MANAGEMENT AND CONTROL
4. Directors and Executive Officers
The following table lists the names and offices held by all directors and executive officers of the Applicant as of the date of this Application. The mailing address for each of the individuals listed in the following table is:
c/o Rite Aid Corporation 30 Hunter Lane Camp Hill, Pennsylvania 17011
Name Office/Position Held---- --------------------Robert G. Miller......................................Chairman and Chief Executive OfficerMary F. Sammons.......................................Director, President and Chief Operating OfficerDavid R. Jessick......................................Senior Executive Vice President and Chief Administrative OfficerElliot S. Gerson......................................Senior Executive Vice President and General CounselJohn T. Standley......................................Senior Executive Vice President and Chief Financial OfficerJames P. Mastrian.....................................Senior Executive Vice President, Marketing and LogisticsChristopher Hall......................................Executive Vice President, Finance and AccountingMark Panzer...........................................Executive Vice President, Store OperationsEric Sorkin...........................................Executive Vice President, Pharmacy ServicesKevin Twomey..........................................Senior Vice President and Chief Accounting OfficerRobert B. Sari........................................Senior Vice President, Deputy General Counsel and SecretaryWilliam J. Bratton....................................DirectorAlfred M. Gleason.....................................DirectorGeorge G. Golleher....................................DirectorLeonard I. Green......................................DirectorNancy A. Lieberman....................................DirectorStuart M. Sloan.......................................DirectorJonathan D. Sokoloff..................................Director
5. Principal Owners of Voting Securities
Based on public filings, as of February 15, 2002, the owners of 10 percent or more of the Applicant's voting securities are as follows:
------------------------------------ ------------------------ -------------------------- ----------------------------Name and Complete Mailing Address Title of Class Owned Amount Beneficially Owned Percentage of Voting Securities Beneficially Owned(1)------------------------------------ ------------------------ -------------------------- ----------------------------Leonard I. Green Common Stock 65,893,299 11.4%(2)------------------------------------ ------------------------ -------------------------- ----------------------------Jonathan D. Sokoloff Common Stock 65,504,535 11.3%(3)------------------------------------ ------------------------ -------------------------- ----------------------------Green Equity Investors III, L.P. Common Stock 64,799,299 11.2%(4)------------------------------------ ------------------------ -------------------------- ----------------------------Putnam Investments, LLC Common Stock 54,207,984 10.5%(5)------------------------------------ ------------------------ -------------------------- ----------------------------1 Based on the number of shares of Common Stock outstanding as of December 29, 2001.2 This amount includes 64,799,299 shares beneficially owned by Green Equity Investors III, L.P., which is affiliated with Leonard Green & Partners, L.P., of which Mr. Green is an executive officer and equity owner, and 990,000 shares owned by Verdi Group, Inc., over which Mr. Green has beneficial ownership. Mr. Green's mailing address is c/o Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011.3 This amount includes 64,799,299 shares beneficially owned by Green Equity Investors III, L.P., which is affiliated with Leonard Green & Partners, L.P., of which Mr. Sokoloff is an executive officer and equity owner, and 200,000 shares owned by Jonathan D. Sokoloff and Cheryl D. Sokoloff Family Trust over which Mr. Sokoloff may be deemed to have beneficial ownership. Mr. Sokoloff's mailing address is c/o Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011.4 Assuming conversion of all Class D preferred stock by Green Equity Investors III, L.P. The mailing address for Green Equity Investors III, L.P. is c/o Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011.5 This amount, which is disclosed in a report on Schedule 13G dated February 5, 2002, includes 39,099,432 shares in respect of which Putnam Investments, LLC and Putnam Investment Management, LLC share dispositive power and 15,108,552 shares in respect of which Putnam Investments, LLC and The Putnam Advisory Company, LLC share dispositive power. The mailing address for Putnam Investments, LLC is One Post Office Square, Boston, Massachusetts 02109.
UNDERWRITERS
6. Underwriters
(a) The following is a list of each person who, within three years prior to the date of filing the application, acted as an underwriter of any securities of the Applicant which are outstanding as of the date of this Application.
UNDERWRITER MAILING ADDRESS TITLE OF CLASS----------- --------------- UNDERWRITTEN --------------Salomon Smith Barney Inc. 388 Greenwich Street 4.75% Convertible Notes New York, NY 10013 Due December 1, 2006 11 1/4% Senior Notes Due 2008Credit Suisse First Boston Eleven Madison Avenue 11 1/4% Senior Notes Due 2008Corporation New York, NY 10010J.P. Morgan Securities Inc. 270 Park Ave. 4.75% Convertible Notes New York, NY 10017 Due December 1, 2006 11 1/4% Senior Notes Due 2008Fleet Securities, Inc. 26 Broadway 11 1/4% Senior Notes Due 2008 New York, NY 10004
(b) Not applicable.
CAPITAL SECURITIES
7. Capitalization
(a) The debt securities and capital stock of the Applicant as of February 15, 2002:
Title of Class Amount Authorized Amount OutstandingCapital Stock (in number of shares) Common Stock, par value $1..................... 1,000,000,000 515,085,296 (at 12/29/01) Preferred Stock, par value $1.................. 20,000,000 -- Series C Convertible Preferred Stock........... 2,250,000 0 8% Series D Cumulative Convertible Pay-in-Kind Preferred Stock.................. 6,000,000 3,495,990Debt Securities (amount in aggregate principalamount): 6.7% notes due 2001............................ $350,000,000 $7,342,000 5.25% convertible subordinated notes due 2002.. $650,000,000 $152,010,000 10.50% senior secured notes due 2002........... $467,500,000 $21,879,000 6.0% dealer remarketable securities due 2003... $200,000,000 $85,050,000 6.0% notes due 2005............................ $200,000,000 $194,500,000 7.625% notes due 2005.......................... $200,000,000 $198,000,000 12.5% senior secured notes due 2006............ $152,025,000 $143,739,000 4.75% convertible notes due 2006............... $250,000,000 $242,625,000 7.125% notes due 2007.......................... $350,000,000 $350,000,000 6.125% notes due 2008.......................... $150,000,000 $150,000,000 11.25% senior notes due 2008................... $150,000,000 $150,000,000 6.875% senior debentures due 2013.............. $200,000,000 $200,000,000 7.7% notes due 2027............................ $300,000,000 $300,000,000 6.875% debentures due 2028..................... $150,000,000 $150,000,000
(b) The rights of each class of voting securities referred to above are as follows:
Common Stock. The holders of common stock are entitled to receive ratably, from funds legally available for the payment thereof, dividends when and as declared by resolution of the Applicant's Board of Directors, subject to any preferential dividend rights granted to the holders of any outstanding preferred stock. Each holder of common stock is entitled to one vote for such share registered in his name on the Applicant's books on all matters submitted to a vote of stockholders. Except as otherwise provided by law, the holders of common stock vote as one class. The shares of common stock do not have cumulative voting rights. As a result, subject to the voting rights of the holders of any shares of the Applicant's preferred stock which may at the time be outstanding, the holders of common stock entitled to exercise more than 50% of the voting rights in an election of directors can elect 100% of the directors to be elected in a particular year if they choose to do so. In such event, the holders of the remaining common stock voting for the election of directors will not be able to elect any persons to the Applicant's Board of Directors.
Holders of the Applicant's common stock do not have preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are duly authorized, validly issued, fully paid and nonassessable.
Preferred Stock. Under the Applicant's Charter, the Applicant's Board of Directors has the authority, without further stockholder action, to issue from time to time up to a maximum of 20,000,000 shares of preferred stock, in one or more series and for such consideration as may be fixed from time to time by the Board, and to fix before the issuance of any shares of preferred stock of a particular series, the designation of such series, the number of shares to comprise such series, the dividend rate or rates payable with respect to the shares of such series, the redemption price or prices, if any, and the terms and conditions of any redemption, the voting rights, any sinking fund provisions for the redemption or purchase of the shares of such series, the terms and conditions upon which the shares are convertible or exchangeable, if they are convertible or exchangeable, and any other relative rights, preferences and limitations pertaining to such series.
Series C Convertible Preferred Stock. There are no shares of the Series C preferred stock outstanding. Each holder of Series C preferred stock is entitled to vote with the holders of common stock and each holder is entitled to one vote for each whole share of common stock issuable upon conversion of the holder's Series C preferred stock.
8% Series D Cumulative Convertible Pay-in-Kind Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Applicant, holders of Series D preferred stock shall be entitled to receive out of the Applicant's assets legally available for distribution to stockholders, before any distribution of assets is made to holders of common stock or any other class or series of capital stock ranking junior to the Series D preferred stock, a liquidation preference of $100, subject to certain adjustments, plus all accrued and unpaid dividends thereon. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Applicant, the amounts payable to holders of Series D preferred stock and any other shares of preferred stock ranking as to such distribution on a parity with the Series D preferred stock are not paid in full, the holders of Series D preferred stock and of such other shares of preferred stock will share ratably in any such distribution of the Applicant's assets in proportion to the full respective preferential amounts to which they are entitled.
Each holder of Series D preferred stock is entitled to vote with holders of common stock and each holder of Series D preferred stock is entitled to one vote for each share of common stock issuable upon conversion of such holder's Series D preferred stock. The holders of Series D preferred stock are entitled to vote separately as a class to elect two directors to the Applicant's Board of Directors.
Each share of Series D preferred stock is convertible into the number of shares of the Applicant's common stock equal to the liquidation preference divided by the conversion price, which is $5.50 per share, subject to certain anti-dilution adjustments.
Each holder of Series D preferred stock is entitled to receive cumulative preferential dividends at the rate of 8.0% on the liquidation preference, payable quarterly in arrears. Dividends shall be paid, at the Applicant's option, either in cash, additional shares of Series D preferred stock, or a combination thereof. From time to time, on or after October 25, 2004, the Applicant may redeem shares of Series D preferred stock at 105% of the liquidation preference plus any unpaid partial dividends to the applicable redemption date. Holders of Series D preferred stock have no preemptive rights to subscribe for any additional securities which the Applicant may issue. The Applicant has granted the holders of Series D preferred stock certain registration rights with respect to the Series D preferred stock and the common stock into which the Series D preferred stock may be converted.
INDENTURE SECURITIES
8. Analysis of Indenture Provisions
The following is a general description of certain provisions of the Indenture to be qualified and is subject in its entirety by reference to the form of the Indenture to be qualified, filed as Exhibit T3C hereto. Terms used below have the same meanings as in the Indenture.
(a) Defaults under the Indenture.
The events of Default set forth in the Indenture include:
(i) default for 30 days in payment of interest on the Notes;
(ii) default in payment of principal when due;
(iii) failure by the Applicant, or any of the Subsidiary Guarantors (as defined in the Indenture), (after the specified grace period) to comply with the provisions of the Indenture relating to merger, consolidation and sale of assets;
(iv) failure by the Applicant, or any of the Subsidiary Guarantors (as defined in the Indenture), (after specified notice to it and after the specified grace period), to observe or perform any other covenant, condition or agreement in the Indenture;
(v) the default under any instrument governing other indebtedness of the Applicant, which (x) shall occur as a result of failure to pay principal at final maturity of such indebtedness (after specified notice to it and after the specified grace period), or (y) which shall result in the declaration of such indebtedness to be due and payable prior to its scheduled maturity, provided, in each case, the aggregate of such indebtedness, together with the principal amount or any other indebtedness under which there has been such failure or default, is at least $10,000,000;
(vi) default under the Second Priority Facilities (as defined in the Indenture) which (x) results in the declaration of such indebtedness to be due and payable prior to its scheduled maturity, or (y) which permits the lenders under any of the Second Priority Facilities to declare such indebtedness to be due and payable prior to its scheduled maturity, provided such default continues for 25 days and which, in the case of (y) above, has not been remedied or cured pursuant to the terms of the Second Priority Facilities;
(vii) certain events of bankruptcy or insolvency relating to the Applicant or certain of its subsidiaries as specified in the Indenture;
(viii) any guarantee under the Second Priority Subsidiary Guarantee Agreement (as defined in the Indenture) ceasing to be in full force and effect, other than in accordance with the terms of the Indenture or the Second Priority Subsidiary Guarantee Agreement (as defined in the Indenture), or any Subsidiary Guarantor (as defined in the Indenture) denying or disaffirming its obligations under that agreement; and
(ix) the material impairment of the security interests under the Second Priority Collateral Documents (as defined in the Indenture) other than due to the satisfaction in full of all obligations thereunder and under the Indenture and the discharge of the Second Priority Collateral Documents (as defined in the Indenture) and the Indenture, or any security interest created under the Indenture being declared invalid or unenforceable, or the Applicant or any of its Subsidiaries (as defined in the Indenture) asserting that any such security interest is invalid or unenforceable.
The Indenture provides that the Trustee will give the Note holders notice of all defaults under the Indenture, provided that, in the case of default described in paragraph (iv) above, no such notice shall be given until at least 30 days after the occurrence of the default in the payment of principal of or interest on any of the Notes.
In case any Event of Default (as defined in the Indenture) will occur and be continuing, the holders of not less than 25% in aggregate principal amount of the Notes then outstanding, may direct the Trustee to declare the principal of and all accrued interest on all the Notes to be due and payable immediately. If an Event of Default (as defined in the Indenture) as described in paragraph (vii) above occurs, the principal and any accrued interest on the outstanding Notes shall become immediately due and payable without any declaration or other act of the Trustee or any holder of the Notes. At any time after such declaration has been made and prior to the Trustee obtaining a decree or judgment for payment of the money due such declaration may be rescinded by holders of a majority in principal amount of the Notes, if (x) all existing Events of Default, other than non-payment of the Notes that have become due and payable due to the Trustee's declaration, have been cured or waived, and (y) the Applicant has paid or deposited with the Trustee a sum sufficient to pay all overdue interest on the Notes and interest on overdue interest, the principal and interest on all Notes that have become due and payable other than by the Trustee's declaration, and certain expenses and compensation of the Trustee. If the Event of Default is one of the certain events of bankruptcy or insolvency specified in the Indenture to constitute an Event of Default, all outstanding Notes shall be due and payable immediately without further action or notice.
Defaults may be waived by the holders of a majority in principal amount of the Notes, upon the conditions provided in the Indenture, except that such holders may not waive a default in payment of principal or interest on the Notes, or a default in respect of a covenant or provision which, under the terms of the Indenture, cannot be modified or amended without the consent of the holders of each outstanding Note affected by such covenant or provision.
The Indenture provides that the Applicant will file annually with the Trustee a certificate regarding compliance by the Applicant with the terms of the Indenture and specifying any defaults of which the signers may have knowledge.
(b) Authentication and Delivery of the Notes.
The Notes to be issued under the Indenture may from time to time be executed on behalf of the Applicant by its chairman of the board of directors, its vice chairman, its president, one of its vice presidents or its secretary and delivered to the Trustee for authentication and delivery in accordance with the Applicant's order and the Indenture. No Note shall be valid unless it bears a certificate of authentication, as provided in the Indenture, executed by manual signature of the Trustee, and such certificate shall be conclusive evidence that such Note has been duly authenticated under the Indenture.
There will be no proceeds (and therefore no application of such proceeds) from the issuance of the Notes because the Notes will be issued as part of an exchange for claims of the plaintiffs pursuant to the Settlement.
(c) Release or Substitution of Property.
Under the terms set forth in the Intercreditor Agreement, (as defined in the Indenture), liens on property held as Collateral (as defined in the Intercreditor Agreement) being disposed of in a permitted disposition will be released automatically upon consummation of such disposition, without the need for any consent or approval by any party, including, without limitation, the Trustee. The necessary parties are required to execute such documents as are reasonably necessary to effectuate such release at the expense of the Applicant.
In addition, liens on any Collateral may be released in whole or in part by the Second Priority Collateral Trustee (as defined in the Indenture) pursuant to written directions signed by the Second Priority Instructing Group (as defined in the Intercreditor Agreement). The release of all or substantially all of the Second Priority Collateral (as defined in the Intercreditor Agreement) requires the written consent of all Second Priority Secured Parties (as defined in the Intercreditor Agreement). To the extent the obligations owing to any Second Priority Secured Party are paid in full (and any commitments related thereto are terminated), the consent of such party shall not be required for any release.
(d) Satisfaction and Discharge of the Indenture.
The Indenture will be discharged and will cease to be of further effect, (except as to (i) rights of registration of transfer and exchange and the Applicant's right of optional redemption, (ii) substitution of destroyed, lost or stolen Notes, (iii) rights of holders to receive payment of principal and interest on the Notes, (iv) rights, obligations and immunities of the Trustee, and (v) rights of the holders of the Notes as beneficiaries of the Indenture with respect to property deposited with the Trustee payable to all or any of them) when:
(i) either (1) all the Notes that have been authenticated (other than Notes which were destroyed, lost or stolen and which were replaced or paid or Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Applicant) have been delivered to the Trustee for cancellation; or
(2) all Notes that have not been delivered to the Trustee for cancellation have become due and payable, or will become due and payable within one year; or (3) are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption by the Trustee in the name, and at the expense, of the Applicant, and, in the case of (1), (2) or (3) above, the Applicant has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose sufficient to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation, including the principal and interest on such Notes to maturity or redemption;
(ii) the Applicant has paid or caused to be paid all other sums payable under the Indenture by the Applicant; and
(iii) the Applicant has delivered to the Trustee an Officers' Certificate (as defined in the Indenture) and an Opinion of Counsel (as defined in the Indenture) each stating that all conditions precedent relating to the satisfaction and discharge of the Indenture have been complied with.
All money deposited with the Trustee, as described above, shall be held in trust and applied by it, in accordance with the provisions of the Notes and the Indenture, to the payment of the principal and interest for whose payment such money has been deposited with the Trustee. However, any money deposited with the Trustee, or any Paying Agent (as defined in the Indenture), or then held by the Applicant, in trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall promptly be paid to the Applicant on the Applicant's request, or (if then held by the Applicant) shall be discharged from such trust; and the holder of such Note shall thereafter, as an unsecured general creditor, look only to the Applicant for payment thereof, and all liability of the Trustee with respect to such trust money, and all liability of the Applicant as trustee thereof, shall cease, provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Applicant cause to be published once, in a newspaper in English language customarily published once on each Business Day (as defined in the Indenture) 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 notification, publication and mailing, any unclaimed balance of such money then remaining will promptly be repaid to the Applicant.
(e) Evidence of Compliance with Conditions.
The Indenture requires that the Applicant will deliver to the Trustee, annually, a certificate regarding compliance by the Applicant with the terms of the Indenture and specifying any defaults of which the signers may have knowledge.
Upon any request or application by the Applicant to the Trustee to take any action under the Indenture, the Applicant is required to furnish to the Trustee an Officer's Certificate (as defined in the Indenture), or an Opinion of Counsel (as defined in the Indenture), as may be required by the Trustee, to the effect that all conditions and covenants, if any, provided for in the Indenture relating to the proposed actions have been satisfied. |
