securities Act, the Exchange Act, the Trust Indenture Act and the rules and regulations of the Commission thereunder so as to permit the completion of the remarketing of the Drs. as contemplated in (i) this Agreement, (ii) the Offering Memorandum first used in connection with the original issuance of the Drs., (iii) the Prospectus first used in connection with the issuance of the Exchange Drs., and (iv) the prospectus, if any, used in connection with the remarketing. (f) If a new or amended Registration Statement in respect of the Drs. is in the opinion of counsel for the Remarketing Dealer or for the Company necessary to sell Drs. on an unrestricted basis on the Remarketing Date, then the Company, at its expense, will, on or before such date: (i) prepare and file with the Commission such amended or new Registration Statement (including a Prospectus) covering such sale of Drs. by the Remarketing Dealer, and cause such Registration Statement to become effective on or prior to the Determination Date; (ii) furnish to the Remarketing Dealer such number of copies of such Prospectus as the Remarketing Dealer may reasonably request; (iii) furnish to the Remarketing Dealer and any other securities dealer participating in the remarketing of the Drs. an officers' certificate, an opinion, including a statement as to the absence of material misstatements in or omissions from the Registration Statement and the Prospectus, of counsel to the Company reasonably satisfactory to the Remarketing Dealer and a "comfort letter" from the Company's independent accountants, in each case dated as of the Remarketing Date 9 and in form and substance satisfactory to the Remarketing Dealer, of the same tenor as the officers' certificate, opinion and comfort letter, respectively, delivered to satisfy the closing conditions of the Purchase Agreement, but modified to relate to such new or amended Registration Statement and the Prospectus; and (iv) provide to the Remarketing Dealer and any other securities dealer participating in the remarketing of the Drs. the opportunity to conduct an underwriters' due diligence investigation of the Company in a scope customarily provided in connection with a public offering of the Company's debt securities. Furthermore, if at any time when, in the opinion of counsel for the Remarketing Dealer, a prospectus is required by the Securities Act to be delivered in connection with sales of the Drs., any event shall occur or condition shall exist as a result of which it is necessary to amend the Registration Statement or amend or supplement the Prospectus in order that such Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it is necessary to amend or supplement the Prospectus to comply with law, the Company, at its expense, will promptly furnish to the Remarketing Dealer such amendments or supplements to the Prospectus as may be needed so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law. The Company agrees to reimburse the Remarketing Dealer for all of its reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred in connection with any remarketing under circumstances described in this subsection 3(f). ---- (g) The Company agrees that neither it nor any of its subsidiaries or affiliates shall purchase or otherwise acquire, or enter into any agreement to purchase or otherwise acquire, any of the Drs. on or prior to the Remarketing Date, other than (i) a repurchase of the Drs. in accordance with subsection 4(g) - ---- (h) The Company will comply with each of the covenants set forth in the Purchase Agreement and the Registration Rights Agreement. (i) In connection with the remarketing, the Company will arrange for the qualification of the Drs. for sale under the laws of such jurisdictions as the Remarketing Dealer may designate, and will maintain such qualifications in effect so long as required for the remarketing of the Drs.; the Company will pay all 10 expenses in connection with such qualification, including the fees and disbursements of counsel for any dealers participating in the remarketing in connection with such qualification and in connection with blue sky and legal investment surveys; provided that the Company shall not be required to file a general consent to service of process in any jurisdiction; and provided further that in connection therewith the Company shall not be required to qualify the Drs. for offering and sale under the securities laws of any such jurisdiction for a period in excess of nine months from the Remarketing Date. (j) During the five Business Day period ending on the Remarketing Date, the Company will not, without the consent of the Remarketing Dealer, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities. Section 4. Appointment and Obligations of the Remarketing Dealer. (a) Unless this Agreement is otherwise terminated in accordance with Section 10 hereof, the Company hereby appoints JPMSI, and JPMSI hereby accepts -- such appointment, in accordance with the terms but subject to the conditions of this Agreement, as the exclusive Remarketing Dealer with respect to the Drs. (b) The obligations of the Remarketing Dealer hereunder to purchase the tendered Drs. on the Remarketing Date, to determine the Interest Rate to Maturity pursuant to subsection 4(d) and to remarket the Drs. are conditioned on: (i) the issuance and delivery of such Drs. pursuant to the terms and conditions of the Purchase Agreement; (ii) the Remarketing Dealer's election on the Notification Date to purchase the Drs. for remarketing on the Remarketing Date and (iii) the fact that the conditions set forth in Section 8 hereof shall - have been fully and completely met to the satisfaction of the Remarketing Dealer. (c) On a Business Day not later than five Business Days prior to the Remarketing Date (the "NOTIFICATION DATE"), the Remarketing Dealer will notify the Company and the Trustee as to whether it elects to purchase the Drs. on the Remarketing Date. If, and only if, the Remarketing Dealer so elects, the Drs. shall be subject to mandatory tender to the Remarketing Dealer for purchase and remarketing on the Remarketing Date, upon the terms and subject to the conditions described herein. The purchase price of the Drs. shall be equal to 100% of the principal amount thereof. 11 (d) The Remarketing Dealer shall determine a new stated interest rate on the Drs. as of the Remarketing Date (the "INTEREST RATE TO MATURITY") on the third Business Day immediately preceding the Remarketing Date (the "DETERMINATION DATE") by soliciting by 3:30 p.m., New York City time, the Reference Corporate Dealers for firm, committed bids to purchase all outstanding Drs. at the Dollar Price, and by selecting the lowest such firm, committed bid (regardless of whether each of the Reference Corporate Dealers actually submits a bid). Each bid shall be expressed in terms of the Interest Rate to Maturity that the Drs. would bear (quoted as a spread over the Base Rate) based on the following assumptions: (i) the Drs. would be sold to such Reference Corporate Dealer on the Remarketing Date for settlement on the same day; (ii) the Drs. would mature on the Stated Maturity Date; (iii) the Drs. would bear interest from the Remarketing Date at a stated rate equal to the Interest Rate to Maturity bid by such Reference Corporate Dealer, payable semi-annually on the interest payment dates for the Drs. The Interest Rate to Maturity announced by the Remarketing Dealer as a result of such process will be quoted to the nearest one hundred-thousandth (0.00001) of one percent per annum and, absent manifest error, will be binding and conclusive upon holders of the Drs., the Company and the Trustee. Subject only to subsection 4(e), below, the Remarketing Dealer shall have the discretion to select the time, prior to 3:30 p.m., New York City time, at which the Interest Rate to Maturity is determined on the Determination Date. The Remarketing Dealer shall have the right in its sole discretion to either (i) remarket the Drs. for its own account or (ii) sell the Drs. to the Reference Corporate Dealer submitting the lowest firm, committed, bid pursuant to subsection 4(d). If two or more Reference Corporate Dealers submit equivalent bids which constitute the lowest firm, committed bid, the Remarketing Dealer may in its sole discretion elect to sell the Drs. to any such Reference Corporate Dealer. (e) If the Remarketing Dealer has elected to remarket the Drs. as provided in subsections 4(c) and 4(d), then it shall notify the Company, the Trustee and --- --- The Depository Trust Company ("DTC") by telephone, confirmed in writing (which may include facsimile or other electronic transmission), by 5:00 p.m., New York City time, on the Determination Date of the Interest Rate to 12 Maturity applicable to the Drs. effective from and including the Remarketing Date. (f) If the Drs. are remarketed as provided herein, then, subject to Section 8 hereof, the Remarketing Dealer will make, or cause the Trustee to make, payment to DTC by the close of business on the Remarketing Date against delivery through DTC of the tendered Drs., of the purchase price for all of the tendered Drs. The purchase price of the tendered Drs. will be equal to 100% of the principal amount thereof and shall be paid in immediately available funds. (g) If the Remarketing Dealer (i) does not elect to purchase the Drs. for remarketing pursuant to subsection 4(c), (ii) does not purchase Drs. because one --- or more of the conditions in Section 8 hereof have not been fulfilled by the - required time, or (iii) for any other reason does not remarket the Drs., then the Company shall repurchase on the Remarketing Date all then outstanding Drs. at a price equal to 100% of the principal amount of such Drs. plus all accrued interest, if any, on such Drs. to (but excluding) the Remarketing Date. (h) If the Remarketing Dealer has elected to remarket the Drs. on the Remarketing Date in accordance with subsection 4(c) hereof, the Company may --- irrevocably elect to exercise its right to redeem the Drs., in whole but not in part, from the Remarketing Dealer on the Remarketing Date at the greater of (x) 100% of the aggregate principal amount of the Drs. and (y) the Dollar Price, by giving notice of such election to the Remarketing Dealer no later than (i) the Business Day immediately prior to the Determination Date or (ii) if fewer than three Reference Corporate Dealers submit firm, committed bids in accordance with subsection 4(d) hereof, immediately after --- the deadline set by the Remarketing Dealer for receiving such bids has passed. In either such case, the Company shall pay such redemption price for the Drs. in same-day funds by wire transfer on the Remarketing Date to an account designated by the Remarketing Dealer. If the Company exercises its right to redeem the Drs. pursuant to clause 4(h)(ii) above, it shall promptly reimburse the Remarketing Dealer for any and - ------- all expenses (including any and all hedge losses) incurred by the Remarketing Dealer in connection with its having to break associated hedging transactions to enable the Company to exercise such redemption right. If any such broken hedges result in a profit to the Remarketing Dealer, the Remarketing Dealer shall promptly pay 13 such profit over to the Company. The amount of any hedge losses or profits shall be determined solely by the Remarketing Dealer, on a reasonable basis. (i) In accordance with the terms and provisions of the Drs., the tender and settlement procedures set forth in this Section 4, shall be subject to modification without the consent of the holders of the Drs., to the extent required by DTC or, if the book-entry system is no longer available for the Drs. at the time of the remarketing, to the extent required to facilitate the tendering and remarketing of Drs. in certificated form. In addition, the Remarketing Dealer may, without the consent of the holders of the Drs., modify the settlement procedures set forth in the Indenture and/or the Drs. in order to facilitate the settlement process. (j) In accordance with the terms and provisions of the Drs., the Company hereby (i) agrees that at all times, it will use its best efforts to maintain the Drs. in book-entry form with DTC or any successor thereto and to appoint a successor depositary to the extent necessary to maintain the Drs. in book-entry form and (ii) waives any discretionary right it otherwise may have under the Indenture to cause the Drs. to be issued in certificated form. Section 5. Fees and Expenses. Subject to subsection 3(f), the last paragraph of subsection 4(h), and --- --- Section 10 hereof, the Remarketing Dealer will not receive any fees or -- reimbursement of expenses from the Company for its remarketing services set forth herein. Section 6. Resignation of the Remarketing Dealer. The Remarketing Dealer may resign and be discharged from its duties and obligations hereunder at any time prior to its giving notice of its intention to remarket the Drs., such resignation to be effective ten Business Days after delivery of a written notice to the Company and the Trustee of such resignation. The Remarketing Dealer also may resign and be discharged from its duties and obligations hereunder at any time, such resignation to be effective immediately, upon termination of this Agreement in accordance with subsection 10(b) hereof. ---- The Company shall have the right, but not the obligation, to appoint a successor Remarketing Dealer. Section 7. Dealing in the Drs.; Purchase of Drs. by the Company. (a) JPMSI, when acting as the Remarketing Dealer or in its individual or any other capacity, may, to the extent permitted by law, buy, sell, hold and deal in any of the Drs. JPMSI, as holder or beneficial owner of the Drs., may exercise 14 any vote or join as a holder or beneficial owner, as the case may be, in any action which any holder or beneficial owner of Drs. may be entitled to exercise or take pursuant to the Indenture with like effect as if it did not act in any capacity hereunder. The Remarketing Dealer, in its capacity either as principal or agent, may also engage in or have an interest in any financial or other transaction with the Company as freely as if it did not act in any capacity hereunder. (b) The Company may purchase Drs. in the remarketing, provided that the Interest Rate to Maturity established with respect to Drs. in the remarketing is not different from the Interest Rate to Maturity that would have been established if the Company had not purchased such Drs. Section 8. Conditions to Remarketing Dealer's Obligations. The obligations of the Remarketing Dealer to purchase the Drs. on the Remarketing Date in accordance with the provisions of this Agreement, to determine the Interest Rate to Maturity pursuant to subsection 4(d), and to --- remarket the Drs. have been undertaken in reliance on, and are subject to, the following conditions: (a) the due performance in all material respects by the Company of its obligations and agreements as set forth in this Agreement and the accuracy of the representations and warranties in this Agreement and any certificate delivered pursuant hereto; (b) the due performance in all material respects by the Company of its obligations and agreements set forth in, and the accuracy as of the dates specified therein of the representations and warranties contained in, the Purchase Agreement; (c) none of the following events shall have occurred at any time on or prior to the Remarketing Date: (i) the Drs. shall cease to be rated Investment Grade by each of the Rating Agencies at any time; for purposes of the foregoing, "RATING AGENCY" shall mean Standard & Poor's Corporation and its successors ("S&P") and Moody's Investor's Services, Inc. and its successors ("MOODY'S"); and "INVESTMENT GRADE" shall mean that the Company's long-term, unsecured debt is rated BBB- or higher by S&P and Baa3 or higher by Moody's; (ii) an Event of Default (as defined in the Indenture), or any event which, with the giving of notice or passage of time, or both, would 15 constitute an Event of Default thereunder, with respect to the Drs. shall have occurred and be continuing; (iii) without the prior written consent of the Remarketing Dealer, the Indenture (including the Drs.) shall have been amended in any manner, or otherwise contain any provision not contained therein as of the date hereof, that in either case in the judgment of the Remarketing Dealer materially changes the nature of the Drs. or the remarketing procedures; (d) none of the following events shall have occurred after the Remarketing Dealer elects on the Notification Date to purchase the Drs.: (i) there shall have occurred any downgrading in the rating accorded the Company's debt securities by either the Standard & Poor's Corporation or Moody's Investors Service, Inc., any threat shall have been made of such downgrading or of placing the Company under special surveillance by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), any notice shall have been given of any intended or potential downgrading in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change; or the Company shall have knowledge of any facts or circumstances that are likely to cause such downgrading, threatened downgrading or the placing of the Company under special surveillance; (ii) trading of any securities of, or guaranteed by, the Company shall have been suspended on any exchange or in any over-the-counter market; (iii) a material adverse change in the financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, the effect of which is such as to make it, in the judgment of the Remarketing Dealer, impracticable or inadvisable to remarket the Drs. or to enforce contracts for the sale of the Drs.; (iv) if a prospectus is required under the Securities Act to be delivered in connection with the remarketing of the Drs., the Company shall fail to furnish to the Remarketing Dealer on the Remarketing Date the officers' certificate, opinion and comfort letter referred to in subsection 3(f) of this Agreement and such other documents and opinions as Davis Polk --- & Wardwell, as special counsel for the Remarketing Dealer may reasonably require for the purpose of enabling such counsel to pass upon the sale of Drs. in the remarketing as herein contemplated and related proceedings, or in order to evidence the accuracy and completeness of any 16 of the representations and warranties, or the fulfillment of any of the conditions, herein contained; (v) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade; or a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities; (vi) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Remarketing Dealer, is material and adverse and which, in the judgment of the Remarketing Dealer, makes it impracticable to remarket the Drs. or to enforce contracts for the sale of the Drs.; (vii) the Treasury Rate used to determine the Dollar Price on the Determination Date exceeds the Base Rate; or (viii) the Remarketing Dealer shall not have received by the required time on the Determination Date any firm, committed bids to purchase all of the Drs. in accordance with subsection 4(d) hereof; --- (e) the Remarketing Dealer shall have received (as soon as practicable following notification by the Remarketing Dealer to the Company on the Notification Date of its election to purchase the Drs. and in any event prior to the Determination Date) a certificate of any of the Chief Financial Officer, the Treasurer, or the Controller of the Company, satisfactory to the Remarketing Dealer, dated as of the Notification Date, to the following effect: (i) the Company has, prior to the Remarketing Dealer's election on the Notification Date to remarket the Drs., provided the Remarketing Dealer with notice of all events as required under subsection 3(a) of this --- Agreement; (ii) the representations and warranties in this Agreement are true and correct at and as of the Notification Date; and (iii) the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Notification Date; and 17 (f) the Remarketing Dealer shall have received on the Remarketing Date a certificate of any of the Chief Financial Officer, the Treasurer or the Controller of the Company, satisfactory to the Remarketing Dealer, dated as of the Remarketing Date, to the following effect: (i) the representations and warranties in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Remarketing Date; (ii) the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Remarketing Date; (iii) no material adverse change, or any development involving a prospective material adverse change in the financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, shall have occurred since the date of the most recent financial statements of the Company filed with the Commission; and (iv) the conditions specified in clauses 8(c)(i), 8(c)(ii), 8(d)(i) ------- -------- ------- and 8(d)(ii) of this Agreement have been satisfied. -------- Section 9. Indemnification. (a) The Company agrees to indemnify and hold harmless the Remarketing Dealer and each person, if any, who controls the Remarketing Dealer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted): (i) arising out of the failure to have an effective registration statement under the Securities Act relating to the Drs., if required, or the failure to satisfy the prospectus delivery requirements of the Securities Act because the Company failed to notify the Remarketing Dealer of such delivery requirement or failed to provide the Remarketing Dealer with a prospectus for delivery, (ii) caused by any untrue statement or alleged untrue statement of a material fact contained in any of the Remarketing Materials or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are 18 caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to the Remarketing Dealer furnished to the Company in writing by the Remarketing Dealer expressly for use therein, (iii) caused by any violation by the Company of, or any failure by the Company to perform any of its obligations under, this Agreement, or (iv) caused by the acts or omissions of the Remarketing Dealer in connection with its duties and obligations hereunder, except to the extent finally judicially determined to be due primarily to its gross negligence or willful misconduct. (b) The Remarketing Dealer agrees to indemnify and hold harmless the Company, its directors and its officers and each person who controls the Company within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Remarketing Dealer in subsection 9(a)(ii) of this Agreement, but only with -------- reference to information relating to such Remarketing Dealer furnished to the Company in writing by such Remarketing Dealer expressly for use in any of the Remarketing Materials. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "INDEMNIFIED PERSON") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the 19 Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Remarketing Dealer and its directors and officers shall be designated in writing by it and any such separate firm for the Company, its directors and its officers who sign the Registration Statement and such control persons of the Company or authorized representatives shall be designated in writing by the Company. The Indem nifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indem nifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. (d) Notwithstanding the foregoing subsection 9(c), if at any time an ---- Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for fees and expenses of counsel as contemplated by such subsection 9(c), the Indemnifying Person agrees that it shall be liable for any ---- settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that were or could have been raised by the plaintiff in such proceeding. (e) If the indemnification provided for in subsections 9(a) and 9(b) is ---- ---- unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to, then each Indemnifying Person, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Remarketing Dealer, on the other, from the remarketing of the Drs. or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 20 (i) above but also the relative fault of the Company, on the one hand, and the Remarketing Dealer, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Remarketing Dealer, on the other, shall be deemed to be in the same respective proportions as the aggregate principal amount of the Drs. bears to the amount, if any, by which the price at which the Drs. are sold by the Remarketing Dealer in the remarketing exceeds the price paid by the Remarketing Dealer for the Drs. tendered on the Remarketing Date. The relative fault of the Company on the one hand and the Remarketing Dealer on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Remarketing Dealer and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (f) The Company and the Remarketing Dealer agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro - rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. (g) Notwithstanding the provisions of this Section 9, in no event shall - the Remarketing Dealer be required to contribute any amount in excess of the amount by which the total price at which the Drs. remarketed by it and distributed to the public were offered to the public exceeds the amount of any damages that such Remarketing Dealer has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. The remedies provided for in this Section 9 are not exclusive and shall not limit - any rights or remedies which may otherwise be available to any indemnified party at law of in equity. (h) The indemnity and contribution agreements contained in this Section 9 - and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement and (ii) any investigation made by or on behalf of the Remarketing Dealer or any person controlling the Remarketing Dealer or by 21 or on behalf of the Company, its officers or directors or any other person controlling the Company. Section 10. Termination of Remarketing Agreement. (a) This Agreement shall terminate as to the Remarketing Dealer on the earliest of (i) the effective date of the resignation of the Remarketing Dealer pursuant to Section 6 hereof; - (ii) the occurrence of any event described in clause (i) or (ii) of subsection 4(g) hereof; or ---- (iii) the date the Company gives notice of its intention to redeem all of the outstanding Drs. in accordance with subsection 4(h); ---- (b) In addition, the Remarketing Dealer may terminate all of its obligations under this Agreement immediately by notifying the Company and the Trustee of its election to do so, at any time on or before the Remarketing Date, if: (i) any of the conditions referred to or set forth in subsection 8(a) or (b) hereof have not been met or satisfied in full or any of the events set forth in subsection 8(c) or 8(d) shall have occurred; or ---- ---- (ii) the Remarketing Dealer determines, in its sole discretion, after consultation with the Company, that there is material, non-public information about the Company that is not available to the Remarketing Dealer which is necessary for it to fulfill its obligations under this Agreement. (c) If this Agreement is terminated pursuant to this Section 10, such -- termination shall be without liability of any party to any other party, except that, in the case of a termination resulting from a failure to observe the conditions set forth in subsections 8(a) or 8(b), or the occurrence of any of ---- ---- the events set forth in subsection 8(c) or clauses 8(d)(i) through 8(d)(iv), the ---- ------- -------- Company shall reimburse the Remarketing Dealer for all of its reasonable out-of- pocket expenses, including the reasonable fees and disbursements of counsel for the Remarketing Dealer. Section 9 and subsections 3(f), 4(h), 10(c) and 10(d) ---- ---- ----- ----- shall survive such termination and remain in full force and effect. 22 (d) Upon: (i) the termination of this Agreement pursuant to subsection 10(b) ----- (except as a result of an event described in subsection 8(d)(vii)); or --------- (ii) a repurchase by the Company of any Drs. due to a failure by the holder thereof to deliver the Drs. to the Remarketing Dealer against payment therefor in connection with a mandatory tender; then, upon the request of the Remarketing Dealer, the Company shall pay to the Remarketing Dealer, in same-day funds by wire transfer to an account designated by the Remarketing Dealer, the Call Price in respect of the Drs. that have become Drs. Unavailable for Remarketing as result of clause (i) or (ii) above. The Call Price for any Drs. Unavailable for Remarketing shall be paid as soon as practicable after the Remarketing Dealer has determined the Call Price and notified the Company of the Call Price, but in any case no later than the earlier of (x) three Business Days after written notification to the Company and (y) the Remarketing Date. The Remarketing Dealer shall promptly notify the Company of the Call Price for any Drs. Unavailable for Remarketing by telephone, confirmed in writing (which may include facsimile or other electronic transmission). The Call Price, absent manifest error, shall be binding and conclusive upon the parties hereto. (e) This Agreement shall not be subject to termination by the Company. Section 11. Remarketing Dealer's Performance; Duty of Care. The duties and obligations of the Remarketing Dealer shall be determined solely by the express provisions of this Agreement and the Indenture. No implied covenants or obligations of or against the Remarketing Dealer shall be read into this Agreement or the Indenture. In the absence of bad faith on the part of the Remarketing Dealer, the Remarketing Dealer may conclusively rely upon any document furnished to it, which purports to conform to the requirements of this Agreement and the Indenture, as to the truth of the statements expressed in any of such documents. The Remarketing Dealer shall be protected in acting upon any document or communication reasonably believed by it to have been signed, presented or made by the proper party or parties. The Remarketing Dealer shall incur no liability to the Company or to any beneficial owner or holder of Drs. in its individual capacity or as Remarketing Dealer for any action or failure to act in connection with the remarketing or otherwise, except to the extent finally judicially determined to be due primarily to its gross negligence or willful misconduct. 23 Section 12. 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 the conflicts of laws provisions thereof. Section 13. Term of Agreement. Unless otherwise terminated in accordance with the provisions hereof, this Agreement shall remain in full force and effect from the date hereof until the earlier of the first day thereafter on which no Drs. are outstanding or the completion of the remarketing of the Drs. Regardless of any termination of this Agreement pursuant to any of the provisions hereof, the obligations of the Company pursuant to Section 9 and - subsections 3(f), 4(h), 10(c) and 10(d) hereof shall remain operative and in ---- ---- ----- ----- full force and effect until fully satisfied. Section 14. Successors and Assigns. The rights and obligations of the Company hereunder may not be assigned or delegated to any other person without the prior written consent of the Remarketing Dealer. The rights and obligations of the Remarketing Dealer hereunder may not be assigned or delegated to any other person (other than an affiliate of the Remarketing Dealer) without the prior written consent of the Company. This Agreement shall inure to the benefit of and be binding upon the Company and the Remarketing Dealer and their respective successors and assigns, and will not confer any benefit upon any other person, partnership, association or corporation other than persons, if any, controlling the Remarketing Dealer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or any other indemnified party to the extent provided in Section 9 - hereof. The terms "successors" and "assigns" shall not include any purchaser of any Drs. merely because of such purchase. Section 15. Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. Section 16. Severability. 24 If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any or all jurisdictions because it conflicts with any provision of any constitution, statute, rule or public policy or for any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case, circumstance or jurisdiction, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever. Section 17. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Section 18. Amendments; Waivers. This Agreement may be amended or portions thereof may be waived by any instrument in writing signed by each of the parties hereto so long as this Agreement as amended or the provisions as so waived are not inconsistent with the Indenture in effect as of the date of any such amendment or waiver. Section 19. Notices. Unless otherwise specified, any notices, requests, consents or other communications given or made hereunder or pursuant hereto shall be made in writing (which may include facsimile or other electronic transmission) and shall be deemed to have been validly given or made when delivered or, if earlier, three days after it was mailed, registered or certified mail, return receipt requested and postage prepaid, addressed as follows: (a) to the Company: Rite Aid Corporation 30 Hunter Lane Camp Hill, Pennsylvania 17011 Attention: Chief Financial Officer Facsimile No.: 717-975-3764 copy to: General Counsel Facsimile No.: 717-760-7867 25 (b) to JPMSI: J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Attention: Syndicate Department Facsimile No.: (212) 648-5909 or to such other address as the Company or the Remarketing Dealer shall specify in writing. 26 IN WITNESS WHEREOF, each of the Company and the Remarketing Dealer has caused this Remarketing Agreement to be executed in its name and on its behalf by one of its duly authorized officers as of the date first above written. RITE AID CORPORATION By /s/ Frank M. Bergonzi ------------------------- Name: Frank Bergonzi Title: Exec. V.P. & CFO J.P. MORGAN SECURITIES INC. By /s/ John E. Simmons ------------------------------------- Name: John E. Simmons Title: V.P. 27 EX-4.3 4 EXCHANGE & REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.3 RITE AID CORPORATION $200,000,000 6% Dealer remarketable securities/SM1/ ("DRS./SM/") due 2013 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT September 22, 1998 J.P. Morgan Securities Inc. Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated c/o J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Ladies and Gentlemen: Rite Aid Corporation., a Delaware corporation (the "COMPANY"), proposes to issue and sell to J.P. Morgan Securities Inc. ("JPMSI"), Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated (collectively, the "INITIAL PURCHASERS"), upon the terms and subject to the conditions set forth in a purchase agreement dated September 17, 1998 (the "PURCHASE AGREEMENT"), $200,000,000 aggregate principal amount of its 6% Dealer remarketable securities/SM/ due 2013 ("DRS./SM/"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company agrees /1//"Dealer remarketable securities/SM/" and "Drs./SM/" are service marks of J.P. Morgan Securities Inc. with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Drs. and the Exchange Drs. (as defined herein) (collectively, the "HOLDERS"), as follows: 1. Registered Exchange Offer. The Company shall (i) prepare and, not ------------------------- later than 90 days following the date of original issuance of the Drs. (the "ISSUE DATE"), file with the Commission a registration statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Drs. (the "REGISTERED EXCHANGE OFFER") to issue and deliver to such Holders, in exchange for the Drs., a like aggregate principal amount of debt securities of the Company (the "EXCHANGE DRS.") that are identical in all material respects to the Drs., except for the transfer restrictions relating to the Drs., (ii) use its reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 180 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 210 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "EXCHANGE OFFER REGISTRATION PERIOD"). The Exchange Drs. will be issued under the same indenture (the "INDENTURE") between the Company and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "TRUSTEE"), as the Drs. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Drs. for Exchange Drs. (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Drs. that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Drs. in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate, and is not participating, in the distribution of the Exchange Drs.) and to trade such Exchange Drs. from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Drs., acquired for its own account as a result of market-making activities or other trading activities, for Exchange Drs. (an "EXCHANGING DEALER"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Drs. received by such Exchanging Dealer pursuant to the Registered Exchange Offer. In connection with the Registered Exchange Offer, the Company shall: -2- (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Drs. at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (a) accept for exchange all Drs. tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (b) deliver to the Trustee for cancellation all Drs. so accepted for exchange; and (c) cause the Trustee promptly to authenticate and deliver to each Holder, Exchange Drs. equal in principal amount to the Drs. of such Holder so accepted for exchange. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Drs.; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the earlier of 180 days from the close of the Registered Exchange Offer and the date on which all Exchanging Dealers have sold all Exchange Drs. held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker- dealer for use in connection with any resale of any Exchange Drs. for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture shall provide that the Drs. and the Exchange Drs. shall vote and consent together on all matters as to which the Indenture provides for voting and consent as one class and -3- that neither the Drs. nor the Exchange Drs. will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Drs. issued pursuant to the Registered Exchange Offer will accrue from the last interest payment date on which interest was paid on the Drs. surrendered in exchange therefor or, if no interest has been paid on the Drs., from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Drs. received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate and is not participating in the distribution of the Drs. or the Exchange Drs. within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable ------------------ interpretations thereof by the Commission's staff the Company is not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any Drs. validly tendered and not withdrawn pursuant to the Registered Exchange Offer are not exchanged for Exchange Drs. within 210 days after the Issue Date, or (iii) in the opinion of counsel for the Initial Purchasers, a registration statement must be filed or a prospectus must be delivered by the Initial Purchasers in connection with any offering or sale of Drs. because such Drs. represent an unsold allotment from the original offering thereof, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer, or (v) any Holder that participates in the Registered Exchange Offer does not receive freely transferable Exchange Drs. in exchange for tendered Drs., or (vi) the Company so elects, then the following provisions shall apply: (a) The Company shall use its reasonable best efforts to file as promptly as practicable (but in no event more than 30 days after so required or requested pursuant to this Section 2) with the Commission, and thereafter shall use its reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to -4- the offer and sale of the Transfer Restricted Drs. (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "SHELF REGISTRATION STATEMENT" and, together with any Exchange Offer Registration Statement, a "REGISTRATION STATEMENT"). (b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Drs. for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Drs. covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Drs. become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "SHELF REGISTRATION PERIOD"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Transfer Restricted Drs. covered thereby not being able to offer and sell such Transfer Restricted Drs. during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "HOLDERS' INFORMATION")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Additional Interest. (a) If (i) the applicable Registration ------------------- Statement is not filed with the Commission on or prior to 90 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 30 days after publication of the change in law or interpretation), (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 180 days after the Issue Date (or in the case of a Shelf Registration, as required by Section 2(a)), (iii) the Registered Exchange Offer is not consummated on or prior to 210 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective as required by Section 2(a) but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being again effective within 30 days or being succeeded within 30 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company will be obligated to pay additional interest ("ADDITIONAL INTEREST") to each Holder of -5- Transfer Restricted Drs., during the period of one or more such Registration Defaults, at a rate of 0.50% per annum on the principal amount of Transfer Restricted Drs. held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated with respect to all properly tendered Drs., (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective (or is superseded by another effective Shelf Registration Statement), as the case may be. Following the cure of all Registration Defaults, the accrual of Additional Interest will cease. As used herein, the term "TRANSFER RESTRICTED DRS." means (i) each Drs. until the date on which such Drs. has been exchanged for a freely transferable Exchange Drs. in the Registered Exchange Offer, (ii) each Drs. until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Drs. until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay Additional Interest to a Holder of Transfer Restricted Drs. if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company shall pay the Additional Interest due on the Transfer Restricted Drs. by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Drs., sums sufficient to pay the Additional Interest then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Drs. to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay Additional Interest shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the Additional Interest provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Drs. by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration ----------------------- Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts -6- to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post- effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) if known by the Company, of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Drs. or the Exchange Drs. for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Drs. included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). -7- (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Drs. included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Drs. in connection with the offer and sale of the Transfer Restricted Drs. covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post- effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company will use its reasonable best efforts to register or qualify, or cooperate with the Holders of Drs., Exchange Drs. included therein and their respective counsel in connection with the registration or qualification of, such Drs. or Exchange Drs. for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Drs. or Exchange Drs. covered by such Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) The Company will cooperate with the Holders of Drs. or Exchange Drs. to facilitate the timely preparation and delivery of certificates representing Drs., Exchange Drs. to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing prior to sales of Drs. or Exchange Drs. pursuant to such Registration Statement. (j) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company is required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the -8- Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Drs. or Exchange Drs. from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Drs. and the Exchange Drs. as the case may be, and provide the applicable trustee with printed certificates for the Drs. or the Exchange Drs. as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company will cause the Indenture, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Drs. to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Drs. as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Drs. of any Holder that fails to furnish such information within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Drs. to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Drs. that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Drs. until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "ADVICE") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "EFFECTIVENESS PERIOD"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Drs. covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). -9- (p) In the case of a Shelf Registration Statement, the Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Drs. or Exchange Drs. being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Drs. or Exchange Drs. pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Drs. and Exchange Drs. being sold and any underwriter participating in any disposition of Drs. or Exchange Drs. pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "INSPECTOR") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Drs. and Exchange Drs. being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel (which may be the Company's general counsel) to deliver an opinion relating to the Shelf Registration Statement and the Drs. or Exchange Drs., as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Drs. and Exchange Drs. being sold, their Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company will bear all expenses incurred in --------------------- connection with the performance of its obligations under Sections 1, 2, 3 and 4 and, in the case of a Shelf Registration Statement, the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Drs. and the Exchange Drs. to be sold pursuant to each Registration Statement (the "SPECIAL COUNSEL") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement --------------- or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Company shall indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against -10- any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Drs. or Exchange Drs.), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Drs. or Exchange Drs. to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Drs. or Exchange Drs. to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (b) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to -11- defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Drs. or Exchange Drs. pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against -12- any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability or claims that were raised or could have been raised by such plaintiff in such proceeding. 7. Contribution. If the indemnification provided for in Section 6 is ------------ unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company from the offering and sale of the Drs., on the one hand, and a Holder with respect to the sale by such Holder of Drs. or Exchange Drs., on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Drs. (before deducting expenses) received by or on behalf of the Company as set forth in the table on the cover of the Offering Memorandum, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Drs. or Exchange Drs., on the other. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company or information supplied by the Company on the one hand or to any Holders' Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Drs. or Exchange Drs. shall not be required to contribute any amount in excess of the amount by which the total price at which the Drs. or Exchange Drs. sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. 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. -13- 8. Rules 144 and 144A. So long as Transfer Restricted Drs. remain ------------------ outstanding, the Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Drs., make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. So long as Transfer Restricted Drs. remain outstanding, the Company covenants that it will take such further action as any Holder of Transfer Restricted Drs. may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Drs. without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). So long as Transfer Restricted Drs. remain outstanding, upon the written request of any Holder of Transfer Restricted Drs., the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Drs. -------------------------- covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Drs. included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Drs. on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this ------------- ---------------------- Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Drs. and the Exchange Drs., taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Drs. are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Drs. and the Exchange Drs. being sold by such Holders pursuant to such Registration Statement. -14- (b) Notices. All notices and other communications provided for or -------- permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to the Initial Purchasers; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; and (3) if to the Company, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the ---------------------- Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of ------------ counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Definition of Terms. For purposes of this Agreement, (a) the term ------------------- "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) Remedies. In the event of a breach by the Company or by any Holder of -------- any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company of its obligations under Sections 1 or 2 -15- hereof for which Additional Interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. The Company represents, warrants and -------------------------- agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement granting any registration rights with respect to any of its debt securities to any person, except for such agreements where the Company has complied and is in compliance with its registration obligations to date, and (iii) without limiting the generality of the foregoing, so long as Transfer Restricted Drs. remain outstanding, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Drs., it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its ----------------------------- security holders (other than the Holders of Transfer Restricted Drs. in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Drs.. (k) Severability. The remedies provided herein are cumulative and not ------------ exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. Please confirm that the foregoing correctly sets forth the agreement among the Company and the Initial Purchasers. -16- Very truly yours, RITE AID CORPORATION By /s/ Frank Bergonzi ---------------------------- Name: Frank Bergonzi Title: Executive V.P. & CFO Accepted: J.P. MORGAN SECURITIES INC. GOLDMAN, SACHS & CO. MORGAN STANLEY & CO. INCORPORATED By: J.P. Morgan Securities Inc. By /s/ John E. Simmons ----------------------- Name: John E. Simmons Title: V.P. -17- ANNEX A Each broker-dealer that receives Exchange Drs. for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Drs.. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Drs. received in exchange for Drs. where such Drs. were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". -18- ANNEX B Each broker-dealer that receives Exchange Drs. for its own account in exchange for Drs., where such Drs. were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Drs. See "Plan of Distribution". -19- ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Drs. for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Drs. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker- dealer in connection with resales of Exchange Drs. received in exchange for Drs. where such Drs. were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _______________, 199_, all dealers effecting transactions in the Exchange Drs. may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Drs. by broker-dealers. Exchange Drs. received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Drs. or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Drs. Any broker- dealer that resells Exchange Drs. that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Drs. may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Drs. and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Drs.) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Drs. (including any broker- dealers) against certain liabilities, including liabilities under the Securities Act. -20- ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Drs. If the undersigned is a broker-dealer that will receive Exchange Drs. for its own account in exchange for Drs. that were acquired as a result of market- making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Drs.; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. -21- EX-5 5 OPINION OF MORGAN, LEWIS & BOCKIUS LLP EXHIBIT 5 Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 November 6, 1998 Rite Aid Corporation 30 Hunter Lane Camp Hill, Pennsylvania 17011-2404 Re: Registration Statement on Form S-4 relating to $200,000,000 in 6% Dealer remarketable securities/SM/ ("Drs./SM/") due 2013 ------------------------------------------------------------------------ Ladies and Gentlemen: As special counsel to Rite Aid Corporation, a Delaware corporation (the "Company"), we are rendering this opinion as to the legality of the $200,000,000 aggregate principal amount of the Company's 6% Dealer remarketable securities/SM/ (the "Drs./SM/") due October 1, 2013 to be registered pursuant to the above-captioned Registration Statement on Form S-4 (the "Registration Statement") filed on the date hereof by the Company with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules and regulations promulgated thereunder (the "Rules"). Except as otherwise defined herein, capitalized terms are used as defined in the Registration Statement. In connection herewith, we have examined originals or copies of (i) the Registration Statement, (ii) the Indenture, dated as of September 22, 1998 (the "Indenture"), between the Company and Harris Trust and Savings Bank, as trustee (the "Trustee"), (iii) the Restated Certificate of Incorporation and By-laws of the Company, as amended to date, and (iv) records of certain corporate proceedings of the Company relating to, among other things, the Drs. In addition, we have made such other examinations of law and fact as we considered necessary in order to form a basis for the opinion hereinafter expressed. In our examination of the aforesaid documents, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any of the documents, the authenticity of all documents submitted to us as originals, the Rite Aid Corporation November 6, 1998 Page 2 conformity to the original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies and the authenticity of all such documents. In rendering the opinion set forth below, we have also assumed that (i) the Registration Statement, and any amendments thereto, will have become effective, (ii) all Drs. will have been issued in compliance with applicable federal and state securities laws, (iii) the Trustee is validly existing with all requisite power and authority to enter into the Indenture and perform its obligations thereunder, (iv) the Indenture has been duly executed and delivered by the Trustee and the Indenture will have been qualified under the Trust Indenture Act of 1939, as amended, and (v) the Drs. will have been duly executed and authenticated by the Trustee, and issued and delivered against receipt of the consideration therefor approved by the Company, in each case as provided in the Indenture. Based upon and subject to the foregoing, we are of the opinion that the Drs., when so issued and delivered, will constitute legal, valid and binding obligations of the Company and will be entitled to the benefits of the Indenture (subject to applicable bankruptcy, insolvency, reorganization, receivership, arrangement, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights generally and general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law). Our opinion expressed above is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware. We hereby consent to the use of our name in the Registration Statement, in the related prospectus as the same appears under the caption "Legal Matters" and in any supplement to such prospectus, and to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Morgan, Lewis & Bockius LLP EX-8 6 OPINION OF MORGAN, LEWIS & BOCKIUS LLP EXHIBIT 8 Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 November 6, 1998 Rite Aid Corporation 30 Hunter Lane Camp Hill, Pennsylvania 17011 Re: Rite Aid Corporation Registration Statement on Form S-4 ---------------------------------- Dear Sirs: We have acted as United States tax counsel to Rite Aid Corporation (the "Company") in connection with the preparation of the above-referenced Registration Statement, and the prospectus forming a part thereof (the "Prospectus"), relating to the issuance and sale by the Company of its 6% Dealer remarketable securities (SM) due October 1, 2013 ("Drs. (SM)"). Unless otherwise defined herein, capitalized terms used herein have the respective meanings ascribed to those terms in the Prospectus. In arriving at the opinion expressed below, we have examined and relied upon the following documents: (a) the Prospectus; (b) the Purchase Agreement, dated September 17, 1998, by and among the Company, and J.P. Morgan Securities Inc. ("JPMSI"), Goldman Sachs & Co. and Morgan Stanley & Co. Incorporated (the "Initial Purchasers"); (c) the Indenture, dated as of September 22, 1998, between the Company and Harris Trust and Savings Bank, as Trustee; (d) the Remarketing Agreement, dated as of September 22, 1998, between the Company and JPMSI; and (e) the Exchange and Registration Rights Agreement, dated as of September 22, 1998, by and among the Company and the Initial Purchasers. We have also read and relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records of the Company and such certificates and representations of officers and representatives of the Company, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinion expressed below. In our examination, we have assumed the authenticity of original documents, the accuracy of copies and the genuineness of signatures. We understand and assume that (i) each agreement represents the valid and binding obligation of the respective parties thereto, enforceable in accordance with its respective terms, and the entire agreement between the parties with respect to the subject matter thereof, (ii) the parties to each agreement have complied, and will comply, with all of their respective covenants, agreements and undertakings contained therein and (iii) the transactions provided for by each agreement were and will be carried out in accordance with their terms. Our opinion is based upon existing federal income tax laws, regulations, administrative pronouncements and judicial decisions. All such authorities are subject to change, either prospectively or retroactively. No assurance can be provided as to the effect of any such change upon our opinion. Rite Aid Corporation November 6, 1998 Page 3 The opinion set forth herein has no binding effect on the Internal Revenue Service or the courts. No assurance can be given that, if the matter were contested, a court would agree with the opinion set forth herein. Based upon the foregoing, we advise you that in our opinion, except as to factual matters and subject to the qualifications and limitations set out in the Prospectus, the statements contained in the Prospectus under the caption "Certain United States Federal Income Tax Considerations" fairly summarize the material United States federal income tax considerations of an investment in the Drs. In giving the foregoing opinion, we express no opinion other than as to the federal income tax law of the United States of America. We are furnishing this letter in our capacity as United States tax counsel to the Company, and this letter is solely for the benefit of the Company. This letter is not to be used, circulated, quoted or otherwise referred to for any other purpose, except as set forth below. We hereby consent to the reference to our firm under the caption "Certain United States Federal Income Tax Considerations" in the Prospectus. Very truly yours, /s/ Morgan, Lewis & Bockius LLP EX-12 7 RATIO OF EARNINGS TO FIXED CHANGES EXHIBIT 12 RITE AID CORPORATION AND SUBSIDIARIES STATEMENTS RE COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES TWENTY-SIX WEEKS ENDED AUGUST 29, 1998 AND YEARS ENDED FEBRUARY 28, 1998, MARCH 1, 1997, MARCH 2, 1996, MARCH 4, 1995, AND FEBRUARY 26, 1994 (Dollar Amounts in Thousands)
Twenty-six Weeks Year Year Year Year Year Ended Ended Ended Ended Ended Ended August 29, Feb. 28, March 1, March 2, March 4, Feb. 26, 1998 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- --------- Fixed Charges Interest Expense $ 83,228 $ 159,752 $ 96,473 $ 68,341 $ 42,300 $ 28,683 Interest Portion(1) of Net Rental Expense 66,993 111,943 66,067 52,080 40,424 40,427 --------- --------- --------- --------- --------- --------- Fixed Charges Before Capitalized Interest 150,221 271,695 162,540 120,421 82,724 69,110 Capitalized Interest 3,843 3,834 1,897 1,948 373 217 --------- --------- --------- --------- --------- --------- Total Fixed Charges $ 154,064 $ 275,529 $ 164,437 $ 122,369 $ 83,097 $ 69,327 ========= ========= ========= ========= ========= ========= Earnings Income\(Loss) Before Extraordinary Loss and Income Taxes $ (3,026)(4) $ 530,041 $ 258,927(3) $ 256,202 $ 231,464 $ 45,670(2) Fixed Charges Before Capitalized Interest 150,221 271,695 162,540 120,421 82,724 69,110 --------- --------- --------- --------- --------- --------- Total Adjusted Earnings $ 147,195 $ 801,736 $ 421,467 $ 376,623 $ 314,188 $ 114,780 ========= ========= ========= ========= ========= ========= Ratio of Earnings to Fixed Charges 0.96 2.91 2.56 3.08 3.78 1.66 ========= ========= ========= ========= ========= =========
(1) The interest portion of the net rental expense is estimated to be equal to one-third of the minimum rental expense for the period. (2) Income before extraordinary loss and income taxes for fiscal year 1994 includes a $149,196,000 one-time, pre-tax provision for corporate restructuring and other charges. (3) Income before extraordinary loss and income taxes for fiscal year 1997 includes a $68,057,000 one-time, pre-tax charge for nonrecurring and other charges. (4) Loss before extraordinary loss and income taxes for twenty-six weeks ended August 29, 1998 includes a $289,678,000 pre-tax charge for store closings and other charges. EX-15 8 UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15 ---------- Rite Aid Corporation Camp Hill, Pennsylvania Gentlemen: Re: Registration Statement of Rite Aid Corporation on Form S-4 With respect to the subject registration statement, we acknowledge our awareness of the use therein of our reports dated June 30, 1998 and October 12, 1998 related to our reviews of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not considered part of a registration statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. Very truly yours, /s/ KPMG Peat Marwick LLP Harrisburg, Pennsylvania November 5, 1998 EX-23.3 9 CONSENT OF KPMG EXHIBIT 23.3 ------------ Consent of Independent Certified Public Accountants The Board of Directors Rite Aid Corporation We consent to the use of our audit reports dated April 14, 1998 on the consolidated financial statements and schedule of Rite Aid Corporation and subsidiaries as of February 28, 1998 and March 1, 1997, and for each of the years in the three-year period then ended incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. KPMG Peat Marwick LLP Harrisburg, Pennsylvania November 5, 1998 EX-25.1 10 STATEMENT OF ELIGIBILITY EXHIBIT 25 ---------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 Statement of Eligibility Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) _______________ HARRIS TRUST AND SAVINGS BANK (Name of Trustee) Illinois 36-1194448 (I.R.S. Employer (State of Incorporation) Identification No.) 111 West Monroe Street, Chicago, Illinois 60603 (Address of principal executive offices) Daniel G. Donovan, Harris Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois, 60603 312-461-2908 (Name, address and telephone number for agent for service) Rite Aid Corporation (Name of Obligor) Delaware 23-1614034 (I.R.S. Employer (State of Incorporation) Identification No.) 30 Hunter Lane Camp Hill, Pennsylvania 17011 (Address of principal executive offices) 6% Dealer remarketable securities, due 2013 (Title of indenture securities) 1. GENERAL INFORMATION. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Commissioner of Banks and Trust Companies, State of Illinois, Springfield, Illinois; Chicago Clearing House Association, 164 West Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance Corporation, Washington, D.C.; The Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Harris Trust and Savings Bank is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee, describe each such affiliation. The Obligor is not an affiliate of the Trustee. 3. thru 15. NO RESPONSE NECESSARY 16. LIST OF EXHIBITS. 1. A copy of the articles of association of the Trustee as now in effect which includes the authority of the trustee to commence business and to exercise corporate trust powers. A copy of the Certificate of Merger dated April 1, 1972 between Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which constitutes the articles of association of the Trustee as now in effect and includes the authority of the Trustee to commence business and to exercise corporate trust powers was filed in connection with the Registration Statement of Louisville Gas and Electric Company, File No. 2-44295, and is incorporated herein by reference. 2. A copy of the existing by-laws of the Trustee. A copy of the existing by-laws of the Trustee was filed in connection with the Registration Statement of Commercial Federal Corporation, File No. 333-20711, and is incorporated herein by reference. 3. The consents of the Trustee required by Section 321(b) of the Act. (included as Exhibit A on page 2 of this statement) 4. A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. (included as Exhibit B on page 3 of this statement) SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the laws of the State of Illinois, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 6th day of November, 1998. HARRIS TRUST AND SAVINGS BANK By: /s/ DGDonovan ----------------------------- D. G. Donovan Assistant Vice President EXHIBIT A The consents of the Trustee required by Section 321(b) of the Act. Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that reports of examinations of said trustee by Federal and State authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. HARRIS TRUST AND SAVINGS BANK By: /s/ DGDonovan ----------------------------- D.G. Donovan Assistant Vice President 2 EXHIBIT B Attached is a true and correct copy of the statement of condition of Harris Trust and Savings Bank as of March 31, 1998, as published in accordance with a call made by the State Banking Authority and by the Federal Reserve Bank of the Seventh Reserve District. HARRIS BANK Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of business on March 31, 1998, a state banking institution organized and operating under the banking laws of this State and a member of the Federal Reserve System. Published in accordance with a call made by the Commissioner of Banks and Trust Companies of the State of Illinois and by the Federal Reserve Bank of this District. Bank's Transit Number 71000288
THOUSANDS ASSETS OF DOLLARS Cash and balances due from depository institutions: Non-interest bearing balances and currency and coin..................... $1,039,854 Interest bearing balances............................................... $290,921 Securities:.................................................................... a. Held-to-maturity securities $0 b. Available-for-sale securities $4,266,201 Federal funds sold and securities purchased under agreements to resell $82,000 Loans and lease financing receivables: Loans and leases, net of unearned income................................ $8,726,578 LESS: Allowance for loan and lease losses.............................. $101,318 ----------- Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b).................................................... $8,625,260 Assets held in trading accounts................................................ $120,674 Premises and fixed assets (including capitalized leases)....................... $219,475 Other real estate owned........................................................ $699 Investments in unconsolidated subsidiaries and associated companies............ $120 Customer's liability to this bank on acceptances outstanding................... $46,688 Intangible assets.............................................................. $266,411 Other assets................................................................... $773,386 ------------------------- TOTAL ASSETS $15,731,689 =========================
3
LIABILITIES Deposits: In domestic offices.......................................................... $8,270,648 Non-interest bearing.................................................... $2,684,862 Interest bearing........................................................ $5,585,786 In foreign offices, Edge and Agreement subsidiaries, and IBF's............... $1,307,928 Non-interest bearing.................................................... $23,432 Interest bearing........................................................ $1,284,496 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds purchased & securities sold under agreements to repurchase....... $3,599,510 Trading Liabilities $74,487 Other borrowed money:.......................................................... a. With remaining maturity of one year or less $471,692 b. With remaining maturity of more than one year $0 Bank's liability on acceptances executed and outstanding $46,688 Subordinated notes and debentures.............................................. $325,000 Other liabilities.............................................................. $386,442 TOTAL LIABILITIES $14,482,395 ========================= EQUITY CAPITAL Common stock................................................................... $100,000 Surplus........................................................................ $601,026 a. Undivided profits and capital reserves..................................... $545,185 b. Net unrealized holding gains (losses) on available-for-sale securities $2,802 ------------------------- TOTAL EQUITY CAPITAL $1,249,294 ========================= Total liabilities, limited-life preferred stock, and equity capital............ $15,731,689 =========================
I, Pamela Piarowski, Vice President of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. PAMELA PIAROWSKI 1/30/98 We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and, to the best of our knowledge and belief, has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and the Commissioner of Banks and Trust Companies of the State of Illinois and is true and correct. EDWARD W. LYMAN, ALAN G. McNALLY, RICHARD E. TERRY Directors. 4 EX-99.1 11 LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL OFFER TO EXCHANGE ALL OUTSTANDING 6% DEALER REMARKETABLE SECURITIES /SM/ ("DRS./SM/") DUE 2013 FOR 6% DEALER REMARKETABLE SECURITIES/SM/ ("DRS./SM/") DUE 2013 OF RITE AID CORPORATION - -------------------------------------------------------------------------------- THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: HARRIS TRUST AND SAVINGS BANK Facsimile Transmission Number: By Hand/Overnight Delivery: By Registered or Certified Mail: - -------------------------------- ------------------------------- -------------------------------- (For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank (212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company of New York of New York 88 Pine Street P.O. Box 1010 For General Information 19th Floor Wall Street Station ----------------------- New York, NY 10005 New York, NY 10268-1010 and to ------ Confirm Receipt of Facsimile by - ------------------------------- Telephone: ---------- (212) 701-7624
(Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand or by overnight courier) DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE Drs. FOR THEIR RESTRICTED Drs. PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR RESTRICTED Drs. TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. The undersigned acknowledges receipt of the prospectus dated _______, 1998 (the "Prospectus") of Rite Aid Corporation, a Delaware corporation (the "Company"), and this Letter of Transmittal (this "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $200,000,000 of its 6% Dealer remarketable securities/SM/ ("Drs./SM/") due October 1, 2013 (the "Exchange Drs.") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for an identical principal amount of its 6% Drs. due October 1, 2013 (the "Restricted Drs.," and together with the Exchange Drs., the "Drs.") outstanding on the date hereof. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. For each Restricted Drs. accepted for exchange and not validly withdrawn, the holder of such Restricted Drs. will receive an Exchange Drs. having a principal amount equal to that of the surrendered Restricted Drs. Restricted Drs. accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Restricted Drs. whose Restricted Drs. are accepted for exchange will not receive any payment in respect of - ---------------------- "Dealer remarketable securities/SM/" and "Drs./SM/" are service marks of J.P. Morgan Securities Inc. interest on such Restricted Drs. otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. Interest on the Exchange Drs. will accrue from the last interest payment date on which interest was paid on the Restricted Drs. surrendered in exchange therefor or, if no interest has been paid on the Restricted Drs., from the date of original issue of the Restricted Drs. The Company expressly reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify the holders of the Restricted Drs. of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter is to be used by a holder of Restricted Drs. if: (i) tender of Restricted Drs. is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book- Entry Transfer Facility") pursuant to the procedures set forth in the Prospectus under "The Exchange Offer -- Book Entry Transfer" by any financial institution that is a participant in the Book-Entry Transfer Facility and whose name appears on a security position listing as the owner of Restricted Drs. or (ii) tender of Restricted Drs. is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "holder" with respect to the Exchange Offer means any person whose Restricted Drs. are held of record by the Book-Entry Transfer Facility who desires to deliver such Restricted Drs. by book-entry transfer at the Book-Entry Transfer Facility. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Questions and requests for assistance or for additional copies of the Prospectus, this Letter and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 8 herein. Listed below are the Restricted Drs. to which this Letter relates. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR RESTRICTED DRS. MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW
- ----------------------------------------------------------------------------------------------------------------- DESCRIPTION OF RESTRICTED DRS. - ----------------------------------------------------------------------------------------------------------------- 1 2 3 - ----------------------------------------------------------------------------------------------------------------- Name(s) and Address(es) of Registered Holder(s) Aggregate Principal Principal Amount (Please fill in, if blank) Amount of Restricted Drs. Tendered* - ----------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ Total Total - ----------------------------------------------------------------------------------------------------------------- * Unless otherwise indicated in this column, any tendering holder of Restricted Drs. will be deemed to have tendered ALL of the Restricted Drs. indicated in column 2. If the space provided above is inadequate, the principal amount of Restricted Drs. should be listed on a separate signed schedule affixed hereto. Restricted Drs. tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. - -----------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS To be completed ONLY if Exchange Drs. are to be registered in the name of someone other than the undersigned or if Restricted Drs. which are not tendered or not accepted for exchange are to be credited to an account maintained by the Book-Entry Transfer Facility other than the account indicated above. Register Exchange Drs. and/or Restricted Drs. in the name of: Name_____________________________________________________ (PLEASE PRINT) Address__________________________________________________ _________________________________________________________ (INCLUDE ZIP CODE) _________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) - --------------------------------------------------------- [ ] CHECK HERE IF TENDERED RESTRICTED DRS. ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution:____________________________________________ Transfer Facility Book-Entry Account No.:_________________________________ Transaction Code No.:_____________________________________________________ [ ] CHECK HERE IF TENDERED RESTRICTED DRS. ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s):__________________________________________ Window Ticket Number (if any):____________________________________________ Date of Execution of Notice of Guaranteed Delivery:_______________________ Account Number: _________________ Transaction Code Number:_______________ [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:_____________________________________________________________________ Address:__________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Drs. If the undersigned is a broker-dealer that will receive Exchange Drs. for its own account in exchange for Restricted Drs. that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a Prospectus in connection with any resale of such Exchange Drs.; however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Ladies and Gentlemen: Subject to the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Restricted Drs. indicated above. Subject to, and effective upon, the acceptance for exchange of the Restricted Drs. tendered in accordance with this Letter, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to such Restricted Drs. tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company and as Trustee under the Indenture for the Restricted Drs. and Exchange Drs.) with respect to the tendered Restricted Drs. with full power of substitution to (i) transfer ownership of such Restricted Drs. on the account books maintained by the Book- Entry Transfer Facility and deliver all accompanying evidence of transfer and authenticity to, or upon the order of, the Company and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Restricted Drs., all in accordance with the terms and subject to the conditions of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Restricted Drs. tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that (i) any Exchange Drs. acquired in exchange for Restricted Drs. tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Drs., whether or not such person is the holder, (ii) neither the holder of such Restricted Drs. nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Drs., (iii) if the holder of Restricted Drs. is not a broker-dealer, or is a broker-dealer but will not receive Exchange Drs. for its own account in exchange for Restricted Drs., neither the holder nor any such other person is engaged in or intends to engage in the distribution of such Exchange Drs. and (iv) neither the holder of such Restricted Drs. nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the Exchange Drs. issued in exchange for the Restricted Drs. pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Drs. are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Drs. However, the Company does not intend to request the SEC to consider, and the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Drs. If any holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Drs. to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction and that such a resale transaction must be covered by an effective registration statement containing the selling security holder information required by the applicable regulation. If the undersigned is a broker-dealer that will receive Exchange Drs. for its own account in exchange for Restricted Drs., that were acquired by it as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Drs.; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that its is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents reasonably deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Restricted Drs. tendered hereby. All authority conferred or agreed to be conferred in this Letter shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the undersigned's heirs, personal representatives, successors and assigns, trustees in bankruptcy or other legal representatives of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth under the caption "The Exchange Offer -- Withdrawal Rights" in the Prospectus. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Restricted Drs. for exchange when, as and if the Company has given oral or written notice thereof to the Exchange Agent with written confirmation of any oral notice to be given promptly thereafter. The undersigned understands that tenders of Restricted Drs. pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering Restricted Drs." in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Issuance Instructions," please issue and register the Exchange Drs. issued in exchange for the Restricted Drs. accepted for exchange and register any Restricted Drs. not tendered or not exchanged in the name(s) of the undersigned by credit to the undersigned's account at the Book-Entry Transfer Facility. In the event that the "Special Issuance Instructions" are completed, please issue and register the Exchange Drs. issued in exchange for the Restricted Drs. accepted for exchange, and register any Restricted Drs. not tendered or not exchanged, in the name(s) of the person(s) so indicated by credit to such person's account at the Book-Entry Transfer Facility. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" to transfer any Restricted Drs. from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Restricted Drs. so tendered. Holders of Restricted Drs. who are unable to deliver their confirmation of the book-entry tender of their Restricted Drs. into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Restricted Drs. according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 1. PLEASE SIGN HERE WHETHER OR NOT RESTRICTED DRS. ARE BEING TENDERED HEREBY X______________________________________ _______________________ DATE X______________________________________ _______________________ SIGNATURE(S) OF REGISTERED HOLDER(S) DATE OR AUTHORIZED SIGNATORY Area Code and Telephone Number:___________________ The above lines must be signed by the registered holder(s) of Restricted Drs. as their name(s) appear(s) as such on a security position listing as the owner of Restricted Drs., or by person(s) authorized to become registered holder(s). If Restricted Drs. to which this Letter of Transmittal relates are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority as to act. See Instruction 3 regarding the completion of this Letter of Transmittal. Name(s):________________________________________________________________________ (PLEASE PRINT) Capacity:_______________________________________________________________________ Address:________________________________________________________________________ (INCLUDE ZIP CODE) Signature(s) Guaranteed by an Eligible Institution (as defined): (If required by Instruction 3) _______________________________________________________________________________ (AUTHORIZED SIGNATURE) _______________________________________________________________________________ (TITLE) _______________________________________________________________________________ (NAME OF FIRM) _______________________________________________________________________________ (ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF FIRM) Date:_______________________________, 1998 _______________________________________________________________________________ INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. DELIVERY OF THIS LETTER AND Drs.; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders (which term, for purposes of the Exchange Offer means any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Restricted Drs.) if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer." A Book-Entry Confirmation, as well as this properly completed and duly executed Letter (or manually signed facsimile hereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to 5:00 p.m., New York City time, on the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Restricted Drs. tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. If a registered holder of the Restricted Drs. desires to tender such Restricted Drs. and time will not permit such holder's Letter of Transmittal or other required documents to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly competed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile and transmission, mail or hand delivery), setting forth the name and address of the holder of Restricted Drs. and the amount of Restricted Drs. tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, a Book-Entry Confirmation and all other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) a Book-Entry Confirmation and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Restricted Drs. and all other required documents is at the election and risk of the tendering holders, and the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Restricted Drs. are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. 2. SIGNATURES ON THIS LETTER; GUARANTEE OF SIGNATURES. If any tendered Restricted Drs. are owned of record by two or more joint owners, all such owners must sign this Letter. If this Letter or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. In the event that signatures on this Letter are required to be guaranteed, such guarantees must be by a firm that is a member or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program, or by an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Restricted Drs. are tendered: (i) by a registered holder of Restricted Drs. who has not completed the box entitled "Special Issuance Instructions" on this Letter; or (ii) for the account of an Eligible Institution. 3. SPECIAL ISSUANCE AND REGISTRATION INSTRUCTIONS. Tendering holders of Restricted Drs. may request that Restricted Drs. not exchanged be credited to an account maintained at the Book-Entry Transfer Facility designated by such holder hereon. If no such instructions are given, such Restricted Drs. not exchanged will be returned to the name of the person signing this Letter. 4. TAX IDENTIFICATION NUMBER. United States federal income tax law may require that a tendering holder whose Restricted Drs. are accepted for exchange provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the United States Internal Revenue Service (the "IRS"). In addition, such tendering holder may be subject to backup withholding tax in an amount equal to 31% of all reportable payments made after the exchange. If such withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Restricted Drs. (including, among others, all corporations) are not subject to these backup withholding requirements. See the enclosed Guidelines For Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for additional instructions. To prevent backup withholding tax, each tendering holder of Restricted Drs. should provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct. If the tendering holder of Restricted Drs. is a nonresident alien or foreign entity not subject to backup withholding tax, such holder should provide a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Restricted Drs. are held in more than one name or are not held in the name of the actual owner, such holder should consult the Guidelines for information on which TIN to report. 5. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable to the transfer of Exchange Drs. in exchange for Restricted Drs. pursuant to the Exchange Offer. If, however, Exchange Drs. or Restricted Drs. not tendered or not accepted are to be registered in the name of any person other than the registered holder of the Restricted Drs. tendered hereby, or if tendered Restricted Drs. are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Restricted Drs. to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 5, it will not be necessary for transfer tax stamps to be affixed to the Restricted Drs. specified in this letter. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Restricted Drs., by execution of this Letter, shall waive any right to receive notice of the acceptance of their Restricted Drs. for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Restricted Drs., nor shall any of them incur any liability for failure to give any such notice. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above. - -------------------------------------------------------------------------------- Name (if joint names, list first and circle the name of the person or entity whose number you enter below) - -------------------------------------------------------------------------------- Business Name (Sole proprietors see the instructions in the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines")) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- City, State and Zip Code - -------------------------------------------------------------------------------- PART I - TAXPAYER IDENTIFICATION NUMBER Enter your taxpayer identification number in the appropriate box. For individuals, this is your social security number. For sole SUBSTITUTE FORM W-9 proprietors, see the instructions in the Department of the Treasury Guidelines. For other entities, it is your Internal Revenue Service employer identification number. If you do not have a number, see "Obtaining a Number" in Request for Taxpayer the Guidelines. Identification Number and Certification Note: If the account is in more than one - --------------------------------- name, see the chart on page 1 of the Guidelines on whose number to enter. ---------------------------------- Social Security Number ---------------------------------- OR ---------------------------------- Employer Identification Number ---------------------------------- -------------------------------------------- PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE INSTRUCTIONS IN THE GUIDELINES) - ------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. SIGNATURE:------------------------------------ DATE:-------------, 1998 NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF CERTAIN PAYMENTS MADE TO YOU. PLEASE REVIEW THE GUIDELINES FOR ADDITIONAL DETAILS. - ------------------------------------------------------------------------------- EX-99.2 12 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Rite Aid Corporation (the "Company") made pursuant to the Prospectus, dated _____, 1998 (the "Prospectus"), if the procedure for book- entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Company prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. This form may be delivered or transmitted by facsimile transmission, mail or hand delivery to Harris Trust and Savings Bank (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Restricted Drs. pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. Delivery To: HARRIS TRUST AND SAVINGS BANK, EXCHANGE AGENT Facsimile Transmission Number: By Hand/Overnight Delivery By Registered or Certified Mail: - ------------------------------ -------------------------- -------------------------------- (For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank (212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company of New York of New York For General Information 88 Pine Street P.O. Box 1010 ----------------------- 19th Floor Wall Street Station and to New York, NY 10268-1010 New York, NY 10005 ------ Confirm Receipt of Facsimile by ------------------------------- Telephone: ---------- (212) 701-7624
(Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand or by overnight courier) Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Restricted Drs. set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Outstanding Drs. Tendered:/*/ $-------------------------------------------------- Provide account number for Restricted Drs. to be delivered by book-entry transfer to the Depository Trust Company. Account Number ------------------------------------ - ------------------------- /*/Must be in denominations of principal amount of $1,000 and any integral multiple thereof. ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED. PLEASE SIGN HERE X_______________________________________________________________________________ X_______________________________________________________________________________ Signature(s) of Owner(s) Date or Authorized Signatory Area Code and Telephone Number: Must be signed by the holder(s) of Restricted Drs. as their name(s) appear(s) on a security position listing or by person(s) authorized to become registered holder(s) by documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or the person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s):________________________________________________________________________ Capacity:_______________________________________________________________________ Address(es):____________________________________________________________________ __________________________________________________________________________ GUARANTEE The undersigned, a member or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program, on an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees that timely confirmation of the book-entry transfer of such Restricted Drs. into the Exchange Agent's account at the Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures" section of the Prospectus, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three business days after the date of the delivery hereof. Name of Firm:----------------------------------------------------------------- Authorized Signature:--------------------------------------------------------- Title:------------------------------------------------------------------------ Name:------------------------------------------------------------------------- Address:---------------------------------------------------------------------- (Please Type or Print) Area Code and Tel. No.-------------------------------------------------------- Dated:------------------------------------------------------------------------ -----END PRIVACY-ENHANCED MESSAGE-----