Item 1.01. Entry Into a Material Definitive Agreement.
On February 5, 2020, in connection with
the settlement of its previously announced offer to exchange (the “Exchange Offer”) up to $600 million aggregate principal
amount of Rite Aid Corporation’s (the “Company”) 6.125% Senior Notes due 2023 (the “Old Notes”) for
newly issued 7.500% Senior Secured Notes due 2025 (the “New Secured Notes”), the Company issued $600 million aggregate
principal amount of New Secured Notes pursuant to an indenture, dated as of February 5, 2020 (the “New Notes Indenture”),
among the Company, the subsidiary guarantors named therein, and The Bank of New York Mellon Trust Company, N.A., as trustee (the
“Trustee”) and as notes collateral agent (the “Notes Collateral Agent”).
The New Secured Notes will bear interest
at a rate of 7.500% per annum, payable semi-annually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Secured
Notes will mature on July 1, 2025.
The
Company may redeem the New Secured Notes at its option, in whole or in part, at any time on or after July 1, 2022 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 July 1, 2022 the Company may redeem at its option the New Secured Notes, 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 July 1, 2022, 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 107.500% 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 and 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 (as defined in the New Notes Indenture), and (ii) a second-priority lien on the ABL Priority
Collateral (as defined in the New Notes Indenture), which, in each case include assets of PBM entities (other than insurance entities) and also secure the
Company’s existing credit facilities.
The New Notes Indenture contains
covenants that restrict the ability of the Company and its restricted subsidiaries to: incur or guarantee additional
indebtedness; create liens; pay dividends; make redemptions and repurchases of capital stock; make loans and investments;
prepay, redeem or repurchase subordinated debt; engage in acquisitions, consolidations, asset dispositions, sale-leaseback
transactions and affiliate transactions; amend some of their debt and other material agreements; issue and sell capital stock
of subsidiaries; and restrict distributions from subsidiaries. Under the New
Notes Indenture, if the New Secured Notes are assigned investment grade ratings 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.