-----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, PgF498tUePUOkFHD3cKaNLHkM2O0GXt62glgx1MmVMUQwhIgZkUTfEMheindSt+G 2JFMsIyVLvqV/t5WU1nmzA== 0000950172-00-000738.txt : 20000412 0000950172-00-000738.hdr.sgml : 20000412 ACCESSION NUMBER: 0000950172-00-000738 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000411 ITEM INFORMATION: FILED AS OF DATE: 20000411 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: 8-K SEC ACT: SEC FILE NUMBER: 001-05742 FILM NUMBER: 598188 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 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 April 11, 2000 (Date of earliest event reported) RITE AID CORPORATION. (Exact Name of Registrant as Specified in its Charter) Delaware 1-5742 23-1614034 (State or Other (Commission (IRS Employer Jurisdiction of File Number) Identification Incorporation) Number) 30 Hunter Lane, Camp Hill, Pennsylvania 17011 (Address of Principal Offices, including zip code) (717) 761-2633 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS On April 11, 2000, Rite Aid Corporation issued a press release announcing its receipt of a commitment letter, both of which are attached hereto as exhibits and incorporated herein by reference. ITEM 7. EXHIBITS 4.1 Commitment Letter dated April 10, 2000. 99.1 Press Release dated April 11, 2000. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. RITE AID CORPORATION Dated: April 11, 2000 By: /s/ Elliot S. Gerson ___________________________________ Name: Elliot S. Gerson Title: Senior Executive Vice President and General Counsel EXHIBIT INDEX Exhibit Number Description 4.1 Commitment Letter dated April 10, 2000. 99.1 Press Release dated April 11, 2000. EX-4 2 EXHIBIT 4.1-COMMITMENT LETTER SALOMON SMITH BARNEY INC. 390 GREENWICH STREET NEW YORK, NEW YORK 10013 HELLER FINANCIAL, INC. FLEET RETAIL FINANCE INC. 500 WEST MONROE STREET 40 BROAD STREET, 10TH FLOOR CHICAGO, ILLINOIS 60661 BOSTON, MASSACHUSETTS 02109 April 10, 2000 Rite Aid Corporation 30 Hunter Lane Camp Hill, Pennsylvania 17011 Attention: Mr. Robert G. Miller Chairman of the Board of Directors and Chief Executive Officer PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY COMMITMENT LETTER Ladies and Gentlemen: Rite Aid Corporation ("Rite Aid") has advised Citi/SSB, Heller and Fleet (as defined below) that Rite Aid desires to establish the Senior Facility (as defined in Exhibit A) in connection with the transactions described in Exhibit A hereto (the "Transaction Description"). Capitalized terms used in this Commitment Letter but not defined herein shall have the meanings given to them in the Transaction Description. Subject to the terms and conditions described in this Commitment Letter (including Exhibits A, B and C hereto), and in the Fee Letters referred to below, Citi/SSB, Heller and Fleet are pleased to inform Rite Aid of their several commitments to provide the following principal amounts of the Senior Facility: Citi/SSB $500,000,000 Heller $250,000,000 Fleet $250,000,000 ------------------ TOTAL $1,000,000,000 Each of Citi/SSB, Heller and Fleet shall be liable only for its own commitment hereunder, and shall not have any liability with respect to the commitment of any other party. The commitments of Citi/SSB, Heller and Fleet hereunder will be irrevocably reduced by the amount of the commitments of any other prospective Senior Lenders (as defined below) which execute commitments relating to the Senior Facility to the extent expressly stated in such commitment of such other prospective Senior Lenders. Such reductions will be allocated among the commitments of Citi/SSB, Heller and Fleet as agreed by them. For purposes of this Commitment Letter, "Citi/SSB" shall mean Citicorp North America, Inc. and/or any affiliate thereof, including Salomon Smith Barney Inc. ("SSBI"), as Citi/SSB shall determine to be appropriate to provide the services contemplated herein. "Heller" means Heller Financial, Inc. or any affiliate thereof that it so designates. "Fleet" means Fleet Retail Finance Inc. or any affiliate thereof. Citi/SSB, Heller and Fleet are referred to collectively as the "Agents". 1. CONDITIONS PRECEDENT. The commitments of Citi/SSB, Heller and Fleet hereunder are subject to: (a) The Agents' completion of, and satisfaction in all respects with, the results of its ongoing due diligence investigation of the business, assets, operations, properties, condition (financial or otherwise), contingent liabilities, prospects and material agreements of Rite Aid. The Agents expect that the due diligence investigation, which is underway, will be completed by April 30, 2000. (b) The preparation, execution and delivery of definitive documentation with respect to the Senior Facility, including a credit agreement, security agreements and guarantees incorporating substantially the terms and conditions outlined in this Commitment Letter and otherwise reasonably satisfactory to the Agents and Citi/SSB's counsel (the "Operative Documents"), on or before May 31, 2000. (c) There not having occurred any material adverse change in the revenues, store operations, inventory, accounts receivable, business or prospects of Rite Aid and its subsidiaries taken as a whole, or to Rite Aid's knowledge, in any relationship with any vendor or third party insurance payor of Rite Aid or any of its subsidiaries, taken as a whole, since November 2, 1999, other than, in each case, as publicly disclosed before the date of this Commitment Letter. (d) There not having occurred any disruption of or change in loan syndication, financial, banking or capital market conditions that, in the judgment of the Agents, could materially impair the syndication of the Senior Facility or the completion of the Exchange Offer. (e) The accuracy and completeness of all representations that Rite Aid and its affiliates make to the Agents and all information that Rite Aid and its affiliates furnish to the Agents. (f) The payment in full of all fees, expenses and other amounts payable under this Commitment Letter and the Engagement Letter. (g) The Agents' satisfaction in all respects with (i) the structure of the Transactions and all related tax, legal and accounting matters, (ii) the material terms of the Transactions and of all agreements and instruments to be entered into in connection with the Transactions and (iii) the capitalization, structure and equity ownership of Rite Aid and its subsidiaries after giving effect to the Transactions. (h) The Agents' satisfaction that Rite Aid is not subject to material contractual or other material restrictions that would be violated by the Transactions, including the granting of security interests and guarantees and the payment of dividends by subsidiaries. (i) The Agents' reasonable satisfaction with the timing and schedule for the Transactions. (j) The execution, delivery and compliance with the terms of (i) this Commitment Letter, and (ii) the Senior Facility Fee Letter, each in form and substance satisfactory to the Agents. (k) The execution, delivery and compliance with the terms of (i) the Engagement Letter, and (ii) the Engagement Fee Letter, each of which will be in form and substance satisfactory to Citi/SSB. (l) The completion of the Debt Modification on substantially similar terms and conditions as those described in this Commitment Letter (including Exhibits A, B and C hereto). (m) The prompt delivery to the Agents of a three year business plan of Rite Aid which shall be satisfactory in all material respects to the Agents. (n) The Agents' receipt of valuations and appraisals of the Collateral by an independent appraisal firm satisfactory to the Agents which valuations and appraisals shall be satisfactory to Agents. (o) Citi/SSB's completion of a field examination of the Collateral, the results of which shall be satisfactory to the Agents. (p) The absence of (i) any development in any Current Litigation (as defined in Exhibit A) after the date hereof, and (ii) any other actual or threatened litigation that, in case of either clause (i) or (ii) in the Agents' sole judgment, could impair the validity, enforceability or priority of the security interests to be granted in favor of the Senior Lenders under the Operative Documents. (q) The absence of (i) any development in any Current Litigation after the date hereof, and (ii) any other actual or threatened litigation that, in case of either clause (i) or (ii) in the Agents' sole judgment, could impair the syndication of the Senior Facility or the completion of the Exchange Offer. Please note that the terms and conditions of Citi/SSB's, Heller's and Fleet's commitments hereunder are not limited to those set forth in this Commitment Letter and that those matters that are not covered or made clear in this Commitment Letter are subject to mutual agreement of the parties. 2. COMMITMENT TERMINATION. The commitments set forth in this Commitment Letter will terminate on the earlier of May 31, 2000 and the date of execution and delivery of the Operative Documents. Before such date, the Agents may terminate this Commitment Letter if any event occurs or information becomes available that, in their reasonable judgment, results or is likely to result in the failure to satisfy any condition set forth in Section 1. 3. SYNDICATION. Each of the Agents reserves the right, before or after the execution of the Operative Documents, to syndicate all or a portion of its commitment to one or more other financial institutions, in consultation with Rite Aid, that will become parties to the Operative Documents pursuant to syndications to be managed by SSBI (the financial institutions becoming parties to the Operative Documents being collectively referred to herein as the "Senior Lenders"). Rite Aid understands that SSBI intends to commence such syndication of the Senior Facility promptly and that SSBI may elect to appoint one or more syndication agents to direct such syndication efforts on its behalf. SSBI will act as the lead syndication agent with respect to the Senior Facility and will manage all aspects of the syndications in consultation with Rite Aid, including the timing of all offers to potential Senior Lenders, the determination of all amounts offered to potential Senior Lenders, the selection of Senior Lenders, the allocation of commitments among the Senior Lenders, the assignment of any titles and the compensation to be provided to the Senior Lenders. Rite Aid shall take all action that SSBI may reasonably request to assist it in forming syndicates acceptable to SSBI and Rite Aid. Rite Aid's assistance in forming such syndicates shall include but not be limited to: (i) making senior management, representatives and advisors of Rite Aid available to participate in informational meetings with potential Senior Lenders at such times and places as SSBI may reasonably request; (ii) using its reasonable best efforts to ensure that the syndication efforts benefit from Rite Aid's existing lending relationships; (iii) assisting (including using its best efforts to cause its affiliates and advisors to assist) in the preparation of a confidential information memorandum for the Senior Facility and other marketing materials to be used in connection with the syndications; and (iv) promptly providing SSBI with all information reasonably deemed necessary by it to successfully complete the syndications, and which in the case of financial information, is reasonably available to Rite Aid. To ensure an orderly and effective syndication of the Senior Facility, Rite Aid agrees that, from the date hereof until the termination of the syndications (as determined by SSBI), it will not and will not permit any of its affiliates to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt security or commercial bank or other debt facility (including any renewals thereof), without the prior written consent of SSBI other than as contemplated by the Transactions; provided, that the foregoing shall not limit Rite Aid's ability to issue privately placed equity. Rite Aid agrees that (a) Citicorp USA, Inc. will act as the sole administrative agent for the Senior Facility, (b) SSBI will act as sole arranger and book manager for the Senior Facility, and (c) Heller and Fleet will act as co-syndication agents for the Senior Facility. No additional agents, co-agents, arrangers or co-arrangers, will be appointed, or other titles conferred, without the consent of SSBI. Rite Aid agrees that no Senior Lender will receive any compensation of any kind for its participation in the Senior Facility, except as expressly provided in the Fee Letters or in Exhibit A, B or C. 4. FEES. In addition to the fees described in Exhibits B and C, Rite Aid will pay the fees set forth in the fee letter relating to the Senior Facility dated the date hereof between Rite Aid and the Agents (the "Senior Facility Fee Letter"), and the fee letter dated the date hereof between Rite Aid and Citi/SSB (the "Engagement Fee Letter", and together with the Senior Facility Fee Letter, the "Fee Letters"). The terms of the Senior Facility Fee Letter are an integral part of the Agents' commitments hereunder and constitute part of this Commitment Letter for all purposes hereof. Each of the fees described in the Fee Letters and Exhibits B and C shall be nonrefundable when paid. 5. INDEMNIFICATION. Rite Aid agrees to indemnify and hold harmless the Agents, each Senior Lender and each of their respective affiliates and each of their respective officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Person") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Person, (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Commitment Letter or the Operative Documents or the Transactions contemplated hereby or thereby, or any use made or proposed to be made with the proceeds of the Senior Facility, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Person's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective, whether or not such investigation, litigation or proceeding is brought by Rite Aid, any of its directors, securityholders or creditors, an Indemnified Person or any other person, or an Indemnified Person is otherwise a party thereto and whether or not the Transactions contemplated hereby are consummated. No Indemnified Person shall have any liability (whether in contract, tort or otherwise) to Rite Aid or any of its directors, securityholders or creditors for or in connection with the Transactions contemplated hereby, except for direct damages (as opposed to special, indirect, consequential or punitive damages including, without limitation, any loss of profits, business or anticipated savings) determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Person's gross negligence or willful misconduct. If any litigation or proceeding is brought against any Indemnified Person in respect of which indemnification may be sought against Rite Aid pursuant to this Section 5, such Indemnified Person shall promptly notify Rite Aid in writing of the commencement of such litigation or proceeding, but the failure so to notify Rite Aid shall relieve Rite Aid from any liability which it may have hereunder only if, and to the extent that, it has been materially prejudiced by such failure and will not in any event relieve Rite Aid from any other obligation or liability that it may have to any Indemnified Person other than under this Commitment Letter. In case any such litigation or proceeding shall be brought against any Indemnified Person and such Indemnified Person shall notify Rite Aid in writing of the commencement of such litigation or proceeding, Rite Aid shall be entitled to participate in such litigation or proceeding, and, after written notice from Rite Aid to such Indemnified Person, to assume the defense of such litigation or proceeding with counsel of its choice at its expense; provided, however, that such counsel shall be satisfactory to the Indemnified Person in the exercise of its reasonable judgment; and provided further, however, that Rite Aid shall not have the right to assume the defense of any litigation or proceeding related to the security interests granted in favor of the Senior Lenders or the validity or enforceability of the documentation for the Senior Facility. Notwithstanding the election of Rite Aid to assume the defense of such litigation or proceeding, such Indemnified Person shall have the right to employ separate counsel and to participate in the defense of such litigation or proceeding, and Rite Aid shall bear the reasonable fees, costs and expenses of such separate counsel and shall pay such fees, costs and expenses at least quarterly (provided that with respect to any single litigation or proceeding or with respect to several litigations or proceedings involving substantially similar legal claims, Rite Aid shall not be required to bear the fees, costs and expenses of more than one such counsel except where such Indemnified Person requires local counsel, in which case Rite Aid shall also be required to bear the fees, costs and expenses of such local counsel) if (i) the use of counsel chosen by Rite Aid to represent such Indemnified Person would present such counsel with a conflict of interest (based upon written advice of counsel to the Indemnified Person), (ii) the defendants in, or targets of, any such litigation or proceeding include both an Indemnified Person and Rite Aid, and such Indemnified Person shall have reasonably concluded that there may be legal defenses available to it or to other Indemnified Persons which are different from or additional to those available to Rite Aid (in which case Rite Aid shall not have the right to direct the defense of such action on behalf of the Indemnified Person), (iii) Rite Aid shall not have employed counsel satisfactory to such Indemnified Person, in the exercise of the Indemnified Person's reasonable judgment, to represent such Indemnified Person within a reasonable time after notice of the institution of such litigation or proceeding or (iv) Rite Aid shall authorize in writing such Indemnified Person to employ separate counsel at the expense of Rite Aid. In any action or proceeding the defense of which Rite Aid assumes, the Indemnified Person shall have the right to participate in such litigation and retain its own counsel at such Indemnified Person's own expense. Each Indemnified Person agrees to use all reasonable efforts to cooperate in the defense of any action or proceeding pursuant to which a claim for indemnification is made under this Section 5. No Indemnified Person seeking indemnification under this Commitment Letter shall, without Rite Aid's prior written consent (which consent shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification may be sought hereunder. 6. COSTS AND EXPENSES. Rite Aid shall pay or reimburse (a) each of Heller and Fleet on demand for all reasonable out-of-pocket costs and expenses incurred by each of them (whether incurred before or after the date hereof) in an aggregate amount not to exceed $50,000 each, and (b) Citi/SSB on demand for all reasonable out-of-pocket costs and expenses incurred by Citi/SSB (whether incurred before or after the date hereof), in each case in connection with the Senior Facility and the preparation, negotiation, execution and delivery of this Commitment Letter, the Operative Documents and any security arrangements in connection (which costs and expenses will be documented in reasonable detail), including the reasonable fees and disbursements of counsel (whether incurred before or after the date hereof), whether or not any of the Transactions contemplated hereby are consummated. Rite Aid further agrees to pay all costs and expenses of Citi/SSB (including, without limitation, reasonable fees and disbursements of counsel) incurred in connection with the enforcement of any of its rights and remedies hereunder. 7. CONFIDENTIALITY. By accepting delivery of this Commitment Letter, Rite Aid agrees that this Commitment Letter is for its confidential use only and that neither its existence nor the terms hereof will be disclosed by it to any person other than its officers, directors, employees, accountants, attorneys and other advisors, and then only on a confidential and "need to know" basis in connection with the Transactions contemplated hereby. Notwithstanding the foregoing, following Rite Aid's acceptance of the provisions hereof and its return of an executed counterpart of this Commitment Letter to Citi/SSB as provided below, (i) Rite Aid may file a copy of this Commitment Letter (other than the Fee Letters) in any public record in which it is required by law to be filed and (ii) Rite Aid may make such other public disclosures of the terms and conditions hereof as (a) Rite Aid is required by law, in the opinion of its counsel, to make and (b) may be necessary or advisable in connection with the Transactions. 8. REPRESENTATIONS AND WARRANTIES. Rite Aid represents and warrants that (i) all information (other than financial projections) that has been or will hereafter be made available to the Agents, any Senior Lender or any potential Senior Lender by or on behalf of Rite Aid or any of its representatives in connection with the Transactions contemplated hereby is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made and (ii) all financial projections, if any, that have been or will be prepared by or on behalf of Rite Aid or any of its representatives and made available to the Agents, any Senior Lender or any potential Senior Lender have been or will be prepared in good faith based upon assumptions that are reasonable at the time made and at the time the related financial projections are made available to the Agents. If, at any time from the date hereof until the execution and delivery of the Operative Documents, any of the representations and warranties in the preceding sentence would be incorrect if the information or financial projections were being furnished, and such representations and warranties were being made, at such time, then Rite Aid will promptly supplement the information and the financial projections so that such representations and warranties will be correct under those circumstances. In issuing this Commitment Letter and in arranging the Senior Facility including the syndication of the Senior Facility, the Agents will be entitled to use, and to rely on the accuracy of, the information furnished to it by or on behalf of Rite Aid or any of its representatives without responsibility for independent verification thereof. 9. NO THIRD PARTY RELIANCE, ETC. The agreements of the Agents hereunder and of any Senior Lender that issues a commitment to provide financing under the Senior Facility are made solely for the benefit of Rite Aid and may not be relied upon or enforced by any other person (other than Indemnified Persons pursuant to Section 5). This Commitment Letter is not intended to create a fiduciary relationship among the parties hereto. 10. SHARING INFORMATION. Rite Aid acknowledges that the Agents may provide debt financing, equity capital or other services (including financial advisory services) to parties whose interests regarding the Transactions described herein and otherwise may conflict with Rite Aid's interests. Consistent with the Agents' policy to hold in confidence the affairs of its customers, the Agents will not furnish confidential information obtained from Rite Aid or its affiliates to any of its other customers. Furthermore, the Agents will not use in connection with the Transactions contemplated hereby, or furnish to Rite Aid, confidential information obtained by the Agents from any other person. 11. ASSIGNMENTS. Rite Aid may not assign this Commitment Letter or the Agents' commitments hereunder without the Agents' prior written consent, and any attempted assignment without such consent shall be void. 12. AMENDMENTS. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each party hereto. 13. GOVERNING LAW, ETC. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. This Commitment Letter sets forth the entire agreement among the parties with respect to the matters addressed herein and supersedes all prior communications, written or oral, with respect hereto. This Commitment Letter may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and all of which, taken together, shall constitute one and the same Commitment Letter. Delivery of an executed counterpart of a signature page to this Commitment Letter by telecopier shall be as effective as delivery of a manually executed counterpart of this Commitment Letter. Sections 3 through 8, 10, 13 and 14 shall survive the expiration or termination of this Commitment Letter whether or not the Operative Documents shall be executed and delivered, but, after the effectiveness of the Operative Documents, only to the extent not inconsistent with the Operative Documents. 14. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter or the Transactions contemplated hereby or the actions of the parties hereto in the negotiation, performance or enforcement hereof. Please indicate your acceptance of the provisions hereof by (i) signing the enclosed copy of this Commitment Letter and the Fee Letters and returning them to Jeffrey A. McDermott, Managing Director, Salomon Smith Barney Inc., 390 Greenwich Street, New York, New York 10013 (telecopier: (212) 816-6591), with a copy to Richard D. Banziger, Director (telecopier: (212) 723-8544) and (ii) making the deposits and advance payments contemplated by the Engagement Fee Letter in respect of costs and expenses to be paid or reimbursed pursuant to Section 6 hereof, in each case at or before 5:00 p.m. (New York City time) on April 11, 2000, at which time the commitment of the Agents set forth above (if such acceptance, deposits and payments have not occurred prior thereto) will expire. If you elect to deliver this Commitment Letter by telecopier, please arrange for the executed original to follow by next-day courier. Very truly yours, CITICORP NORTH AMERICA, INC., By__________________________ Name: Title: Vice President SALOMON SMITH BARNEY INC., By__________________________ Name: Title: Managing Director HELLER FINANCIAL, INC., By__________________________ Name: Title: FLEET RETAIL FINANCE INC., By__________________________ Name: Title: ACCEPTED AND AGREED on April 11, 2000: RITE AID CORPORATION, By_______________________ Name: Title: CONFIDENTIAL EXHIBIT A April 10, 2000 PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY TRANSACTION DESCRIPTION All capitalized terms used herein but not defined herein shall have the meanings provided in the Commitment Letter relating to this Transaction Description. The following transactions are referred to herein as the "Transactions". 1. Rite Aid will obtain a new senior secured credit facility in an aggregate principal amount of $1,000,000,000 (the "Senior Facility"), which shall be unconditionally guaranteed by its subsidiaries and secured by a first priority security interest in the Collateral (as described in Exhibit B to the Commitment Letter). 2. Rite Aid will provide its lenders with respect to each of: (a) the indebtedness under Rite Aid's $1,300,000,000 Term Loan Agreement dated as of October 25, 1999 (the "PCS Facility"); (b) the indebtedness under Rite Aid's $1,000,000,000 Amended and Restated Credit Agreement dated as of October 25, 1999 (the "RCF Facility"); (c) the indebtedness in the amount of approximately $35,000,000 represented by the 7.30% Senior Secured Notes due February 28, 2002 (the "Prudential Note") issued by Finco, Inc. and guaranteed by Rite Aid; and (d) the indebtedness in the amount of approximately $270,000,000 under the Term Loan Agreement dated as of October 27, 1999 (the "MGT Term Note", and together with the indebtedness described under clauses (a) through (c) above, the "Agreement Debt"), the option (the "Debt Exchange Option") to exchange (the "Debt Exchange") a portion of such Agreement Debt (the "Exchangeable Debt") for a combination of (x) shares of common stock, par value $.01 per share (the "Common Stock"), of Rite Aid with an aggregate value equal to 50% of the aggregate principal amount of the Exchangeable Debt (based on a price per share of Common Stock of $5.50), together with registration rights to be agreed upon, and (y) indebtedness in an aggregate principal amount equal to 50% of the principal amount of the Exchangeable Debt (the "Exchange Debt"). The maximum aggregate amount of Exchangeable Debt that will be eligible for the Debt Exchange shall be equal to the product of two multiplied by the value of 20% of the outstanding Common Stock of Rite Aid prior to the Debt Exchange. J.P. Morgan shall have the first right to participate in the Debt Exchange with respect to up to 100% of its outstanding loans to Rite Aid, and the remaining lenders with respect to the Agreement Debt shall be permitted to participate in the Debt Exchange on a pro rata basis. The terms of the Exchange Debt will include (i) a first priority security interest in certain specified collateral, including a portion of Rite Aid's prescription files to be agreed before the initial funding date under the Senior Facility, with a value equal to the aggregate principal amount of such Exchange Debt, (ii) a silent second priority lien on the Collateral that will be shared with the Agreement Debt, the Synthetic Leases (as described below) and the Exchange Notes (as described below) on a pari passu basis, (iii) with respect to any Agreement Debt that constitutes Exchangeable Debt, the right to any liens on pledged stock (i.e., the PCS stock and drugstore.com stock) such lenders were entitled to under the Agreement Debt and (iv) a maturity date of August 15, 2002. 3. To the extent the Agreement Debt has not been exchanged for Exchange Debt and shares of Common Stock in connection with the Debt Exchange, Rite Aid will modify the terms of, and obtain the appropriate amendments to, the Agreement Debt, in order to, among other things, provide for the extension of the maturity date of the Agreement Debt to August 15, 2002, modify certain existing covenants and provide that the Agreement Debt shall be secured by a silent second priority lien on the Collateral that will be shared with the Exchange Debt, the Exchange Notes and the Synthetic Leases on a pari passu basis (the "Agreement Debt Modification"). 4. Rite Aid will modify the terms of, and obtain the appropriate amendments to, certain synthetic leases in an aggregate amount of approximately $214,000,000 (the "Synthetic Leases") in order to, among other things, provide for the modification of certain covenants and provide that the Synthetic Leases shall be secured by a silent second priority lien on the Collateral that will be shared with the Exchange Debt, the Exchange Notes and the Agreement Debt on a pari passu basis (the "Synthetic Lease Modification"). 5. Rite Aid will seek to exchange not less than 85% of its senior indenture debt (the "Senior Notes") consisting of $200,000,000 of unsecured 5.50% fixed rate senior notes due 2000 (the "5.50% Notes") and $350,000,000 of unsecured 6.70% notes due 2001 (the "6.70% Notes", and together with the 5.50% Notes, the "Existing Notes") in an exchange offer in accordance with Section 4(2) of the Securities Act of 1933 (the "Securities Act"), made only to Qualified Institutional Buyers or institutional Accredited Investors (as such terms are defined in the rules and regulations under the Securities Act), at par, for new senior notes (the "Exchange Notes") maturing on September 15, 2002 and having, among other things, the same silent second priority lien on the Collateral that will be shared with the Agreement Debt, the Exchange Debt and the Synthetic Leases on a pari passu basis (the " Exchange Offer", and together with the Debt Exchange, the Synthetic Lease Modification and the Agreement Debt Modification, the "Debt Modification"). 6. All outstanding uncollected receivables to be collected by Rite Aid as collection agent (the "Obligations to be Repurchased") under its accounts receivable securitization facility (the "Securitization Facility") will be repurchased by the seller thereof from the purchaser thereof and the Securitization Facility terminated. 7. Costs and expenses (including, without limitation, all fees and amounts payable under the Fee Letters) incurred in connection with the foregoing transactions will be paid in an amount approximately equal to $60,000,000 (the "Transaction Costs"). 8. The estimated sources and uses of the funds necessary to consummate the Transactions are set forth in Annex I hereto (the "Sources and Uses of Funds"). ANNEX I to Transaction Description
PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY SOURCES AND USES OF FUNDS SOURCES USES - --------------------------------------------- ------------------------------------------------- Senior Facility $1,000,000,000 Obligations to be $ 300,000,000 Repurchased Exchange Notes $ 550,000,000 Existing Notes $ 550,000,000 Transaction Costs $ 60,000,000 Availability for Working Capital, Capital Expenditures and other permitted General Corporate Purposes $ 640,000,000 ------------------------ --------------- TOTAL SOURCES $1,550,000,000 TOTAL USES $ 1,550,000,000 ======================== ===============
CONFIDENTIAL EXHIBIT B April 10, 2000 PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY SUMMARY OF PRINCIPAL TERMS AND CONDITIONS All capitalized terms used herein but not defined herein shall have the meanings provided in the Commitment Letter and the Transaction Description relating to this Summary of Principal Terms and Conditions. BORROWER: Rite Aid Corporation, a Delaware corporation. TRANSACTIONS: As described in the Transaction Description. ADMINISTRATIVE AGENT: Citicorp USA, Inc., or an affiliate thereof designated by SSBI (in its individual capacity "CUSA" and in its capacity as Administrative Agent, the "Administrative Agent"). COLLATERAL AGENT: CUSA (in its capacity as Collateral Agent, the "Collateral Agent"). SYNDICATION AGENTS: SSBI, Heller Financial, Inc. and Fleet Retail Finance Inc. (together with the Administrative Agent and Collateral Agent, the "Agents"). LEAD ARRANGER AND SOLE BOOK MANAGER: Salomon Smith Barney Inc. ("SSBI" or the "Arranger"). SENIOR LENDERS: A syndicate of financial institutions arranged by SSBI (the "Senior Lenders"). SENIOR FACILITY: (A) Senior Secured Term Loan Facilities in an aggregate principal amount of $500,000,000 (the "Term Facilities"), such aggregate principal amount to be allocated, as determined by the Arranger in its discretion, entirely to or between one or more term loan facilities. (B) A Senior Secured Revolving Credit Facility in an aggregate principal amount of $500,000,000 (the "Revolving Facility"). (C) Up to $100,000,000 of the Revolving Facility will be available as a letter of credit subfacility. (D) An amount to be agreed, but no less than $50,000,000, of the Revolving Facility will be available as an uncommitted swing line facility. Swing line loans must be repaid not later than seven days after being drawn and may not be refinanced with swing line loans. PURPOSE AND AVAILABILITY: The Term Facilities will be fully drawn on the date on which the conditions to the initial borrowing specified below are satisfied (the "Initial Funding Date"). The Revolving Facility will be available on and after the Initial Funding Date and at any time before the final maturity of the Revolving Facility, in minimum principal amounts to be agreed. Amounts borrowed under the Term Facilities that are repaid or prepaid may not be reborrowed. Amounts repaid under the Revolving Facility may be reborrowed. Amounts borrowed under the Term Facilities will be utilized by the Borrower solely (1) to finance the repurchase by the sellers thereof from the purchasers thereof of all outstanding uncollected receivables to be collected by the Borrower as collection agent under the Borrower's accounts receivable securitization facility (the "Securitization Facility"), (2) to pay approximately $60,000,000 of transaction costs for the Transactions, and (3) for liquidity and other permitted general corporate purposes. Amounts borrowed under the Revolving Facility will be utilized by the Borrower solely to finance working capital requirements and capital expenditures and for other permitted general corporate purposes. Letters of credit may be issued in the ordinary course of the Borrower's business for permitted general corporate purposes. Existing standby letters of credit issued by Mellon Bank for the benefit of the Borrower and its subsidiaries will remain outstanding up to a limit of $35,000,000, and will be secured by a shared first-priority lien on the Collateral. Treatment of existing trade letters of credit issued for the benefit of the Borrower and its subsidiaries will be as agreed in the Operative Documents. FINAL MATURITY: The Term Facilities and the Revolving Facility will mature (and all lending commitments under the Revolving Facility will terminate) on August 1, 2002. BORROWING BASE: All loans and other extensions of credit under the Senior Facility will be subject to a borrowing base (the "Borrowing Base") calculated as percentages to be agreed of Eligible Receivables and Eligible Inventory pledged as Collateral. The components, standards of calculation and initial advance rates of the Borrowing Base will be determined at the reasonable judgment and customary practices of the Agents. The Collateral Agent may use its reasonable judgment to increase the initial advance rates by 5%. Any increase greater than that amount will be subject to a 662/3% vote of the Senior Lenders and any increase in advance rates above 80% of the orderly liquidation value of the Eligible Inventory or 85% of orderly liquidation value of the Eligible Receivables will be subject to a 100% vote of the Senior Lenders. The Borrowing Base will be computed weekly and at other times requested by the Collateral Agent. A Borrowing Base Certificate presenting the Borrower's computation will be delivered to the Collateral Agent, with respect to accounts receivable, not later than two business days after the end of each week or the date of any such request, and with respect to inventory, as agreed in the Operative Documents. GUARANTEE: All obligations of the Borrower under the Senior Facility and under any interest protection or other hedging arrangements entered into with a Senior Lender (or any affiliate thereof) will be unconditionally guaranteed (the "Guarantees") by each existing and subsequently acquired or organized domestic and, to the extent no adverse tax consequences would result, foreign direct or indirect subsidiary of the Borrower owning any assets consisting of inventory, accounts receivable, certain owned real estate (including owned fixtures) and intellectual property ("Specified Assets"). Each such subsidiary (collectively, the "Subsidiary Guarantors") shall be designated as an "Unrestricted Subsidiary" under each of the indentures governing the Borrower's outstanding senior debt securities. Guarantees given by PCS Holding Corporation, PCS Health Systems and any other PCS companies (collectively, the "PCS Companies") will be limited in recourse to the assets of such companies which constitutes collateral, and the guarantees of each PCS Company and will automatically be terminated upon sale of such PCS Company by Rite Aid. COLLATERAL: The Senior Facility, the Guarantees, any interest protection and other hedging arrangements entered into with a Senior Lender (or any affiliate thereof) and the Borrower's obligations in respect of not more than $35,000,000 at any time outstanding of standby letters of credit issued by Mellon Bank will be secured by a first priority pledge of, or mortgages on, all Specified Assets of each Subsidiary Guarantor (whether existing or subsequently acquired or organized) and all proceeds of the foregoing (collectively, the "Collateral"). The indebtedness under the Agreement Debt, the Exchange Debt, the Synthetic Leases and the Exchange Notes (collectively, the "Second Priority Indebtedness") will be secured, on a pari passu basis, by a silent second priority lien on the Collateral. Such lien will not entitle the Second Priority Indebtedness to take any action whatsoever with respect to the Collateral, and the Senior Lenders will at all times control all remedies or other actions relating to the Collateral. The holders of the obligations under the Senior Facility will have the right to receive all proceeds of any realization on the Collateral until all obligations under the Senior Facility have been paid in full. The Second Priority Indebtedness will have secured claims in bankruptcy proceedings, but the intercreditor provisions will provide that the holders of Second Priority Indebtedness may not vote such claims in a manner adverse to the Senior Facility. CASH DOMINION: The Borrower will establish a cash management system reasonably satisfactory to the Administrative Agent. As part of that system, the Administrative Agent will act as the concentration bank for all of the Borrower's and the Subsidiary Guarantors' cash collections and proceeds. Collections and proceeds from assets sales, including credit card collections, will be deposited into an account with the Administrative Agent, or into an account at another institution that is subject to a blocked account or agency agreement reasonably satisfactory to the Administrative Agent. The Borrower will have free access to the funds in such accounts during such periods of time when (i) no default exists and (ii) availability under the Senior Facility exceeds a minimum amount to be agreed by the Borrower and the Agents. At all other times, such accounts will be automatically blocked and the Administrative Agent will use each day's proceeds to reduce outstandings under the Revolving Facility, to be applied on the business day following receipt. INTEREST RATES AND FEES: As set forth in Annex I hereto and in the Senior Facility Fee Letter. OPTIONAL PREPAYMENTS AND REDUCTIONS IN COMMITMENTS: Optional prepayments of borrowings under the Senior Facility, and optional reductions of the unutilized portion of the Senior Facility commitments, will be permitted at any time, in minimum principal amounts to be agreed, without premium or penalty, subject to reimbursement of the Senior Lenders' redeployment costs in the case of a prepayment of LIBOR borrowings other than on the last day of the relevant interest period. MANDATORY PREPAYMENTS: The Senior Facility will be subject to mandatory prepayment with the proceeds of sales of Specified Assets (other than sales in the ordinary course of business and other limited exceptions to be agreed) and certain permitted capital markets transactions, but only to the extent required to ensure that the ratio of: (a) Eligible Inventory and Eligible Receivables, to (b) outstanding loans and unused commitments under the Senior Facility, after giving effect to any such sale or transaction, is not less than such ratio as of the closing date of the Senior Facility. Proceeds not required to be applied to the Senior Facility may be applied to repay the Agreement Debt. Mandatory prepayments of the Senior Facility will be allocated between the Revolving Facility and the Term Facility pro rata based on outstanding amounts and unused commitments. Commitments under the Revolving Facility shall be permanently reduced (with corresponding prepayments of obligations under the Revolving Facility) by amounts allocated to the Revolving Facility. Outstanding principal under the Term Facility will be prepaid with amounts allocated to the Term Facility. Borrowings under the Senior Facility (including the face amount of outstanding letters of credit) must be prepaid (or cash collateralized) on any date when the aggregate principal amount thereof exceeds the Borrowing Base by an amount sufficient to eliminate such excess. LETTERS OF CREDIT: Letters of credit under the Revolving Facility will be issued by one or more Senior Lenders (or an affiliate thereof) to be agreed (collectively, the "Issuing Lender"). Each letter of credit shall expire not later than the earlier of (a) 12 months after its date of issuance and (b) the fifth business day before the final maturity of the Revolving Facility. Drawings under any letter of credit shall be reimbursed by the Borrower (or converted to loans under the Revolving Facilities) on the same business day. To the extent that the Borrower does not reimburse the Issuing Lender on the same business day, the Senior Lenders under the Revolving Facility shall be irrevocably obligated to reimburse the Issuing Lender pro rata based upon their respective Revolving Facility commitments, with the amount of such reimbursement payment being deemed to be a drawing under the Revolving Facility. The issuance of all letters of credit shall be subject to the customary procedures of the Issuing Lender. REPRESENTATIONS AND WARRANTIES: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents (with certain exceptions to be agreed upon as a result of the current circumstances of the Borrower), including, without limitation: 1. Corporate status and authority. 2. Execution, delivery, and performance of loan documents and transactions contemplated thereby do not violate law or other agreements. 3. No government or regulatory approvals required, other than approvals in effect. 4. Neither (a) any development in any Current Litigation after April 10, 2000, or (b) other litigation or administrative proceeding which could in case of either clause (a) or (b) reasonably be expected to (i) have a material adverse effect on the business, financial position, results of operations or prospects of the Borrower and its subsidiaries, taken as a whole, (ii) affect the legality, validity and enforceability of the loan documents (including without limitation, the validity, enforceability or priority of security interests to be granted) or (iii) impair the Borrower's or its subsidiaries' ability to perform its or their obligations under the loan documents. "Current Litigation" means the bondholders' class actions and shareholders' class actions currently pending in the Eastern District of Pennsylvania, and the related pending Securities Exchange Commission investigation. 5. Since November 2, 1999, and until delivery by Rite Aid of financial statements for the fiscal quarter ending May 27, 2000, no material adverse change in the revenues, store operations, inventory, accounts receivable, business or prospects of Rite Aid and its subsidiaries taken as a whole, or to Rite Aid's knowledge, in any relationship with any vendor or third party insurance payor of Rite Aid or any of its subsidiaries, taken as a whole, other than, in each case, as publicly disclosed before April 10, 2000. 6. Effective upon delivery by Rite Aid of financial statements for the fiscal quarter ending May 27, 2000, no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its subsidiaries, taken as a whole since May 27, 2000. 7. Effective until delivery by Rite Aid of financial statements for the fiscal quarter ending May 27, 2000, accuracy of representations concerning revenues, store operations, inventory, accounts receivable, business or prospects of Rite Aid and its subsidiaries, or to Rite Aid's knowledge, in any relationship with any vendor or third party insurance payor of Rite Aid and any of its subsidiaries. 8. Effective upon delivery by Rite Aid of financial statements for the fiscal quarter ending May 27, 2000, accuracy of financial statements (except as previously disclosed in writing to the Agents and the Senior Lenders) and other information. 9. Material compliance with laws and regulations, including ERISA, margin regulations and all applicable environmental laws and regulations, except as previously disclosed before April 10, 2000 to the Agents and the Senior Lenders. 10. Legality, validity, binding effect and enforceability of the loan documents. 11. Inapplicability of the Investment Company Act and Public Utility Holding Company Act. 12. Solvency. 13. Payment of taxes. 14. Validity, priority and perfection of security interests in the Collateral, and location of accounts receivable, inventory, receivables, real estate and intellectual property in Subsidiary Guarantors. 15. No conflicts with laws, material contracts, etc. CONDITIONS PRECEDENT TO INITIAL BORROWING: Usual for facilities and transactions of this type, including those specified in the Summary of Additional Conditions Precedent attached as Exhibit C to the Commitment Letter, and others to be reasonably specified by the Agents (with certain exceptions to be agreed upon as a result of the current circumstances of the Borrower). AFFIRMATIVE COVENANTS: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents (to be applicable to the Borrower and the Borrower's subsidiaries), including, without limitation, and subject, in each case, to customary exceptions to be agreed: 1. Preservation of corporate existence. 2. Material compliance with laws (including ERISA and applicable environmental laws). 3. Payment of taxes. 4. Payment or performance of obligations. 5. Delivery of audited and unaudited financial statements to be agreed, including delivery by July 11, 2000 of audited financial statements for the fiscal year ended February 26, 2000 and of unaudited financial statements for the fiscal quarter ending May 27, 2000. 6. Other reporting requirements, including with respect to the Borrowing Base, and notices of default and litigation. 7. Visitation rights, including Collateral and Borrowing Base reviews. 8. Maintenance of books and records. 9. Maintenance of properties. 10. Maintenance of insurance. 11. Use of proceeds. 12. Further assurances, including future pledges of Specified Assets to be owned and pledged by Subsidiary Guarantors that are "Unrestricted Subsidiaries" under the Borrower's indentures. NEGATIVE COVENANTS: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents (to be applicable to the Borrower and the Borrower's subsidiaries), including, without limitation, subject in each case to customary exceptions to be agreed: 1. Limitations on liens. Security interests with respect to existing trade letters of credit that continue after the closing date will be permitted. 2. Limitations on incurrence of debt (including obligations in respect of foreign currency exchange and other hedging arrangements). Treatment of existing trade letter of credit arrangements will be as agreed in the Operative Documents. 3. Limitations on dividends, redemptions and repurchases with respect to capital stock and on loans and investments. 4. Limitations on prepayments, redemptions and repurchases of certain debt (other than loans under the Senior Facility and prepayments of the Exchange Debt and the Agreement Debt with proceeds of the dispositions of the PCS Companies, drugstore.com and other first priority collateral granted to the holders hereof). 5. Limitations on loans and investments. 6. Limitations on capital expenditures. 7. Limitations on mergers, consolidations, acquisitions, asset dispositions and sale/leaseback transactions. 8. Limitations on transactions with affiliates. 9. Limitations on changes in business conducted by the Borrower and its subsidiaries. 10. Limitations on amendment of certain debt and other material agreements. 11. Limitations on the issuance and sale of capital stock of subsidiaries. 12. Limitations on restrictions on distributions from subsidiaries. 13. Limitation on negative pledges granted to other creditors. SELECTED FINANCIAL COVENANTS: Usual for facilities and transactions of this type, including, without limitation, minimum EBITDA, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. EVENTS OF DEFAULT: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents, including, without limitation: 1. Failure to pay principal, interest or any other amount when due. 2. Representations or warranties materially incorrect when given. 3. Failure to comply with covenants (with notice and cure periods as applicable). 4. Cross-default to payment defaults on principal aggregating $25,000,000, or default or event of default if the effect is to accelerate or (with lapse of time, notice or both) permit acceleration. 5. Unsatisfied judgment or order in excess of $25,000,000 individually or of $25,000,000 in the aggregate. 6. Bankruptcy or insolvency. 7. ERISA events. 8. Change of control or ownership. 9. Actual invalidity, or invalidity asserted by Rite Aid or any of its subsidiaries, of any loan document. 10. Invalidity, non-perfection or loss of priority of any material lien. VOTING: Amendments and waivers of the loan documents will require the approval of Senior Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Senior Facility, except that (a) the consent of each affected Senior Lender shall be required with respect to, among other things, (i) waiver of any condition precedent to the initial borrowing, (ii) increases in commitments of the Senior Lenders, (iii) reductions of principal, interest or fees, (iv) extensions of final maturity and (v) releases of all or any substantial part of the Collateral (other than in connection with any sale or financing of Collateral permitted by the loan documents) and (b) the consent of Senior Lenders holding more than 50% of each adversely affected tranche of the Term Facilities shall be required with respect to any amendment that changes the allocation between the Term Facilities of any prepayments of loans under the Term Facilities. ASSIGNMENT AND PARTICIPATION: The Senior Lenders will have the right to assign loans and commitments to (i) their affiliates, (ii) other Senior Lenders or (iii) any Federal Reserve Bank, in each case without restriction, or to other financial institutions, with the consent, not to be unreasonably withheld, of the Agents and the Borrower (but the Borrower's consent shall not be required if an Event of Default shall have occurred and be continuing). Minimum aggregate assignment level (except other Senior Lenders) of $5,000,000 and increments of $1,000,000 in excess thereof. The parties to the assignment (other than the Borrower) shall pay to the Administrative Agent an administrative fee of $3,500. Each Senior Lender will have the right to sell participations in its rights and obligations under the loan documents, subject to customary restrictions on the participants' voting rights. YIELD PROTECTION, TAXES AND OTHER DEDUCTIONS: (1) The loan documents will contain yield protection provisions, customary for facilities of this nature, protecting the Senior Lenders in the event of unavailability of funding, funding losses, reserve and capital adequacy requirements. (2) All payments to be free and clear of any present or future taxes, withholdings or other deductions whatsoever (other than income taxes in the jurisdiction of the Senior Lender's applicable lending office). The Senior Lenders will use reasonable efforts to minimize to the extent possible any applicable taxes and the Borrower will indemnify the Senior Lenders and the Agents for such taxes paid by the Senior Lenders or the Agents. EXPENSES: The Borrower will reimburse all reasonable out-of- pocket expenses (including, without limitation, expenses incurred in connection with due diligence, Collateral and Borrowing Base appraisals and fees and expenses of counsel) (a) of Citi/SSB and SSBI incurred by them in connection with the preparation, syndication and execution of the Senior Facility and the loan documents and (b) of Citi/SSB, SSBI and the Senior Lenders incurred by them in connection with the waiver, modification and enforcement of the Senior Facility and the loan documents. Such amounts shall be reimbursed by the Borrower upon presentation of a statement of account, whether or not the Initial Funding Date occurs or the loan documents are executed and delivered. GOVERNING LAW AND FORUM: New York. COUNSEL TO CITI/SSB AND SSBI: Cravath, Swaine & Moore. ANNEX I to Exhibit B PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY INTEREST RATES AND FEES INTEREST RATES: The interest rates under the Senior Facility are LIBOR plus a spread of 3.00% or Base Rate plus a spread of 2.00%. The Borrower may choose LIBOR or Base Rate pricing and may elect interest periods of 7 days or 1, 1 1/2, 2, 3 or 6 months for LIBOR borrowings, except that all swing line loans will have Base Rate pricing. Calculation of interest shall be on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of Base Rate loans). Interest will be payable in arrears (a) for loans accruing interest at a rate based on LIBOR, at the end of each interest period (but not less frequently than every 3 months) and on the maturity date, (b) for loans accruing interest based on the Base Rate, quarterly in arrears and on the maturity date. "Base Rate" means the highest of (a) Citibank, N.A.'s base rate, (b) the Federal Funds Effective Rate plus 1/2 of 1% and (c) the Base CD Rate plus 1/2 of 1%. LIBOR will at all times include statutory reserves. DEFAULT RATE: The applicable interest rate plus 2% per annum. COMMITMENT FEES: 0.5% per annum on the undrawn portion of the commitments in respect of the Senior Facility, payable quarterly in arrears. LETTER OF CREDIT FEE: A per annum fee equal to the spread over LIBOR under the Revolving Facility will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility, payable quarterly in arrears and on the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day year. Such fees shall be distributed to the Senior Lenders participating in the Revolving Facility pro rata in accordance with the amount of each such Senior Lender's Revolving Facility commitment. In addition, the Borrower shall pay to the Issuing Lender, for its own account, (a) a fronting fee of 1/4 of 1% per annum on the aggregate face amount of outstanding letters of credit, payable quarterly in arrears and on the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day year, and (b) customary issuance and administration fees. CONFIDENTIAL EXHIBIT C April 10, 2000 PROJECT SHIELD $1,000,000,000 SENIOR SECURED CREDIT FACILITY SUMMARY OF ADDITIONAL CONDITIONS PRECEDENT All capitalized terms used herein but not defined herein shall have the meanings provided in the Transaction Description and the Summary of Principal Terms and Conditions relating to this Summary of Additional Conditions Precedent. The initial borrowing under the Senior Facility shall be subject to the following additional conditions precedent: 1. CONSUMMATION OF DEBT MODIFICATION. The Debt Modification shall have been consummated, and in connection therewith: (a) The holders of the indebtedness under the Agreement Debt and the Synthetic Leases shall have: (i) Extended the maturity of such indebtedness to August 15, 2002, except that with respect to the Synthetic Leases, the maturity date for each such Synthetic Lease shall be the later of August 15, 2002 and the applicable maturity date currently existing under such Synthetic Lease. (ii) Modified certain existing covenants. (iii) Agreed to a silent second priority security interest in the Collateral. (iv) Eliminated rights to additional collateral. (b) Not less than 85% of the Existing Notes shall have been exchanged, in an Exchange Offer, at par, for Exchange Notes maturing on September 15, 2002 and having the same silent second priority security interest in the Collateral as the Agreement Debt and, other than maturity and interest rates, containing substantially the same terms and provisions as the Existing Notes. The terms and conditions of the Debt Modification, and all documentation and agreements relating thereto, shall be reasonably satisfactory to the Agents and the Senior Lenders. 2. SENIOR FACILITY DOCUMENTATION. The documentation for the Senior Facility shall have been executed and delivered and shall be reasonably satisfactory to each of the Agents and the Senior Lenders. The holders of the Second Priority Indebtedness or their representatives shall have entered into, or otherwise become subject to, intercreditor arrangements reasonably satisfactory to the Agents and the Senior Lenders providing for the silent second priority lien on the Collateral described under the heading "Collateral" in the Summary of Principal Terms and Conditions. 3. COLLATERAL AND GUARANTEES. All Specified Assets of the Borrower and its subsidiaries (other than foreign subsidiaries to the extent adverse tax consequences would result and de minimis Specified Assets owned by the Borrower) shall be owned by Subsidiary Guarantors and the Senior Lenders shall have a first-priority perfected security interest in the Collateral. Notwithstanding anything to the contrary, none of the assets of the Borrower shall be pledged as Collateral. The Agents shall be reasonably satisfied that all material Specified Assets acquired after the Funding Date will be owned by Subsidiary Guarantors and subject to a first-priority perfected security interest securing the Senior Facility obligations. 4. SECURITIZATION FACILITY. All outstanding uncollected receivables to be collected by Rite Aid as collection agent under its accounts receivable securitization facility (the "Securitization Facility") will be repurchased by the sellers from the purchaser thereof, and the Securitization Facility terminated, substantially simultaneously with the initial borrowing under the Senior Facility. 5. CERTAIN FINANCIAL INFORMATION. The Agents and the Senior Lenders shall have received certain financial information of the Borrower and its subsidiaries as of a date or dates to be agreed upon, relating to inventory, accounts receivable, certain owned real estate, funded debt obligations and trade accounts payable (including the obligors thereof), in each case with respect to the Borrower and its subsidiaries, together with a certificate of the chief financial officer of the Borrower to the effect that to such officer's knowledge such information accurately presents the matters disclosed therein (subject to the limitations and qualifications stated therein (which shall be reasonably satisfactory to the Agents) and subject to adjustments to reflect the results of the Borrower's ongoing audits), and the Agents and the Senior Lenders shall be satisfied that such statements are not materially inconsistent with the forecasts and other information previously provided to the Agents and the Senior Lenders. 6. BUSINESS PLAN. The Agents and the Senior Lenders shall have received a three year business plan of the Borrower which shall be satisfactory in all material respects to the Agents and the Senior Lenders. 7. BORROWING BASE; VALUATION AND APPRAISAL; FIELD EXAMINATION. The Borrowing Base shall be sufficient to support the initial borrowings under the Senior Facility. The Administrative Agent shall have received such valuations and appraisals of the Borrowing Base by an independent appraisal firm reasonably satisfactory to the Administrative Agent as the Administrative Agent shall reasonably request. The Administrative Agent shall have completed completion of a field examination of the Collateral, the results of which shall be satisfactory to the Senior Lenders. 8. ENVIRONMENTAL AND EMPLOYEE HEALTH AND SAFETY. The Agents and the Senior Lenders shall be reasonably satisfied as to the amount and nature of any environmental liabilities and exposures relating to the properties to be mortgaged, and any employee health and safety liabilities and exposures to which the Borrower and its subsidiaries may be subject and with the plans of the Borrower with respect thereto. The Agents and the Senior Lenders shall have received Phase I desk audits relating to the properties to be mortgages reasonably satisfactory to the Agents from an environmental consulting firm satisfactory to Agents. 9. LITIGATION. There shall be (a) no development in any Current Litigation after April 10, 2000, and (b) no litigation or administrative proceeding that in case of either clause (a) or (b) could reasonably be expected to have a material adverse effect on the business, financial position, results of operations or prospects of the Borrower and its subsidiaries, taken as a whole, or which in the Agents' judgment would affect the legality, validity and enforceability of the loan documents (including without limitation, the validity, enforceability or priority of security interests to be granted) or would impair the Borrower's or its subsidiaries' ability to perform its or their obligations under the loan documents. There shall be no development in any Current Litigation after April 10, 2000, and there shall be no litigation or administrative proceeding that, in the Senior Lenders' sole judgment, could impair the validity, enforceability or priority of the security interests to be granted in favor of the Senior Lenders under the Operative Documents. 10. WORKING CAPITAL. The Agents shall be reasonably satisfied with the sufficiency of amounts available under the Senior Facility to meet the ongoing working capital requirements of the Borrower and its subsidiaries. 11. EXISTING MANAGEMENT. The Agents shall be satisfied with any proposed changes in the management of the Borrower. 12. NO CONFLICTS. The consummation of the Transactions, including the Senior Facility and the other transactions contemplated hereby, shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event of default or an acceleration of any rights or benefits under, any material agreement of the Borrower or any of its subsidiaries, and the Agents and the Senior Lenders shall have received one or more legal opinions to such effect, satisfactory to the Agents, from counsel to the Borrower satisfactory to the Agents. 13. CONSENTS. All requisite material governmental authorities and third parties shall have approved or consented to the transactions contemplated hereby to the extent required, all applicable appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on the transactions contemplated hereby. 14. MATERIAL ADVERSE CHANGE. Absence of any material adverse change in the revenues, store operations, inventory, accounts receivable, business or prospects of Rite Aid and its subsidiaries taken as a whole, or to Rite Aid's knowledge, in any relationship with any vendor or third party insurance payor of Rite Aid or any of its subsidiaries, taken as a whole, since November 2, 1999, other than, in each case, as publicly disclosed before April 10, 2000. 15. CONTRACTUAL RESTRICTIONS. The Senior Lenders' satisfaction that the Borrower and its subsidiaries are not subject to material contractual or other restrictions that would be violated by the contemplated transactions, including the granting of security interests and guarantees by subsidiaries. 16. TITLE SEARCHES. The Collateral Agent shall have received mortgage and lien searches with respect to the real estate Collateral reasonably satisfactory to the Agents. 17. MISCELLANEOUS CLOSING CONDITIONS. Other customary closing conditions, including delivery of satisfactory legal opinions of the Borrower's and the Agents' counsel, other financial information to be agreed; accuracy of representations and warranties; absence of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the transactions contemplated hereby; evidence of authority; compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations and environmental laws); payment of fees and expenses; and obtaining of satisfactory insurance. EX-99 3 EXHIBIT 99.1 PRESS RELEASE FINAL INVESTORS: MEDIA: Doug Wilburne Karen Rugen (717) 975-3710 (717) 730-7766 FOR IMMEDIATE RELEASE RITE AID ANNOUNCES COMMITMENT FOR NEW $1 BILLION SECURED CREDIT FACILITY EXISTING LEAD BANKS SUPPORT TRANSACTION WHICH ALSO REQUIRES MODIFICATIONS TO $3.3 BILLION OF EXISTING DEBT FACILITIES; EXPECTED TO CLOSE DURING MAY 2000 J. P. MORGAN AGREES TO CONVERT $200 MILLION OF EXISTING BANK DEBT INTO RITE AID COMMON STOCK NEW MANAGEMENT SAYS FINANCING IS "A CORNERSTONE OF OUR TURNAROUND PLAN" CAMP HILL, PA., April 11, 2000--Rite Aid Corporation (NYSE, PSE:RAD) today announced that it has received a fully underwritten commitment from Citibank, N.A. to provide a new $1 billion senior secured credit facility. The new facility, which is scheduled to close during May 2000 and which will mature on August 1, 2002, is also being underwritten by Fleet Retail Finance, Inc. and Heller Financial, Inc. When completed, the new credit facility will provide Rite Aid with more than $600 million in additional liquidity for general working capital purposes, which the Company said would support the turnaround plan developed by Rite Aid's new management team. The remainder of the facility will be used to repay the Company's existing $300 million asset securitization facility and to pay expenses associated with the planned refinancing and debt modifications. Rite Aid said that after completion of the planned transactions, the Company will have almost no debt maturing prior to August 2002. The closing of the facility is subject to customary financing conditions and to the condition that the Company complete modifications to approximately $3.3 billion of other existing indebtedness of Rite Aid, including approximately $2.5 billion of indebtedness held by banks and other financial institutions, $230 million of obligations under synthetic leases, and $550 million of notes due in 2000 and 2001 (consisting of $200 million of 5.50% notes due 2000 and $350 million of 6.70% notes due 2001). The new $1 billion senior secured credit facility will be secured by inventory, accounts receivable, and certain other assets owned by Rite Aid subsidiaries. The modified existing bank debt will continue to be secured by the stock of PCS Health Systems, Inc. and drugstore.com. All of the modified debt, including the modified existing bank debt and modified notes, will be secured by a second lien on the collateral securing the new $1 billion senior secured credit facility. Rite Aid said that the planned transactions provide for the modified bank debt to mature on August 15, 2002 and the modified notes to mature on September 15, 2002. Rite Aid also said that no modification of its remaining private or public debt was required. The Company said that one of its principal lenders, J. P. Morgan, has agreed to convert $200 million of existing bank debt which it holds into Rite Aid common stock at a price of $5.50 per share in connection with the closing of the new facility. The financing transaction also contemplates that up to approximately $85 million of additional outstanding bank debt may be exchanged into Rite Aid common stock at $5.50 per share. Bob Miller, who was named chairman and chief executive officer of Rite Aid in December 1999, said, "When our new management team began work at the end of last year, we made a commitment to improve this Company's performance as quickly as possible. We now have had time to evaluate both the challenges and the opportunities facing Rite Aid. The new financing commitment and debt modifications that we are announcing today are a cornerstone of our turnaround plan. We believe that these proposed transactions address, in the most practical and balanced way possible, the interests of our creditors, vendors and shareholders. We are excited about the commitment to our business being made today by Citibank, Fleet and Heller and their lending syndicate as well as the strong support expressed by the lead banks in our existing credit facilities and other financing arrangements, including J. P. Morgan, Citibank, Bank of America, The Chase Manhattan Bank, and Bank One." Miller emphasized that the proposed transactions benefit the Company and its constituents by o creating substantial additional liquidity for Rite Aid; o extending the maturities of the Company's debt to, at the earliest, August 2002, which provides time for management to improve Rite Aid's operating and financial performance; and o converting a minimum of $200 million and possible maximum of up to approximately $285 million of the Company's debt into equity. "Our new credit facility and the related transactions announced today, when completed, will provide us with the liquidity we need to support our turnaround plan," Miller added. Rite Aid said that the commitment letter, which will be filed on Form 8-K with the Securities and Exchange Commission, and the closing of the new facility are subject to various conditions including the completion of the bank debt and note modifications discussed above, the execution of appropriate documentation, the satisfactory completion of due diligence by the bank agents, agreement concerning the final structure of the transaction, and the absence of any material adverse change in the revenues, store operations, inventory, accounts receivable, business or prospects, including relationships with vendors and third party insurance payors, of Rite Aid and its subsidiaries taken as a whole other than as publicly disclosed as of April 11, 2000. Rite Aid is one of the nation's leading drugstore chains with annual revenues of approximately $14 billion and approximately 3,800 stores in 30 states and the District of Columbia. Rite Aid owns PCS Health Systems, Inc., which provides pharmacy benefit management programs and services that can help improve patient health and reduce health care costs. Rite Aid also owns approximately 18 percent of drugstore.com, a leading online source for health, beauty and pharmacy products. Information about Rite Aid, including corporate background and press releases, can be found at the company's Web site at http://www.riteaid.com. This press release may contain forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include the ability of the Company to satisfy the conditions and requirements of financing commitments accepted by the Company including consummation of various consent, amendment and exchange transactions involving approximately $3.3 billion of existing debt of the Company as there can be no assurances that the new facility will become available or that the conditions and requirements of the financing commitments can be satisfied, the preparation of restated historic financial statements, final audit adjustments, completion of the SEC's review of the Company's financial reporting and the impact of possible asset sales or other corporate transactions which the Company is currently considering but the consummation of which is not assured. Additional factors could include competitive pricing pressures, third-party prescription reimbursement levels, continued consolidation of the drugstore industry, consumer preferences, regulatory changes governing pharmacy practices, general economic conditions, inflation, merchandise supply constraints, interest rate movements, access to capital, the development of the Internet market for pharmaceuticals, availability of real estate, construction and start-up of drugstore and distribution center facilities. Consequently, all of the forward-looking statements made in this press release are qualified by these and other factors, risks and uncertainties. Readers are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----