Item 1.01. Entry Into a Material Definitive Agreement.
Issuance of New Notes
On July 27, 2020, in connection with
the settlement of the previously announced offer to exchange (the “Exchange Offer”) up to $1.125 billion
aggregate principal amount of Rite Aid Corporation’s (the “Company”) 6.125% Senior Notes due 2023 (the
“Old Notes”) for newly issued 8.000% Senior Secured Notes due 2026 (the “New Secured Notes”) and
cash, the Company issued $849,918,000 aggregate principal amount of New Secured Notes pursuant to an indenture, dated as of
July 27, 2020 (the “New Notes Indenture”), among the Company, the subsidiary guarantors named therein (the
“Guarantors”), and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) and as
notes collateral agent (the “Notes Collateral Agent”) and paid $238,375,023.15 in cash (including (i) accrued and
unpaid interest with respect to the Old Notes accepted for exchange and (ii) a separate cash consent payment in connection
with the Consent Solicitation (as defined below)).
The New Secured Notes will bear interest
at a rate of 8.000% per annum, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2021. The
New Secured Notes will mature on November 15, 2026.
At any time on or after January 15, 2023,
the Company may redeem the New Secured Notes at its option, in whole or in part, at the redemption prices specified in the New
Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. At any time prior to January
15, 2023, the Company may redeem the New Secured Notes at its option, in whole or in part, at a redemption price equal to 100%
of the principal amount of the New Secured Notes redeemed plus the Applicable Premium (as defined in the New Notes Indenture) as
of, and accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, on or prior to January 15,
2023, the Company may, subject to certain limitations specified in the New Notes Indenture, at its option and on one or more occasions,
redeem up to 40% of the aggregate principal amount of the New Secured Notes at a redemption price equal to 108.000% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date with the net cash
proceeds of certain equity offerings. Upon a Change of Control (as defined in the New Notes Indenture), the Company must offer
to purchase the New Secured Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest to,
but not including, the date of purchase.
The Company’s obligations under the
New Secured Notes are fully and unconditionally guaranteed on a senior secured basis by the same subsidiary guarantors as the Company’s
existing credit facilities, the Old Notes and the Company’s 7.500% Senior Secured Notes due 2025 (the “2025 Notes”)
and the New Secured Notes are effectively senior to the Old Notes. The New Secured Notes and the related guarantees are secured
by substantially all of the Company’s subsidiaries’ assets, including (i) a first-priority lien on the Notes priority
collateral, and (ii) a second-priority lien on the ABL priority collateral, which, in each case include assets of PBM entities
(other than insurance entities) and also secure the Company’s existing credit facilities and the 2025 Notes.
The New Notes Indenture contains covenants
that restrict the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness; create
or incur debt and liens; pay dividends; make redemptions and repurchases of capital stock; make loans and investments; prepay,
redeem or repurchase debt; engage in acquisitions, consolidations, asset dispositions, sale-leaseback transactions and affiliate
transactions; change its business; amend some of its debt and other material agreements; issue and sell capital stock of subsidiaries;
restrict distributions from subsidiaries; and grand negative pledges to other creditors. Under the New Notes Indenture, if the
New Secured Notes are assigned an investment grade rating and no default or event of default has occurred and is continuing, certain
of these covenants will be suspended. The New Notes Indenture also contains certain affirmative covenants and events of default.
The New Secured Notes have not been registered
under the Securities Act of 1933, as amended or the securities laws of any state and may not be offered or sold in the United States
absent registration or an exemption from the registration requirements of the Securities Act and applicable state securities laws.
The foregoing description of the New Notes
Indenture does not purport to be complete and is qualified in its entirety by reference to the New Notes Indenture, which is as
attached hereto as Exhibit 4.1 and is incorporated herein by reference.
Consent
Solicitation – Supplemental Indenture
In
connection with the Exchange Offer, the Company solicited the consent of the holders of the Old Notes (the “Consent Solicitation”)
to adopt certain proposed amendments to the indenture governing the Old Notes (collectively, the “Proposed Amendments”)
for a separate cash consent payment. The Proposed Amendments modified the debt and lien covenants in the Old Notes Indenture
(as defined below) to provide additional secured debt capacity by creating exemptions for (i) the $600 million of outstanding 2025
Notes and (ii) the New Secured Notes. The Company received the requisite consents from holders of
the Old Notes and entered into a supplemental indenture, dated as of June 9, 2020 (the “Supplemental Indenture”)
by and among the Company, the Guarantors and the Trustee, to that certain indenture, dated as of April 2, 2015 (as supplemented
to date, the “Old Notes Indenture”), among the Company, the guarantors named therein and the Trustee, as supplemented
by the supplemental indenture, dated as of August 23, 2018, among the Company, the guarantors named therein and the Trustee and
the supplemental indenture, dated as of February 8, 2019, among the Company, the guarantors named therein and the Trustee, governing
the Old Notes.
The
Supplemental Indenture became effective upon execution thereof by the parties thereto and became operative on July 27, 2020 (the
settlement date of the Exchange Offer and Consent Solicitation).
The
foregoing summary of the Supplemental Indenture is qualified in its entirety by reference to the full text of the Supplemental
Indenture, a copy of which is filed with this Current Report on Form 8-K as Exhibit 4.3 and is incorporated herein by
reference.